Nicholas Financial Reports 1st Quarter Fiscal Year 2021 Results

Rhea-AI Summary

Nicholas Financial (NICK) reported a net income of $1.4 million for Q2 2020, up from $0.6 million year-over-year. The diluted earnings per share rose to $0.18 from $0.07. However, revenue declined by 15% to $14.2 million. The pre-tax yield increased to 3.5%, with income before income taxes at $1.9 million. While new loan originations decreased by 11.9%, direct loans increased by 18%. Delinquent accounts dropped to 2.5%, and the company added $3 million to reserves amid COVID-19 uncertainties. An annual meeting is scheduled for August 27, 2020.

Positive

• Net income increased by 133.2% year-over-year.
• Diluted earnings per share improved to $0.18.
• Pre-tax yield rose to 3.5%.
• Direct loan originations increased by 18%.

Negative

• Revenue decreased by 15% to $14.2 million.
• New loan originations decreased by 11.9%.
• Added $3 million to reserves due to pandemic concerns.

• Income year-over-year before income taxes for the three months ended June 30, 2020 increased by 133.2% compared to prior year first quarter
  
• Pre-tax yield for the three months ended June 30, 2020 increased to 3.5% compared to 1.4% during the prior year first quarter.
• Originations year-over-year on new Contracts purchased for the three months ended June 30, 2020 decreased by 11.9% compared to prior year first quarter
• Originations year-over-year on Direct Loans for the three months ended June 30, 2020 increased by 18.0% compared to prior year first quarter
• Accounts 60+ days delinquent decreased to 2.5%, excluding Chapter 13 bankruptcy accounts, compared to 3.0% as of the prior year first quarter
• Net Portfolio Yield for the three months ended June 30, 2020 increased to 17.2% compared to 16.6% during the prior year first quarter

CLEARWATER, Fla., July 30, 2020 (GLOBE NEWSWIRE) -- Nicholas Financial, Inc. (NASDAQ: NICK) announced net income for the three months ended June 30, 2020 of $1.4 million compared to $0.6 million for the three months ended June 30, 2019.  Diluted net income per share was $0.18 for the three months ended June 30, 2020 as compared to $0.07 for the three months ended June 30, 2019. Revenue decreased 15.0% to $14.2 million for the three months ended June 30, 2020 as compared to $16.6 million for the three months ended June 30, 2019. The Company reported income before income taxes for the three months ended June 30, 2020 of $1.9 million compared to $0.8 million for the three months ended June 30, 2019.  The Company recorded an income tax expense of approximately $0.4 million during the three months ended June 30, 2020 as compared to $0.2 million during the three months ended June 30, 2019.

During the quarter ended June 30, 2020, the Company originated $19.2 million in finance receivables, collected $28.4 million in principal payments, reduced debt by $4.6 million and increased cash by $7.6 million.

“There is no doubt that the Covid-19 pandemic had an impact on our operations overall and particularly on our new loan originations,” commented Nicholas’ president and CEO, Doug Marohn.  “However, times like these prove out our business concepts and validate our branch-based model nicely.  We finance primary transportation to and from work for the subprime borrower through the local independent dealer.  Our loans tend to be smaller than most of our competitors and therefore payments are lower and exposure on those accounts is shorter.  The vehicle is one that they need – not just want - and the payments are affordable even in times of economic crisis.  Our local presence allows us to maintain a better relationship with the customer, as well.” 

“Although the pandemic had an early negative impact on new loans and originations in April and May, we were able to outproduce both 2018’s and 2019’s loan volume for the month of June.  From a portfolio management perspective, we enjoyed decreases in 31+ delinquency, 61+ delinquency, repossessions and losses,” continued Marohn.  “Out of an abundance of caution we added over $3 million of provision expense to bolster our reserves in case the pandemic has a more negative impact on our receivables in the upcoming Quarters.  Even with the $3 million of provision expense, we were able to turn out the best earnings Quarter in recent history.”

The 2020 Annual General Meeting of Shareholders of Nicholas Financial, Inc. will be held at the Company’s corporate headquarters, located at 2454 McMullen Booth Road, Building C, Clearwater, Florida, on Thursday, August 27, 2020, at 10:30 a.m. (Clearwater, Florida time).  Due to the COVID-19 epidemic, the Company has also elected to have concurrently a virtual shareholder meeting this year for the safety of its shareholders, partners, and board.  The URL Path for the virtual meeting is www.issuerdirect.com/virtualevent/nick.

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			1,686			$	16,796			$	9,962				23.5		%			8.0		%			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
2018			9,767			$	109,575			$	11,219				22.4		%			7.4		%			54

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			555			$	2,427			$	4,373				28.7		%			26
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
2018			2,036			$	7,642			$	3,754			25.2			%			29

*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 both 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, 2019.  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
		June 30,
		2020				2019
Revenue:
Interest and fee income on finance receivables		$	14,151			$	16,641
Expenses:
Operating expenses			7,343				8,971
Provision for credit losses			3,300				4,385
Interest expense			1,649				2,488
Total expenses			12,292				15,844
Income before income taxes			1,859				797
Income tax expense			429				206
Net income		$	1,430			$	591
Earnings per share:
Basic		$	0.18			$	0.07
Diluted		$	0.18			$	0.07

Condensed Consolidated Balance Sheets
(Unaudited, In Thousands)

		June 30,				March 31,
		2020				2020
Cash and restricted cash		$	32,318			$	24,684
Finance receivables, net			189,328				199,781
Repossessed assets			1,073				1,340
Operating lease right-of-use assets			2,413				2,598
Other assets			9,986				10,415
Total assets		$	235,118			$	238,818
Credit facility, net of debt issuance costs		$	116,532			$	124,255
Note payable			3,244				-
Operating lease liabilities			2,410				2,652
Other liabilities			3,857				4,332
Total liabilities			126,043				131,239
Shareholders’ equity			109,075				107,579
Total liabilities and shareholders’ equity		$	235,118			$	238,818
Book value per share		$	13.98			$	13.78

		Three months ended
		June 30,
		(In thousands)
Portfolio Summary		2020				2019
Average finance receivables (1)		$	213,859			$	235,172
Average indebtedness (2)		$	122,786			$	149,043
Interest and fee income on finance receivables		$	14,151			$	16,641
Interest expense			1,649				2,488
Net interest and fee income on finance receivables		$	12,502			$	14,153
Portfolio yield (3)			26.47		%		28.30		%
Interest expense as a percentage of average finance receivables			3.08		%		4.23		%
Provision for credit losses as a percentage of average finance receivables			6.17		%		7.46		%
Net portfolio yield (3)			17.22		%		16.61		%
Operating expenses as a percentage of average finance receivables			13.73		%		15.26		%
Pre-tax yield as a percentage of average finance receivables (4)			3.49		%		1.35		%
Net charge-off percentage (5)			6.01		%		8.93		%
Finance receivables		$	208,808			$	235,931
Allowance percentage (6)			5.39		%		6.83		%
Total reserves percentage (7)			9.56		%		11.42		%

Note: All three-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
June 30, 2020		$	196,943			$	9,584			$	3,595			$	1,334			$	26			$	14,539
							4.87		%		1.83		%		0.68		%		0.01		%		7.39		%
June 30, 2019		$	226,711			$	13,566			$	5,302			$	1,627			$	10			$	20,505
							5.98		%		2.34		%		0.72		%		0.00		%		9.04		%
Direct Loans		Balance
		Outstanding				30 – 59 days				60 – 89 days				90 – 119 days				120+				Total
June 30, 2020		$	11,684			$	244			$	81			$	79			$	0			$	404
							2.09		%		0.69		%		0.68		%		0.00		%		3.46		%
June 30, 2019		$	8,698			$	228			$	103			$	46			$	0			$	377
							2.62		%		1.18		%		0.53		%		0.00		%		4.33		%

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
		June 30,								June 30,
		(Purchases in thousands)								(Originations in thousands)
		2020				2019				2020				2019
Purchases/Originations		$	16,796			$	19,054			$	2,427				$	2,056
Average APR			23.5		%		23.4		%	28.7			%		28.2			%
Average discount			8.0		%		8.3		%	N/A					N/A
Average term (months)			46				47				26					24
Average amount financed		$	9,962			$	10,071			$	4,373				$	3,765
Number of contracts			1,686				1,892				555					546

The following table presents selected information on the entire Contract and Direct Loan portfolios of the Company:

		Contracts								Direct Loans
		As of								As of
		June 30,								June 30,
Portfolio		2020				2019				2020				2019
Average APR			22.6		%		22.6		%		27.4		%			26.2		%
Average discount			7.62		%		7.65		%	N/A					N/A
Average term (months)			51			52				27					27
Number of active contracts			25,931				28,631				3,412					2,763

Contact:	Irina Nashtatik		NASDAQ: NICK
	CFO		Web site: www.nicholasfinancial.com
	Ph #  (727)-726-0763

FAQ

What were Nicholas Financial's earnings results for Q2 2020?

Nicholas Financial reported a net income of $1.4 million for Q2 2020, compared to $0.6 million in Q2 2019.

How did COVID-19 impact Nicholas Financial's operations?

COVID-19 affected new loan originations negatively in April and May, although loan volume rebounded in June.

What is the stock symbol for Nicholas Financial?

The stock symbol for Nicholas Financial is NICK.

When is Nicholas Financial's Annual General Meeting?

The Annual General Meeting is scheduled for August 27, 2020.

What was the decline in revenue for Nicholas Financial in Q2 2020?

Revenue declined by 15% to $14.2 million in Q2 2020 compared to the previous year.