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Nicholas Financial Reports 3rd Quarter Fiscal Year 2021 Results

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Nicholas Financial, Inc.
·13 min read
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  • Income year-over-year before income taxes for the three months ended December 31, 2020 increased by 821.3% compared to prior year third quarter

  • Pre-tax yield as a percentage of average finance receivables for the three months ended December 31, 2020 increased to 7.63% compared to 0.98% during the prior year third quarter

  • Net Portfolio Yield for the three months ended December 31, 2020 increased to 23.0% compared to 15.5% during the prior year third quarter

  • Originations year-over-year on new Contracts purchased for the three months ended December 31, 2020 decreased by 14.5% compared to prior year third quarter

  • Originations year-over-year on Direct Loans for the three months ended December 31, 2020 increased by 2.6% compared to prior year third quarter

  • Accounts 60+ days delinquent decreased to 3.9%, excluding Chapter 13 bankruptcy accounts, compared to 4.0% as of the prior year third quarter

CLEARWATER, Fla., Feb. 03, 2021 (GLOBE NEWSWIRE) -- Nicholas Financial, Inc. (NASDAQ: NICK) announced net income for the three months ended December 31, 2020 of $3.8 million compared to $0.3 million for the three months ended December 31, 2019. Diluted net income per share was $0.49 for the three months ended December 31, 2020 as compared to $0.04 for the three months ended December 31, 2019. Total revenue decreased 3.3% to $14.5 million for the three months ended December 31, 2020 as compared to $15.0 million for the three months ended December 31, 2019, which included realized gains of $0.2 million and unrealized gains of $1.1 million on equity investments during the three months ended December 31, 2020. The Company reported income before income taxes for the three months ended December 31, 2020 of $5.0 million compared to $0.5 million for the three months ended December 31, 2019. The Company recorded an income tax expense of approximately $1.2 million during the three months ended December 31, 2020 compared to an income tax expense of $0.2 million during the three months ended December 31, 2019.

The Company announced net income for the nine months ended December 31, 2020 of $6.5 million compared to $1.2 million for the nine months ended December 31, 2019. Diluted net income per share was $0.85 for the nine months ended December 31, 2020 as compared to $0.15 for the nine months ended December 31, 2019. Total revenue decreased 9.5% to $42.7 million for the nine months ended December 31, 2020 as compared to $47.2 million for the nine months ended December 31, 2019, which included realized and unrealized gains of $1.3 million on equity investments during the nine months ended December 31, 2020. The Company reported income before income taxes for the nine months ended December 31, 2020 of $8.2 million compared to $1.7 million for the nine months ended December 31, 2019. The Company recorded an income tax expense of approximately $1.7 million during the nine months ended December 31, 2020 compared to $0.5 million during the nine months ended December 31, 2019.

For the nine months ended December 31, 2020, the Company originated $60.3 million in finance receivables, collected $87.5 million in principal payments, reduced debt by a net amount of $29.8 million, repurchased $0.7 million of common stock, and increased cash by $4.6 million.

“For the third consecutive Quarter we recognized near-record low losses and strong portfolio performance in terms of organic delinquency control,” stated Doug Marohn, President and CEO of Nicholas Financial, Inc. “We continue to enjoy these results without any increase in deferments and without the use of any special Covid-19 related customer assistance programs. Indirect sales finance originations continue to be soft, but our direct loan originations are strong.”

“The increase in core earnings is exciting and is a testament to our successful implementation and execution of Nicholas’ business strategy,” Marohn continued. “This unique and disciplined business model is being replicated in new markets as we look to continue our expansion. We have just completed several new offices expansions and continue to initiate expansion in several others states including Texas, Arizona, Utah, Idaho and New Mexico. This will allow us to be prepared to maximize originations potential when the market starts to return to normal levels.”

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

4,878

$

49,388

$

10,132

23.5

%

7.4

%

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

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

2,744

$

10,864

$

4,054

29.6

%

24

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

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

Nine months ended

December 31,

December 31,

2020

2019

2020

2019

Revenue:

Interest and fee income on finance receivables

$

13,180

$

14,973

$

41,395

$

47,199

Realized gain on equity investments

238

-

238

-

Unrealized gain on equity investments

1,056

-

1,101

-

Total revenue

14,474

14,973

42,734

47,199

Expenses:

Operating expenses

7,407

7,950

22,881

25,848

Provision for credit losses

650

4,597

7,000

12,982

Interest expense

1,442

1,886

4,660

6,672

Total expenses

9,499

14,433

34,541

45,502

Income before income taxes

4,975

540

8,193

1,697

Income tax expense

1,190

229

1,711

527

Net income

$

3,785

$

311

$

6,482

$

1,170

Earnings per share:

Basic

$

0.49

$

0.04

$

0.84

$

0.15

Diluted

$

0.49

$

0.04

$

0.85

$

0.15

Condensed Consolidated Balance Sheets
(Unaudited, In Thousands)

December 31,

March 31,

2020

2020

Cash and restricted cash

$

29,261

$

24,684

Equity investments with readily determinable fair values

4,286

-

Finance receivables, net

172,386

199,781

Repossessed assets

805

1,340

Operating lease right-of-use assets

2,940

2,598

Other assets

5,015

10,415

Total assets

$

214,693

$

238,818

Credit facility, net of debt issuance costs

$

91,547

$

124,255

Note payable

3,244

-

Operating lease liabilities

2,929

2,652

Other liabilities

3,513

4,332

Total liabilities

101,233

131,239

Shareholders’ equity

113,460

107,579

Total liabilities and shareholders’ equity

$

214,693

$

238,818

Book value per share

$

14.69

$

13.78


Three months ended

Nine months ended

December 31,

December 31,

(In thousands)

(In thousands)

Portfolio Summary

2020

2019

2020

2019

Average finance receivables (1)

$

192,966

$

219,618

$

203,996

$

230,527

Average indebtedness (2)

$

101,522

$

119,518

$

112,476

$

136,164

Interest and fee income on finance receivables

$

13,180

$

14,973

$

41,395

$

47,199

Interest expense

1,442

1,886

4,660

6,672

Net interest and fee income on finance receivables

$

11,738

$

13,087

$

36,735

$

40,527

Portfolio yield (3)

27.32

%

27.27

%

27.06

%

27.30

%

Interest expense as a percentage of average finance receivables

2.99

%

3.44

%

3.05

%

3.86

%

Provision for credit losses as a percentage of average finance receivables

1.35

%

8.37

%

4.58

%

7.51

%

Net portfolio yield (3)

22.98

%

15.46

%

19.43

%

15.93

%

Operating expenses as a percentage of average finance receivables

15.35

%

14.48

%

14.96

%

14.95

%

Pre-tax yield as a percentage of average finance receivables (4)

7.63

%

0.98

%

4.47

%

0.98

%

Net charge-off percentage (5)

6.30

%

8.84

%

5.94

%

9.63

%

Finance receivables

$

188,626

$

211,813

Allowance percentage (6)

4.81

%

6.27

%

Total reserves percentage (7)

8.76

%

10.35

%

Note: All three-month and nine-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, annualized for 12 months.
(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

December 31, 2020

$

174,170

$

12,914

$

4,955

$

2,117

$

28

$

20,014

7.41

%

2.84

%

1.22

%

0.02

%

11.49

%

December 31, 2019

$

200,092

$

16,748

$

5,993

$

2,279

$

47

$

25,067

8.37

%

3.00

%

1.14

%

0.02

%

12.53

%

Direct Loans

Balance

Outstanding

30 – 59 days

60 – 89 days

90 – 119 days

120+

Total

December 31, 2020

$

14,227

$

442

$

188

$

110

$

4

$

744

3.11

%

1.32

%

0.77

%

0.03

%

5.23

%

December 31, 2019

$

11,423

$

331

$

123

$

68

$

3

$

525

2.90

%

1.08

%

0.60

%

0.03

%

4.60

%

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

December 31,

December 31,

(Purchases in thousands)

(Originations in thousands)

2020

2019

2020

2019

Purchases/Originations

$

15,285

$

17,880

$

4,605

$

4,490

Average APR

23.4

%

23.3

%

30.9

%

28.4

%

Average discount

7.5

%

7.6

%

N/A

N/A

Average term (months)

46

47

22

24

Average amount financed

$

10,307

$

10,200

$

3,641

$

3,949

Number of contracts

1,483

1,753

1,265

1,137

Contracts

Direct Loans

Nine months ended

Nine months ended

December 31,

December 31,

(Purchases in thousands)

(Originations in thousands)

2020

2019

2020

2019

Purchases/Originations

$

49,388

$

57,038

$

10,864

$

9,534

Average APR

23.5

%

23.4

%

29.6

%

28.0

%

Average discount

7.4

%

7.9

%

N/A

N/A

Average term (months)

46

47

24

24

Average amount financed

$

10,132

$

10,089

$

4,054

$

3,919

Number of contracts

4,878

5,656

2,744

2,422


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

Contracts

Direct Loans

As of

As of

December 31,

December 31,

Portfolio

2020

2019

2020

2019

Average APR

22.7

%

22.7

%

28.4

%

27.0

%

Average discount

7.6

%

7.7

%

N/A

N/A

Average term (months)

51

51

26

26

Number of active contracts

23,388

25,995

4,126

3,376


Contact:
Irina Nashtatik
CFO
Ph # (727)-726-0763