- Income year-over-year before income taxes for the three months ended September 30, 2020 increased by 277.5% compared to prior year second quarter
- Pre-tax yield as a percentage of average finance receivables for the three months ended September 30, 2020 increased to 2.6% compared to 0.6% during the prior year second quarter
- Originations year-over-year on new Contracts purchased for the three months ended September 30, 2020 decreased by 13.9% compared to prior year second quarter
- Originations year-over-year on Direct Loans for the three months ended September 30, 2020 increased by 28.2% compared to prior year second quarter
- Accounts 60+ days delinquent decreased to 2.9%, excluding Chapter 13 bankruptcy accounts, compared to 3.2% as of the prior year second quarter
- Net Portfolio Yield for the three months ended September 30, 2020 increased to 18.6% compared to 16.0% during the prior year second quarter
CLEARWATER, Fla., Oct. 30, 2020 (GLOBE NEWSWIRE) -- Nicholas Financial, Inc. (NASDAQ: NICK) announced net income for the three months ended September 30, 2020 of $1.3 million compared to $0.3 million for the three months ended September 30, 2019. Diluted net income per share was $0.16 for the three months ended September 30, 2020 as compared to $0.03 for the three months ended September 30, 2019. Revenue decreased 9.8% to $14.1 million for the three months ended September 30, 2020 as compared to $15.6 million for the three months ended September 30, 2019. The Company reported income before income taxes for the three months ended September 30, 2020 of $1.4 million compared $0.4 million for the three months ended September 30, 2019. The Company recorded an income tax expense of approximately $0.1 million during the three months ended September 30, 2020 compared to an income tax expense of $0.1 million during the three months ended September 30, 2019.
For the Fiscal Year 2021, the Company has calculated an effective tax rate of approximately 25%, before income tax benefit. As of September 30, 2020, the company recognized a net income tax benefit of approximately $(0.3) million, with $(0.2) million relating to the tax provision analysis and $(0.1) million relating to the net operating loss carry-back provisions allowed by the CARES Act. The effective tax rate has been similar for the reporting periods presented.
The Company announced net income for the six months ended September 30, 2020 of $2.7 million compared to $0.9 million for the six months ended September 30, 2019. Diluted net income per share was $0.34 for the six months ended September 30, 2020 as compared to $0.11 for the six months ended September 30, 2019. Revenue decreased 12.4% to $28.2 million for the six months ended September 30, 2020 as compared to $32.2 million for the six months ended September 30, 2019. The Company reported income before income taxes for the six months ended September 30, 2020 of $3.2 million compared $1.2 million for the six months ended September 30, 2019. The Company recorded an income tax expense of approximately $0.5 million during the six months ended September 30, 2020 compared to $0.3 million during the six months ended September 30, 2019.
For the six months ended September 30, 2020, the Company originated $40.4 million in finance receivables, collected $58.8 million in principal payments, reduced debt by a net amount of $14.6 million, repurchased $0.2 million of common stock, and increased cash by $8.5 million.
“We continue to enjoy excellent results in terms of portfolio management,” stated Doug Marohn, President and CEO of Nicholas Financial, Inc. “Our core philosophy of providing primary transportation to and from work for the subprime borrower and our focus on smaller dollar, more affordable loans have made it easier for customers to meet their obligation even in tough economic times. Matching our customers’ individual needs and abilities with an appropriate loan structure has served them and Nicholas well.”
“The strong portfolio performance is encouraging and reinforces our approach to this business as being the right way. The 2nd Quarter generated reduced delinquency and lower losses year over year without relying on increased extensions or modifications. That said we are maintaining a conservative approach to our reserve methodology and ensuring our loss reserves are more than sufficient until we have better clarity of the future as it relates to the economic impact of the pandemic.”
“Whereas it is true that new originations on indirect retail sales finance have been suppressed throughout this pandemic, Nicholas is very much committed to growing our receivables and expanding our reach wherever possible and prudent,” continued Marohn. “Our Direct Loan product is experiencing substantial growth now that it is active and in place in every one of our brick and mortar locations across our branch network. We have renewed our focus on new market expansion and are excited to report we are opening our first Nevada branch in Las Vegas this month. We expect that, over the next 30 to 60 days we will have new fully operational branches in Columbia, SC and Milwaukee, WI. We are actively developing expansion in Salt Lake City, UT and Boise, ID. We are also initiating initial expansion efforts on top of that in Arizona and New Mexico. Finally, we have elected to re-enter the Texas market now that we have reinforced our infrastructure and disciplined approach.”
| Key Performance Indicators on Contracts Purchased | ||||||||||||||||||||||||||||
| (Purchases in thousands) | ||||||||||||||||||||||||||||
| Number of | Average | |||||||||||||||||||||||||||
| Fiscal Year | Contracts | Principal Amount | Amount | Average | Average | Average | ||||||||||||||||||||||
| /Quarter | Purchased | Purchased# | Financed*^ | APR* | Discount%* | Term* | ||||||||||||||||||||||
| 2021 | 3,395 | $ | 34,103 | $ | 10,045 | 23.5 | % | 7.4 | % | 46 | ||||||||||||||||||
| 2 | 1,709 | 17,307 | 10,127 | 23.5 | % | 6.8 | % | 46 | ||||||||||||||||||||
| 1 | 1,686 | 16,796 | 9,962 | 23.5 | % | 8.0 | % | 46 | ||||||||||||||||||||
| 2020 | 7,647 | $ | 76,696 | $ | 10,035 | 23.4 | % | 7.9 | % | 47 | ||||||||||||||||||
| 4 | 1,991 | 19,658 | 9,873 | 23.5 | % | 7.9 | % | 46 | ||||||||||||||||||||
| 3 | 1,753 | 17,880 | 10,200 | 23.3 | % | 7.6 | % | 47 | ||||||||||||||||||||
| 2 | 2,011 | 20,104 | 9,997 | 23.5 | % | 7.9 | % | 46 | ||||||||||||||||||||
| 1 | 1,892 | 19,054 | 10,071 | 23.4 | % | 8.3 | % | 47 | ||||||||||||||||||||
| 2019 | 7,684 | $ | 77,499 | $ | 10,086 | 23.5 | % | 8.2 | % | 47 | ||||||||||||||||||
| 4 | 2,151 | 21,233 | 9,871 | 23.5 | % | 8.0 | % | 46 | ||||||||||||||||||||
| 3 | 1,625 | 16,476 | 10,139 | 23.5 | % | 8.1 | % | 47 | ||||||||||||||||||||
| 2 | 1,761 | 17,845 | 10,133 | 23.5 | % | 8.4 | % | 47 | ||||||||||||||||||||
| 1 | 2,147 | 21,945 | 10,221 | 23.7 | % | 8.3 | % | 48 | ||||||||||||||||||||
| Key Performance Indicators on Direct Loans Originated (Originations in thousands) | |||||||||||||||||||||
| Number of | Principal | ||||||||||||||||||||
| Fiscal Year | Loans | Amount | Average Amount | Average | Average | ||||||||||||||||
| /Quarter | Originated | Originated | Financed*^ | APR* | Term* | ||||||||||||||||
| 2021 | 1,479 | $ | 6,259 | $ | 4,260 | 29.0 | % | 26 | |||||||||||||
| 2 | 924 | 3,832 | 4,147 | 29.2 | % | 25 | |||||||||||||||
| 1 | 555 | 2,427 | 4,373 | 28.7 | % | 26 | |||||||||||||||
| 2020 | 3,142 | $ | 12,638 | $ | 4,017 | 28.2 | % | 25 | |||||||||||||
| 4 | 720 | 3,104 | 4,310 | 28.6 | % | 25 | |||||||||||||||
| 3 | 1,137 | 4,490 | 3,949 | 28.4 | % | 24 | |||||||||||||||
| 2 | 739 | 2,988 | 4,043 | 27.4 | % | 25 | |||||||||||||||
| 1 | 546 | 2,056 | 3,765 | 28.2 | % | 24 | |||||||||||||||
| 2019 | 1,918 | $ | 7,741 | $ | 4,036 | 26.4 | % | 25 | |||||||||||||
| 4 | 236 | 1,240 | 4,654 | 27.3 | % | 24 | |||||||||||||||
| 3 | 738 | 2,999 | 4,063 | 25.9 | % | 25 | |||||||||||||||
| 2 | 495 | 1,805 | 3,646 | 26.5 | % | 25 | |||||||||||||||
| 1 | 449 | 1,697 | 3,779 | 25.7 | % | 28 | |||||||||||||||
*Each average included in the tables is calculated as a simple average.
^Average amount financed is calculated as a single loan amount.
#Bulk portfolio purchase excluded for period-over-period comparability
Nicholas Financial, Inc. (NASDAQ:NICK) is a specialized consumer finance company, operating branch locations in primarily Southeastern and Midwestern U.S. States. The Company engages primarily in acquiring and servicing automobile finance installment contracts (“Contracts”) for purchases of used and new automobiles and light trucks. Additionally, Nicholas Financial originates direct consumer loans (“Direct Loans”) and sells consumer-finance related products. For an index of Nicholas Financial, Inc’s new releases or to obtain a specific release, please visit our website at www.nicholasfinancial.com.
Cautionary Note regarding Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements, including expectations regarding the impact of COVID-19 on the Company’s business, its ability to obtain the expected financial and tax benefits from the CARES Act, and its ability to obtain loan forgiveness under its PPP loan, that involve risks and uncertainties, including risk relating to competition and our ability to increase and maintain yield and profitability at desirable levels, as well as risks relating to general economic conditions, including in connection with the current COVID-19 pandemic, access to bank financing, our ability to expand the geographical scope of, and otherwise continue growing, our Direct Loan operations, and other risks detailed from time to time in the Company’s filings and reports with the Securities and Exchange Commission including the Company’s Annual Report on Form 10-K for the year ended March 31, 2020. When used in this document, the words “anticipate”, “estimate”, “expect”, “will”, “may”, “plan,” “believe”, “intend” and similar expressions are intended to identify forward-looking statements. Such statements are based on the beliefs of Company management as well as assumptions made by and information currently available to Company management. Actual events or results may differ materially from those anticipated, estimated or expect. All forward-looking statements and cautionary statements included in this document are made as of the date hereof based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement or cautionary statement.
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited, Dollars in Thousands, Except Share and Per Share Amounts)
| Three months ended | Six months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenue: | ||||||||||||||||
| Interest and fee income on finance receivables | $ | 14,064 | $ | 15,585 | $ | 28,215 | $ | 32,226 | ||||||||
| Unrealized gain on equity investments | 45 | - | 45 | - | ||||||||||||
| Total revenue | 14,109 | 15,585 | 28,260 | 32,226 | ||||||||||||
| Expenses: | ||||||||||||||||
| Operating expenses | 8,131 | 8,927 | 15,474 | 17,898 | ||||||||||||
| Provision for credit losses | 3,050 | 4,000 | 6,350 | 8,385 | ||||||||||||
| Interest expense | 1,569 | 2,298 | 3,218 | 4,786 | ||||||||||||
| Total expenses | 12,750 | 15,225 | 25,042 | 31,069 | ||||||||||||
| Income before income taxes | 1,359 | 360 | 3,218 | 1,157 | ||||||||||||
| Income tax expense | 92 | 92 | 521 | 298 | ||||||||||||
| Net income | $ | 1,267 | $ | 268 | $ | 2,697 | $ | 859 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.16 | $ | 0.03 | $ | 0.34 | $ | 0.11 | ||||||||
| Diluted | $ | 0.16 | $ | 0.03 | $ | 0.34 | $ | 0.11 | ||||||||
Condensed Consolidated Balance Sheets
(Unaudited, In Thousands)
| September 30, | March 31, | ||||||
| 2020 | 2020 | ||||||
| Cash and restricted cash | $ | 33,169 | $ | 24,684 | |||
| Equity investments with readily determinable fair values | 3,013 | - | |||||
| Finance receivables, net | 179,035 | 199,781 | |||||
| Repossessed assets | 856 | 1,340 | |||||
| Operating lease right-of-use assets | 2,588 | 2,598 | |||||
| Other assets | 7,085 | 10,415 | |||||
| Total assets | $ | 225,746 | $ | 238,818 | |||
| Credit facility, net of debt issuance costs | $ | 106,639 | $ | 124,255 | |||
| Note payable | 3,244 | - | |||||
| Operating lease liabilities | 2,590 | 2,652 | |||||
| Other liabilities | 3,129 | 4,332 | |||||
| Total liabilities | 115,602 | 131,239 | |||||
| Shareholders’ equity | 110,144 | 107,579 | |||||
| Total liabilities and shareholders’ equity | $ | 225,746 | $ | 238,818 | |||
| Book value per share | $ | 14.14 | $ | 13.78 | |||
| Three months ended | Six months ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||
| Portfolio Summary | 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Average finance receivables (1) | $ | 203,407 | $ | 232,021 | $ | 208,608 | $ | 236,024 | |||||||||
| Average indebtedness (2) | $ | 113,233 | $ | 139,929 | $ | 117,983 | $ | 144,486 | |||||||||
| Interest and fee income on finance receivables | $ | 14,064 | $ | 15,585 | $ | 28,215 | $ | 32,226 | |||||||||
| Interest expense | 1,569 | 2,298 | 3,218 | 4,786 | |||||||||||||
| Net interest and fee income on finance receivables | $ | 12,495 | $ | 13,287 | $ | 24,997 | $ | 27,440 | |||||||||
| Portfolio yield (3) | 27.66 | % | 26.87 | % | 27.05 | 27.31 | % | ||||||||||
| Interest expense as a percentage of average finance receivables | 3.09 | % | 3.96 | % | 3.09 | 4.06 | % | ||||||||||
| Provision for credit losses as a percentage of average finance receivables | 6.00 | % | 6.90 | % | 6.09 | 7.11 | % | ||||||||||
| Net portfolio yield (3) | 18.57 | % | 16.01 | % | 17.87 | 16.15 | % | ||||||||||
| Operating expenses as a percentage of average finance receivables | 15.99 | % | 15.39 | % | 14.84 | 15.17 | % | ||||||||||
| Pre-tax yield as a percentage of average finance receivables (4) | 2.58 | % | 0.62 | % | 3.03 | % | 0.98 | % | |||||||||
| Net charge-off percentage (5) | 5.56 | % | 11.40 | % | 5.79 | % | 10.01 | % | |||||||||
| Finance receivables | $ | 198,168 | $ | 222,320 | |||||||||||||
| Allowance percentage (6) | 5.79 | % | 6.07 | % | |||||||||||||
| Total reserves percentage (7) | 9.84 | % | 10.42 | % | |||||||||||||
Note: All three-month and six-month statement of income performance indicators expressed as percentages have been annualized.
| (1) | Average finance receivables represent the average of finance receivables throughout the period. |
| (2) | Average indebtedness represents the average outstanding borrowings under the Credit Facility. |
| (3) | Portfolio yield represents interest and fee income on finance receivables as a percentage of average finance receivables. Net portfolio yield represents (a) interest and fee income on finance receivables minus (b) interest expense minus (c) the provision for credit losses, as a percentage of average finance receivables. |
| (4) | Pre-tax yield represents net portfolio yield minus operating expenses, as a percentage of average finance receivables. |
| (5) | Net charge-off percentage represents net charge-offs (charge-offs less recoveries) divided by average finance receivables, outstanding during the period. |
| (6) | Allowance percentage represents the allowance for credit losses divided by finance receivables outstanding as of ending balance sheet date. |
| (7) | Total reserves percentage represents the allowance for credit losses, purchase price discount, and unearned dealer discounts divided by finance receivables outstanding as of ending balance sheet date. |
The following tables present certain information regarding the delinquency rates experienced by the Company with respect to automobile finance installment contracts (“Contracts”) and direct consumer loans (“Direct Loans”), excluding any Chapter 13 bankruptcy accounts:
(In thousands, except percentages)
| Contracts | Balance | ||||||||||||||||||||||||
| Outstanding | 30 – 59 days | 60 – 89 days | 90 – 119 days | 120+ | Total | ||||||||||||||||||||
| September 30, 2020 | $ | 185,287 | $ | 10,232 | $ | 3,962 | $ | 1,560 | $ | 42 | $ | 15,796 | |||||||||||||
| 5.52 | % | 2.14 | % | 0.84 | % | 0.02 | % | 8.53 | % | ||||||||||||||||
| September 30, 2019 | $ | 212,396 | $ | 13,981 | $ | 4,950 | $ | 1,946 | $ | 42 | $ | 20,919 | |||||||||||||
| 6.58 | % | 2.33 | % | 0.92 | % | 0.02 | % | 9.85 | % | ||||||||||||||||
| Direct Loans | Balance | ||||||||||||||||||||||||
| Outstanding | 30 – 59 days | 60 – 89 days | 90 – 119 days | 120+ | Total | ||||||||||||||||||||
| September 30, 2020 | $ | 12,715 | $ | 349 | $ | 159 | $ | 52 | $ | 0 | $ | 560 | |||||||||||||
| 2.74 | % | 1.25 | % | 0.41 | % | 0.00 | % | 4.40 | % | ||||||||||||||||
| September 30, 2019 | $ | 9,480 | $ | 219 | $ | 115 | $ | 56 | $ | 0 | $ | 390 | |||||||||||||
| 2.31 | % | 1.21 | % | 0.59 | % | 0.00 | % | 4.11 | % | ||||||||||||||||
The following table presents selected information on Contracts purchased and Direct Loans originated by the Company:
| Contracts | Direct Loans | ||||||||||||||||
| Three months ended | Three months ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| (Purchases in thousands) | (Originations in thousands) | ||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| Purchases/Originations | $ | 17,307 | $ | 20,104 | $ | 3,832 | $ | 2,988 | |||||||||
| Average APR | 23.5 | % | 23.5 | % | 29.2 | % | 27.4 | % | |||||||||
| Average discount | 6.8 | % | 7.9 | % | N/A | N/A | |||||||||||
| Average term (months) | 46 | 46 | 25 | 25 | |||||||||||||
| Average amount financed | $ | 10,127 | $ | 9,997 | $ | 4,147 | $ | 4,043 | |||||||||
| Number of contracts | 1,709 | 2,011 | 924 | 739 | |||||||||||||
| Contracts | Direct Loans | ||||||||||||||||
| Six months ended | Six months ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| (Purchases in thousands) | (Originations in thousands) | ||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| Purchases/Originations | $ | 34,103 | $ | 39,158 | $ | 6,259 | $ | 5,044 | |||||||||
| Average APR | 23.5 | % | 23.5 | % | 29.0 | % | 27.8 | % | |||||||||
| Average discount | 7.4 | % | 8.1 | % | N/A | N/A | |||||||||||
| Average term (months) | 46 | 47 | 26 | 25 | |||||||||||||
| Average amount financed | $ | 10,045 | $ | 10,034 | $ | 4,260 | $ | 3,904 | |||||||||
| Number of contracts | 3,395 | 3,903 | 1,479 | 1,285 | |||||||||||||
The following table presents selected information on the entire Contract and Direct Loan portfolios of the Company:
| Contracts | Direct Loans | ||||||||||||||||
| As of | As of | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| Portfolio | 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Average APR | 22.7 | % | 22.7 | % | 27.7 | % | 26.5 | % | |||||||||
| Average discount | 7.6 | % | 7.7 | % | N/A | N/A | |||||||||||
| Average term (months) | 51 | 52 | 27 | 27 | |||||||||||||
| Number of active contracts | 24,656 | 27,294 | 3,673 | 2,921 | |||||||||||||
| Contact: | Irina Nashtatik | NASDAQ: NICK |
| CFO Ph # (727)-726-0763 | Web site: www.nicholasfinancial.com |