Nicholas Financial Reports 1st Quarter Fiscal Year 2023 Results

Rhea-AI Summary

Nicholas Financial (NASDAQ: NICK) reported a net loss of $1.8 million for the three months ending June 30, 2022, compared to a net income of $1.7 million in the same period last year. The diluted loss per share was $0.24 versus a profit of $0.22 in 2021. Despite these losses, the company saw a 10.1% increase in originations for new contracts and a 43.2% rise in direct loans. Interest income declined by 4.2% to $12.1 million. The firm aims to reduce operating expenses amidst rising delinquencies and capital costs, having initiated a branch consolidation plan.

Positive

• 10.1% increase in originations on new contracts year-over-year.
• 43.2% growth in originations on direct loans year-over-year.
• Finance receivables increased by $0.8 million.

Negative

• Net loss of $1.8 million compared to net income of $1.7 million in 2021.
• Diluted net loss per share of $0.24, down from diluted net income of $0.22.
• 4.2% decrease in interest and fee income on finance receivables.

• Originations year-over-year on new Contracts purchased for the three months ended June 30, 2022 increased by 10.1% compared to prior year first quarter.
• Originations year-over-year on Direct Loans for the three months ended June 30, 2022 increased by 43.2% compared to prior year first quarter.
• Finance Receivables, net grew by $0.8 million or 0.5% for the three months ended June 30, 2022.
  

CLEARWATER, Fla., July 29, 2022 (GLOBE NEWSWIRE) -- Nicholas Financial, Inc. (NASDAQ: NICK) announced a net loss for the three months ended June 30, 2022 of $1.8 million compared to net income of $1.7 million for the three months ended June 30, 2021. Diluted net loss per share was $0.24 for the three months ended June 30, 2022 as compared to diluted net income per share of $0.22 for the three months ended June 30, 2021. Interest and fee income on finance receivables decreased 4.2% to $12.1 million for the three months ended June 30, 2022 as compared to $12.6 million for the three months ended June 30, 2021. The Company total revenue included an unrealized loss of $0.8 million on equity investments in the three month ended June 30, 2022. The Company reported a loss before income taxes for the three months ended June 30, 2022 of $2.4 million compared to income before income taxes of $2.3 million for the three months ended June 30, 2021. The Company recorded an income tax benefit of approximately $0.6 million during the three months ended June 30, 2022 as compared to income tax expense of $0.6 million during the three months ended June 30, 2021.

For the quarter ended June 30, 2022, the Company originated $30.6 million in finance receivables, collected $28.3 million in principal payments, purchased $7.2 million of equity investments, increased debt by $11.8 million and decreased cash by $1.2 million.

“While we ended up with a net loss of $1.8 million this fiscal quarter, we increased our finance receivables by $1.3 million with a total of $30.6 million originated. Our underwriting and servicing were top priorities through the quarter, as we adhered to our core policies and procedures to ensure quality and compliance.” commented Mike Rost, interim CEO of Nicholas Financial.

“Adding another quarter of receivable growth is a great accomplishment for the Company, but the net financial results highlighted the need for an urgent reduction in operating expenses, especially in the environment of rising delinquencies and capital costs. As previously announced in July 2022, we executed a branch consolidation plan affecting several markets along with right-sizing the remaining branch network. We believe that this initiative will allow the Company to be better positioned for the possible economic downturn,” concluded Rost.

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*
	2023				1,935			$	22,354			$	11,552				22.9		%			6.6		%			48
	1				1,935				22,354				11,552				22.9		%			6.6		%			48
	2022				7,793			$	85,804			$	11,002				23.1		%			6.9		%			47
	4				2,404				27,139				11,289				22.9		%			6.9		%			47
	3				1,735				19,480				11,228				23.1		%			6.8		%			47
	2				1,707				18,880				11,061				23.0		%			6.7		%			47
	1				1,947				20,305				10,429				23.2		%			7.0		%			46
	2021				7,307			$	74,025			$	10,135				23.4		%			7.5		%			46
	4				2,429				24,637				10,143				23.2		%		7.5			%			46
	3				1,483				15,285				10,307				23.4		%			7.5		%			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

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*
	2023				1,990					$	8,215			$	4,128				31.2		%			25
	1				1,990						8,215				4,128				31.2		%			25
	2022				6,770					$	28,740			$	4,307				30.5		%			26
	4				1,584						7,458				4,708				30.0		%			27
	3				2,282						8,505				3,727			31.8			%			24
	2				1,588						7,040				4,433				30.0		%			26
	1				1,316						5,737				4,359			30.1			%			25
	2021				3,497					$	14,148			$	4,131				29.6		%			25
	4				753						3,284				4,362			29.6			%			25
	3				1,265						4,605				3,641			30.9			%			22
	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

*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

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 28may 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, the Securities and Exchange Commission (SEC), Department of Justice, 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; 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 line of credit 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). 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,
		2022				2021
Revenue:
Interest and fee income on finance receivables		$	12,064			$	12,594
Unrealized losses on equity investments			(787	)			-
Total Revenue		$	11,277			$	12,594
Expenses:
Operating expenses			9,469				8,348
Provision for credit losses			3,644				730
Interest expense			568				1,188
Total expenses			13,681				10,266
(Loss)/Income before income taxes			(2,404	)			2,328
Income tax (benefit)/expense			(627	)			599
Net (Loss)/Income		$	(1,777	)		$	1,729
(Loss)/Earnings per share:
Basic		$	(0.24	)		$	0.22
Diluted		$	(0.24	)		$	0.22

Condensed Consolidated Balance Sheets
(Unaudited, In Thousands)

		June 30,				March 31,
		2022				2022
Cash		$	3,551			$	4,775
Equity investments			6,449				-
Finance receivables, net			169,380				168,600
Repossessed assets			988				658
Operating lease right-of-use assets			4,084				4,277
Other assets			5,896				5,260
Total assets		$	190,348			$	183,570
Line of credit, net of debt issuance costs		$	69,831			$	54,813
Note payable			-				3,244
Operating lease liabilities			4,228				4,410
Other liabilities			3,967				4,717
Total liabilities			78,026				67,184
Shareholders’ equity			112,322				116,386
Total liabilities and shareholders’ equity		$	190,348			$	183,570
Book value per share		$	15.36			$	15.42

		Three months ended
		June 30,
		(In thousands)
Portfolio Summary		2022				2021
Average finance receivables (1)		$	179,455			$	181,970
Average indebtedness (2)		$	60,829			$	79,217
Interest and fee income on finance receivables		$	12,064			$	12,594
Interest expense			568				1,188
Net interest and fee income on finance receivables		$	11,496			$	11,406
Portfolio yield (3)			26.89		%		27.68		%
Interest expense as a percentage of average finance receivables			1.27		%		2.61		%
Provision for credit losses as a percentage of average finance receivables			8.12		%		1.60		%
Net portfolio yield (3)			17.50		%		23.47		%
Operating expenses as a percentage of average finance receivables			21.11		%		18.35		%
Pre-tax yield as a percentage of average finance receivables (4)			(3.61	)	%		5.12		%
Net charge-off percentage (5)			6.48		%		3.59		%
Finance receivables		$	180,053			$	180,823
Allowance percentage (6)			2.05		%		2.90		%
Total reserves percentage (7)			5.95		%		7.01		%

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 daily outstanding borrowings under the line of credit. Average indebtedness does not include the PPP loan.
(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 dates.
(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, 2022		$	153,029			$	8,958			$	4,041				$	1,448				$	29				$	14,476
							5.85		%		2.64		%			0.95		%			0.02		%			9.46		%
June 30, 2021		$	164,929			$	7,087			$	2,575				$	644				$	10				$	10,316
							4.30		%		1.56		%			0.39		%			0.01		%			6.26		%
Direct Loans		Balance
		Outstanding				30 – 59 days				60 – 89 days					90 – 119 days					120+					Total
June 30, 2022		$	26,779			$	889			$	300				$	187				$	0				$	1,376
							3.32		%		1.12		%			0.70		%			0.00		%			5.14		%
June 30, 2021		$	15,721			$	285			$	70				$	53				$	0				$	408
							1.81		%		0.45		%			0.34		%			0.00		%			2.60		%

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)
		2022				2021				2022				2021
Purchases/Originations		$	22,354			$	20,305			$	8,215				$	5,737
Average APR			22.9		%		23.2		%	31.2			%		30.1			%
Average discount			6.6		%		7.0		%	N/A					N/A
Average term (months)			48				46				25					25
Average amount financed		$	11,552			$	10,429			$	4,128				$	4,359
Number of contracts			1,935				1,947				1,990					1,316

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		2022				2021				2022				2021
Average APR			22.9		%		22.8		%		29.9		%			28.8		%
Average discount			7.3		%		7.5		%	N/A					N/A
Average term (months)			50			50				27					27
Number of active contracts			18,959				21,995				7,096					4,354

FAQ

What were Nicholas Financial's earnings results for Q2 2022?

Nicholas Financial reported a net loss of $1.8 million for Q2 2022, compared to a net income of $1.7 million in Q2 2021.

How did Nicholas Financial's direct loans perform in Q2 2022?

Nicholas Financial saw a 43.2% increase in direct loan originations year-over-year for the three months ended June 30, 2022.

What is Nicholas Financial's stock symbol?

Nicholas Financial is traded under the stock symbol NICK on NASDAQ.

What steps is Nicholas Financial taking to address its financial losses?

The company is implementing a branch consolidation plan and aiming to reduce operating expenses due to rising delinquencies and capital costs.