Nicholas Financial Reports 3rd Quarter Fiscal Year 2020 Results

  • Originations year-over-year on new Contracts purchased for the three months ended December 31, 2019 increased by 15.2% compared to prior year third quarter, which included a bulk portfolio purchase of $1.1 million
  • Originations year-over-year on Direct Loans for the three months ended December 31, 2019 increased by 49.7% compared to prior year third quarter
  • Accounts 60+ days delinquent decreased to 4.0%, excluding Chapter 13 bankruptcy accounts, compared to 5.7% as of the prior year third quarter
  • Gross Portfolio Yield for the three months ended December 31, 2019 increased to 27.3% compared to 25.7% during the prior year third quarter
  • Interest and fee income on finance receivables for the three months ended December 31, 2019 decreased 10.6% due to a 15.9% decrease in average finance receivables, compared to prior year third quarter
  • Average APR on new Contracts purchased for the three months ended December 31, 2019 decreased to 23.3% compared to 23.5% during the prior year third quarter
  • Average APR on Direct Loan originations for the three months ended December 31, 2019 increased to 28.4% compared to 25.9% during the prior year third quarter

CLEARWATER, Fla., Feb. 06, 2020 (GLOBE NEWSWIRE) -- Nicholas Financial, Inc. (NASDAQ: NICK) announced net income for the three months ended December 31, 2019 of $0.3 million compared to net loss of $0.9 million for the three months ended December 31, 2018.  Diluted net income per share was $0.04 for the three months ended December 31, 2019 as compared to net loss per share of $0.12 for the three months ended December 31, 2018. Revenue decreased 10.6% to $15.0 million for the three months ended December 31, 2019 as compared to $16.7 million for the three months ended December 31, 2018. The Company reported income before income taxes for the three months ended December 31, 2019 of $0.5 million compared to net loss of $1.3 million for the three months ended December 31, 2018.   The Company recorded an income tax expense of approximately $0.2 million during the three months ended December 31, 2019 compared to an income tax benefit of $0.4 million during the three months ended December 31, 2018. 

Net income for the nine months ended December 31, 2019 of $1.2 million compared to $1.1 million for the nine months ended December 31, 2018.  Diluted net income per share was $0.15 for the nine months ended December 31, 2019 as compared to $0.14 for the nine months ended December 31, 2018. Revenue decreased 14.0% to $47.2 million for the nine months ended December 31, 2019 as compared to $54.9 million for the nine months ended December 31, 2018. The Company reported income before income taxes for the nine months ended December 31, 2019 of $1.7 million compared $1.4 million for the nine months ended December 31, 2018.   The Company recorded an income tax expense of approximately $0.5 million during the nine months ended December 31, 2019 compared to $0.3 million during the nine months ended December 31, 2018. 

“We are very pleased with the progress we have been making overall, and particularly pleased with the progress in our 3rd Quarter of Fiscal Year 2020.  On both new indirect contract purchases and direct loan volume we have outpaced year over year results for the 3rd Quarter and Year to Date,” Said Doug Marohn, CEO and president of Nicholas Financial, Inc.  “Our targeted efforts to improve same store sales, rollout our Direct Loan product to more states, continue new market expansion and be open to other strategic partnerships is yielding positive results.”

“In the 3rd Quarter we saw more than a 15% increase on Indirect purchases and nearly 50% increase on the Direct Loan production,” Marohn continued. “We also added an additional $1.1 million by way of a bulk portfolio purchase from another company in our space.  Our expansion efforts are underway in Las Vegas, Nevada in addition to the other areas previously identified.  We are in the process of initiating expansion in Salt Lake City, Utah; Boise, Idaho; and Des Moines, Iowa; just to name a few.”

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*
2020  5,656  $57,038  $10,089   23.4 %  7.9 %  47
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
4  2,814   29,254   10,396   23.3 %  7.9 %  50
3  2,365   27,378   11,577   21.7 %  6.9 %  54
2  2,239   25,782   11,515   22.0 %  7.3 %  55
1  2,349   27,161   11,563   22.3 %  7.6 %  55


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*
2020  2,422   9,534   3,919   28.0 %  24
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
4  380   1,445   3,752   25.0 %  29
3  622   2,218   3,566  25.2 %  28
2  501   1,953   3,897   25.1 %  29
1  533   2,026   3,801   25.4 %  30

 *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. is a publicly-traded specialty consumer finance company, operating branch locations in both Southeastern and Midwestern U.S. states. The Company has approximately 7.9 million shares of voting common stock outstanding. For an index of Nicholas Financial, Inc.’s news releases or to obtain a specific release, visit our web site at www.nicholasfinancial.com.

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


Cautionary Note regarding Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements 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, 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  Nine months ended
  December 31,  December 31,
  2019  2018  2019  2018
Revenue:                
Interest and fee income on finance receivables $14,973  $16,740  $47,199   $54,903
Expenses:                
Operating expenses  7,950   7,848   25,848    24,615
Provision for credit losses  4,597   7,870   12,982    21,670
Interest expense  1,886   2,303   6,672    7,228
Total expenses  14,433   18,021   45,502    53,513
Income (loss) before income taxes  540   (1,281)  1,697    1,390
Income tax expense (benefit)  229   (376)  527    293
Net income (loss) $311  $(905) $1,170   $1,097
Earnings (loss) per share:                
Basic $0.04  $(0.12) $0.15   $0.14
Diluted $0.04  $(0.12) $0.15   $0.14


Condensed Consolidated Balance Sheets

(Unaudited, In Thousands)

  December 31,  March 31,
  2019  2019
Cash and restricted cash $24,106  $37,642
Finance receivables, net  190,327   202,042
Other assets  13,289   12,736
Intangibles  65   -
Goodwill  295   -
Total assets $228,082  $252,420
Credit facility $116,768  $142,619
Other liabilities  5,322   4,916
Total liabilities  122,090   147,535
Shareholders’ equity  105,992   104,885
Total liabilities and shareholders’ equity $228,082  $252,420
Book value per share $13.37  $13.26


  Three months ended  Nine months ended  
  December 31,  December 31,  
  (In thousands)  (In thousands)  
Portfolio Summary 2019  2018  2019  2018  
Average finance receivables (1) $219,618  $261,036  $230,527   $279,023  
Average indebtedness (2) $119,518  $127,332  $136,164   $143,693  
Interest and fee income on finance receivables $14,973  $16,740  $47,199   $54,903  
Interest expense  1,886   2,303  $6,672   $7,228  
Net interest and fee income on finance receivables $13,087  $14,437  $40,527   $47,675  
Portfolio yield (3)  27.27 % 25.65 % 27.30 %  26.24 %
Interest expense as a percentage of average finance receivables  3.45 % 3.53 % 3.86 %  3.45 %
Provision for credit losses as a percentage of average finance receivables (7)  8.37 % 12.06 % 7.51 %  10.36 %
Net portfolio yield (3)  15.45 % 10.06 % 15.93 %  12.43 %
Operating expenses as a percentage of average finance receivables  14.48 % 12.03 % 14.95 %  11.76 %
Pre-tax yield as a percentage of average finance receivables (4)  0.97 % (1.97)% 0.98 %  0.67 %
Net charge-off percentage (5) (7)  8.84 % 10.84 % 9.63 %  10.49 %
Allowance percentage (6) (7)  6.04 % 7.65 % 5.76 %  7.16 %

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.
(6)Allowance percentage represents the allowance for credit losses divided by average finance receivables outstanding during the period.
(7)The Company completed bulk sales of charge-off accounts, which included $1.5 million of bankruptcy accounts and $0.1 million of non-performing accounts.  These bulk sales impacted the provision for credit losses, net charge-off, and allowance percentages for December 31, 2019.

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, 2019 $200,092  $16,748  $5,993   $2,279   $47   $25,067  
       8.37 % 3.00 %  1.14 %  0.02 %  12.53 %
December 31, 2018 $238,183  $19,552  $7,577   $3,919   $2,439   $33,487  
       8.21 % 3.18 %  1.65 %  1.02 %  14.06 %
       
Direct Loans Balance                         
  Outstanding  30 – 59 days  60 – 89 days   90 – 119 days   120+   Total  
December 31, 2019 $11,423  $331  $123   $68   $3   $525  
       2.90 % 1.08 %  0.60 %  0.03 %  4.60 %
December 31, 2018 $8,470  $189  $95   $35   $68   $387  
       2.23 % 1.12 %  0.41 %  0.80 %  4.57 %

As of March 2019, the Company changed its charge-off policy from 181 days past due to 121 days past due, which aligned with industry standards and the sub-prime nature of the customers.  In the event of repossession, the charge-off will occur in the month in which the vehicle is repossessed.  Based on these actions, improved servicing, and stricter underwriting policies, management has seen improvements in the delinquency rates.

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)  
  2019  2018  2019  2018  
Purchases/Originations $17,880  $16,476  $4,490   $2,999  
Average APR  23.3 % 23.5 %28.4 % 25.9 %
Average discount  7.6 % 8.1 %N/A   N/A  
Average term (months)  47   47   24    25  
Average amount financed $10,200  $10,139  $3,949   $4,063  
Number of contracts  1,753   1,625   1,137    738  
                   
  Contracts  Direct Loans  
  Nine months ended  Nine months ended  
  December 31,  December 31,  
  (Purchases in thousands)  (Originations in thousands)  
  2019  2018  2019  2018  
Purchases/Originations $57,038  $56,266  $9,534   $6,501  
Average APR  23.4 % 23.6 % 28.0 %  26.0 %
Average discount  7.9 % 8.3 %N/A   N/A  
Average term (months)  47   47   24    26  
Average amount financed $10,089  $10,164  $3,919   $3,829  
Number of contracts  5,656   5,533   2,422    1,682  

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 2019  2018  2019  2018  
Average APR  22.7 % 22.7 % 27.0 %  26.0 %
Average discount  7.65 % 7.46 %N/A   N/A  
Average term (months)  51  53  26   27  
Number of active contracts  25,995   29,061   3,376    2,641  

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