On July 26, 2024, World Acceptance Corp (WRLD, Financial) released its 8-K filing detailing the financial results for the first quarter of fiscal 2025. World Acceptance Corp operates a small-loan consumer finance business, offering short-term small installment loans, medium-term larger installment loans, related credit insurance, and ancillary products and services to individuals. The company also provides income tax return preparation services to its loan customers and other individuals.
Performance Overview
World Acceptance Corp reported a net income of $9.9 million for the first quarter of fiscal 2025, up from $9.5 million in the same quarter of the previous year. This translates to a diluted net income per share of $1.79, surpassing the analyst estimate of $1.69. However, total revenues fell short of expectations, coming in at $129.5 million, a 7.0% decrease from $139.3 million in the prior year and below the estimated $141.00 million.
Key Financial Metrics
Despite the revenue shortfall, the company saw improvements in several key areas:
- Recency delinquency on accounts 90+ days past due improved to 3.4% from 3.5% year-over-year.
- Gross loans outstanding decreased by 8.8% year-over-year to $1.275 billion.
- Net charge-offs decreased by $4.1 million to $38.7 million.
- General and administrative expenses decreased by 9.9% to $61.4 million.
Challenges and Strategic Focus
The company faced a decline in total revenues, driven by a 4.7% drop in interest and fee income and a 19.4% decrease in insurance income. The gross loan portfolio also saw a reduction, with a notable 8.8% year-over-year decline. The customer base decreased by 2.6% over the past twelve months, although this was an improvement compared to a 14.8% decrease in the previous year.
Income Statement Highlights
Net income for the quarter increased to $9.9 million from $9.5 million in the same quarter of the prior year. Total revenues for the first quarter of fiscal 2025 were $129.5 million, down from $139.3 million in the same quarter of the previous year. Interest and fee income declined to $111.2 million from $116.6 million, while insurance income decreased to $12.9 million from $16.0 million.
Balance Sheet and Cash Flow
The company's allowance for credit losses as a percentage of net loans receivable was 11.6% at June 30, 2024, compared to 12.7% at June 30, 2023. General and administrative expenses decreased by $6.7 million, or 9.9%, to $61.4 million. Personnel expenses also saw a reduction, decreasing by $4.8 million, or 11.5%.
Portfolio and Customer Metrics
Gross loans outstanding were $1.275 billion as of June 30, 2024, an 8.8% decrease from $1.398 billion as of June 30, 2023. The customer base decreased by 2.6% during the twelve-month period ended June 30, 2024. The number of unique borrowers in the portfolio increased by 0.5% during the quarter ended June 30, 2024.
| Customer Type | Q1 FY 2025 | Q1 FY 2024 | Q1 FY 2023 |
|---|---|---|---|
| New Customers | $31,834,005 | $34,647,578 | $68,465,774 |
| Former Customers | $90,318,862 | $97,806,668 | $117,241,356 |
| Refinance Customers | $559,874,646 | $588,767,136 | $746,740,124 |
Management Commentary
"Management believes that continuing to carefully invest in our best customers and closely monitoring performance has strengthened the Company's financial position and positioned us well for the remainder of the fiscal year."
Conclusion
World Acceptance Corp's first quarter results for fiscal 2025 present a mixed picture. While the company managed to exceed earnings per share estimates, it fell short on revenue expectations. The conservative lending approach and focus on credit quality have yielded some positive outcomes, but challenges remain in terms of revenue growth and customer base expansion. Investors will be keen to see how the company navigates these challenges in the coming quarters.
Explore the complete 8-K earnings release (here) from World Acceptance Corp for further details.
