On October 25, 2024, World Acceptance Corp (WRLD, Financial) released its 8-K filing detailing the financial results for the second quarter of fiscal 2025. The company, which operates a small-loan consumer finance business, reported a notable increase in earnings per share (EPS) but faced a decline in total revenue.
Financial Performance Overview
World Acceptance Corp (WRLD, Financial) reported a net income of $22.1 million for the second quarter of fiscal 2025, up from $16.1 million in the same quarter of the previous year. This resulted in an EPS of $3.99, significantly exceeding the analyst estimate of $1.99. However, total revenues decreased by 4.0% to $131.4 million, falling short of the estimated $139.52 million.
Loan Portfolio and Customer Dynamics
The company's gross loans outstanding as of September 30, 2024, were $1.30 billion, a 6.1% decrease from the previous year. Despite this, there was a sequential increase of 1.7% from the previous quarter. The customer base saw a slight decrease of 0.1% over the year, but the number of unique borrowers increased by 3.6% during the quarter.
Revenue and Income Analysis
Interest and fee income declined by 2.6% to $113.9 million, while insurance income saw a significant drop of 20.5% to $12.3 million. The large loan portfolio's share of the overall portfolio decreased from 56.7% to 52.1% year-over-year. Despite these declines, other income increased by 17.5% to $5.2 million.
Expense Management and Profitability
World Acceptance Corp (WRLD, Financial) managed to reduce general and administrative expenses by 26.4% to $46.4 million, contributing to the improved net income. Personnel expenses saw a substantial decrease of 43.4%, largely due to a $14.6 million reduction in incentive expenses.
Credit Losses and Risk Management
The provision for credit losses increased to $46.7 million from $40.5 million in the previous year, reflecting growth and higher expected loss rates. Net charge-offs also rose slightly to $41.9 million. However, accounts 61 days or more past due decreased to 5.6% from 5.9% a year earlier, indicating some improvement in credit quality.
Strategic Initiatives and Shareholder Returns
During the quarter, World Acceptance Corp (WRLD, Financial) repurchased 85,843 shares of its common stock for approximately $10.0 million, demonstrating a commitment to returning value to shareholders. The company also reduced its debt, with interest expenses decreasing by 16.6% due to lower average debt outstanding.
Conclusion
World Acceptance Corp (WRLD, Financial) has shown resilience in its earnings performance despite challenges in revenue growth. The company's focus on credit quality and expense management has bolstered its financial position, although the decline in revenue and increased credit loss provisions highlight ongoing challenges in the consumer finance sector.
Explore the complete 8-K earnings release (here) from World Acceptance Corp for further details.
