Nicholas Financial (NICK) Reports Q3 EPS of ($0.09)

Nicholas Financial, Inc. (NASDAQ: NICK) announced a net loss for the three months ended December 31, 2021 of $0.7 million compared to net income of $3.8 million for the three months ended December 31, 2020. As announced on November 5, 2021 the Company entered into new senior secured credit facility. Concurrently, the Company recognized $1.9 million of additional interest expense related to previously incurred but unamortized debt issuance costs on the extinguishment of the Ares credit facility. Diluted net loss per share was $0.09 for the three months ended December 31, 2021 as compared to net income per share of $0.49 for the three months ended December 31, 2020. Interest and fee income on finance receivables decreased 7.1% to $12.2 million for the three months ended December 31, 2021 as compared to $13.2 million for the three months ended December 31, 2020. Total revenue declined 15.4% to $12.2 million for the three months ended December 31, 2021 as compared to $14.5 million during the three months ended December 31, 2020 in which the Company recognized $1.3 million realized and unrealized gain on equity investments. For the three months ended December 31, 2021 operating expenses increased to $8.9 million from $7.4 million when compared to the three months ended December 31, 2020, primarily due to an increase in the administrative, salaries, and employee benefits expenses. The Company reported loss before income taxes for the three months ended December 31, 2021 of $0.9 million compared to income before income taxes of $5.0 million for the three months ended December 31, 2020. The Company recorded an income tax benefit of approximately $0.2 million during the three months ended December 31, 2021 as compared to income tax expense of $1.2 million during the three months ended December 31, 2020.

The Company announced net income for the nine months ended December 31, 2021 of $2.6 million compared to net income of $6.5 million for the nine months ended December 31, 2020. As announced on November 5, 2021 the Company entered into new senior secured credit facility. Concurrently, the Company recognized $1.9 million of additional interest expense related to previously incurred but unamortized debt issuance costs on the extinguishment of the Ares credit facility. Diluted net income per share was $0.34 for the nine months ended December 31, 2021 as compared to net income per share of $0.85 for the nine months ended December 31, 2020. Interest and fee income on finance receivables decreased 9.6% to $37.4 million for the nine months ended December 31, 2021 as compared to $41.4 million for the nine months ended December 31, 2020. Total revenue declined 12.4% to $37.4 million for the nine months ended December 31, 2021 as compared to $42.7 million during the nine months ended December 31, 2020 in which the Company recognized $1.3 million realized and unrealized gain on equity investments. For the nine months ended December 31, 2021 operating expenses increased to $25.1 million from $22.9 million when compared to the nine months ended December 31, 2020, primarily due to an increase in salaries and employee benefits expenses. Provision for credit losses decreased to $3.8 million from $7.0 million for the nine months ended December 31, 2021 and 2020, respectively, due to a decrease in net charge-off percentage. The Company reported income before income taxes for the nine months ended December 31, 2021 of $3.6 million compared to income before income taxes of $8.2 million for the nine months ended December 31, 2020. The Company recorded an income tax expense of approximately $0.9 million during the nine months ended December 31, 2021 as compared to income tax expense of $1.7 million during the nine months ended December 31, 2020.

For the nine months ended December 31, 2021, the Company originated $79.9 million in finance receivables, collected $87.8 million in principal payments, reduced debt by $33.3 million and cash by $26.4 million.

“We are generally pleased with our financial results for the 3rd Quarter of Fiscal Year in spite of having to recognize a one-time, non-recurring, non-cash transaction of $1.9 million related to the closing of our credit facility with Ares,” commented Doug Marohn, president and CEO of Nicholas Financial. “This new credit facility provides us significant savings in that the credit spread decreased from 3.75% down to 2.25%, and 1% floor over LIBOR was replaced with zero floor over SOFR. Revolving structure of the facility allows us same-day access to capital and notably larger credit availability, which increased from $18.3 million to $77.6 million on the consecutive quarter-over-quarter basis. We also have eliminated additional monthly custodial and back-up servicing fees that existed under the ARES facility. The recognition of the $1.9 million acceleration of unamortized debt issuance costs as well as the additional administrative expenses associated with unwinding the custodial relationship and file warehousing made for significant one-time expense recognition of approximately $0.1 million. We believe the material cost savings of the new facility absolutely offset this initial expense recognition.”

“Additionally, we saw our payroll expenses increase by more than 10%,” Marohn went on to say. “First we increased our employee head count by almost 10%. This was to not only support our branch expansion efforts but also to staff support departments that have assisted in the origination growth we have and will continue to enjoy. Second, in this highly competitive employment market we are being proactive to ensure we are offering competitive compensation at all levels, allowing us to avoid significant turnover. So far our efforts on this second point have been particularly successful.”

“The continued positive portfolio results along with the large increase in both Direct and Indirect originations are the real news from this Quarter. We have not only outperformed year-over-year originations in both categories but have actually out produced each of the last 3 years for the same period. We recently opened our 47th office in Houston, TX,” continued Marohn. “We continue to pursue expansion efforts in several markets. We are maintaining historically low credit losses. We are starting to enjoy origination growth from both product lines. The increased investment and emphasis on employee training and development is yielding improved results. These are all positive indicators as we head into our 4th Quarter of this fiscal year.”

The following table presents selected information on Contracts purchased and Direct Loans originated by the Company:

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

NASDAQ: NICKWeb site: www.nicholasfinancial.com

Contact: Irina Nashtatik

CFO

Ph # (727)-726-0763

Source: Nicholas Financial, Inc.

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