World Acceptance (WRLD) - 2026 Q1 - Quarterly Report

GLOSSARY OF DEFINED TERMS Glossary This section provides definitions for key terms used throughout the report, including various stock option and incentive plans, accounting standards, and financial metrics, to ensure clarity and consistent understanding - The glossary defines terms such as '2008 Plan', '2011 Plan', '2017 Plan' (stock option plans), 'ASC' (Accounting Standards Codification), 'ASU' (Accounting Standards Update), 'CECL' (Current Expected Credit Loss), 'CFPB' (U.S. Consumer Financial Protection Bureau), 'EPS' (Earnings per share), 'GAAP' (U.S. generally accepted accounting principles), 'Notes' ($300 million 7.0% unsecured senior notes due November 2026), 'Performance Options', 'Performance Shares', 'Restricted Stock', 'Service Options', and 'TAL' (Tax Advance Loan)[12] PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) This section presents the Company's unaudited consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with comprehensive notes detailing accounting policies, fair value measurements, loan portfolio performance, debt, income taxes, and subsequent events for the periods ended June 30, 2025, and June 30, 2024 Consolidated Balance Sheets Consolidated Balance Sheets | Metric | June 30, 2025 ($) | March 31, 2025 ($) | | :-------------------------------- | :------------------ | :------------------- | | Cash and cash equivalents | 8,126,292 | 9,730,296 | | Gross loans receivable | 1,264,340,621 | 1,225,635,918 | | Loans receivable, net | 829,098,570 | 812,968,685 | | Total assets | 1,024,056,405 | 1,007,627,647 | | Senior notes payable | 302,673,702 | 262,451,475 | | Senior unsecured notes payable, net | 169,064,077 | 184,418,211 | | Total liabilities | 596,205,067 | 568,147,183 | | Total shareholders' equity | 427,851,338 | 439,480,464 | Consolidated Statements of Operations Consolidated Statements of Operations | Metric | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Interest and fee income | 115,302,802 | 111,161,086 | 4,141,716 | 3.7% | | Insurance and other income, net | 17,149,118 | 18,366,180 | (1,217,062) | (6.6%) | | Total revenues | 132,451,920 | 129,527,266 | 2,924,654 | 2.3% | | Provision for credit losses | 50,515,969 | 45,419,007 | 5,096,962 | 11.2% | | Total general and administrative expenses | 70,360,252 | 61,412,324 | 8,947,928 | 14.6% | | Interest expense | 9,629,883 | 9,768,771 | (138,888) | (1.4%) | | Total expenses | 130,506,104 | 116,600,102 | 13,906,002 | 11.9% | | Income before income taxes | 1,945,816 | 12,927,164 | (10,981,348) | (85.0%) | | Income tax expense | 601,749 | 2,979,737 | (2,377,988) | (79.8%) | | Net income | 1,344,067 | 9,947,427 | (8,603,360) | (86.5%) | | Basic EPS | 0.26 | 1.82 | (1.56) | (85.7%) | | Diluted EPS | 0.25 | 1.79 | (1.54) | (86.0%) | Consolidated Statements of Shareholders' Equity Consolidated Statements of Shareholders' Equity | Metric | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Balances at March 31 | 439,480,464 | 424,427,216 | | Proceeds from exercise of stock options | 1,566,318 | 686,382 | | Common stock repurchases | (13,018,311) | (11,254,770) | | Stock-based compensation (reversal) related to restricted stock, net of cancellations | (1,797,081) | (1,338,807) | | Stock-based compensation related to stock options | 275,881 | 143,720 | | Net income | 1,344,067 | 9,947,427 | | Balances at June 30 | 427,851,338 | 422,611,168 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows | Cash Flow Activity | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Net cash provided by operating activities | 58,153,047 | 48,410,927 | | Net cash used in investing activities | (68,268,213) | (35,868,956) | | Net cash provided by (used in) financing activities | 8,511,162 | (13,262,293) | | Net change in cash and cash equivalents | (1,604,004) | (720,322) | | Cash and cash equivalents at beginning of period | 9,730,296 | 11,839,460 | | Cash and cash equivalents at end of period | 8,126,292 | 11,119,138 | Notes to Consolidated Financial Statements NOTE 1 – BASIS OF PRESENTATION The consolidated financial statements are unaudited and prepared in accordance with Form 10-Q, relying on management's estimates and assumptions. They should be read in conjunction with the Company's audited consolidated financial statements for the fiscal year ended March 31, 2025, included in the fiscal 2025 Annual Report on Form 10-K - The financial statements are unaudited and include adjustments of a normal, recurring nature, with results for interim periods not necessarily indicative of full-year results[25] - Preparation of financial statements requires management to make estimates and assumptions, which could differ from actual results[26] - Disclosures are adequate to prevent misleading information and should be read with the fiscal 2025 Annual Report on Form 10-K[27] NOTE 2 – SUMMARY OF SIGNIFICANT POLICIES This note outlines the Company's core business as a small-loan consumer finance provider, its seasonal operational trends, and key accounting policies for loans receivable and credit losses. It also addresses segment reporting, identifying consumer finance as the sole reportable segment, and discusses recently issued accounting standards under evaluation - The Company is a small-loan consumer finance company offering short-term and medium-term loans, related credit insurance, ancillary products, and income tax return preparation services[28] - Loan demand is highest from October through December (Q3) and lowest from January to March (Q4), leading to significant seasonal fluctuations in operating results and cash needs[29] - The Company has one reportable segment: the consumer finance segment, with other revenue-generating activities integrated within the existing branch network[38] - Management is evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses) to determine their impact on consolidated financial statements[40][42] NOTE 3 – FAIR VALUE This note describes the Company's fair value measurements for financial instruments, categorizing them into a three-level hierarchy based on input observability. Cash and cash equivalents are Level 1, senior unsecured notes payable are Level 2, and loans receivable and senior notes payable are Level 3 - Fair value measurements are grouped into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[46] Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities (June 30, 2025) | Input Level | Financial Instrument | Carrying Value ($) | Estimated Fair Value ($) | | :---------- | :------------------- | :----------------- | :----------------------- | | 1 | Cash and cash equivalents | 8,126,292 | 8,126,292 | | 3 | Loans receivable, net | 829,098,570 | 829,098,570 | | 2 | Senior unsecured notes payable, net | 169,064,077 | 168,981,236 | | 3 | Senior notes payable | 302,673,702 | 302,673,702 | NOTE 4 – LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES This note provides a detailed analysis of the Company's gross loans receivable, segmented by customer tenure and payment performance (recency and contractual basis). It also outlines the methodology for the allowance for credit losses, noting an increase due to seasonally driven expected loss rates, and presents a roll forward of the allowance and charge-off data Gross Loans Receivable by Customer Tenure (June 30, 2025) | Customer Tenure | Amount ($) | | :-------------- | :--------- | | 0 to 5 months | 90,769,121 | | 6 to 17 months | 93,051,287 | | 18 to 35 months | 98,386,262 | | 36 to 59 months | 142,981,865 | | 60+ months | 836,171,692 | | TALs | 2,980,394 | | Total | 1,264,340,621 | Allowance for Credit Losses Roll Forward (Three months ended June 30, 2025 vs 2024) | Metric | 2025 ($) | 2024 ($) | Change ($) | | :-------------------- | :--------- | :--------- | :--------- | | Beginning balance | 103,347,129 | 102,962,811 | 384,318 | | Provision for credit losses | 50,515,969 | 45,419,007 | 5,096,962 | | Charge-offs | (49,497,349) | (43,889,454) | (5,607,895) | | Recoveries | 4,661,279 | 5,150,999 | (489,720) | | Net charge-offs | (44,836,070) | (38,738,455) | (6,097,615) | | Ending Balance | 109,027,028 | 109,643,363 | (616,335) | - The increase in the allowance for credit losses from March 31, 2025, to June 30, 2025, was primarily due to a seasonally driven increase in expected loss rates during the period[59] NOTE 5 – LEASES This note details the Company's accounting policies for operating leases, which primarily cover office space and equipment. It provides a breakdown of lease costs and other lease-related information, including weighted-average lease terms and discount rates, for the three months ended June 30, 2025, and 2024 Lease Cost and Other Lease Information (Three months ended June 30, 2025 vs 2024) | Metric | 2025 ($) | 2024 ($) | | :-------------------------------- | :--------- | :--------- | | Operating lease cost | 6,317,365 | 6,179,179 | | Variable lease cost | 954,602 | 1,088,833 | | Total lease cost | 7,271,967 | 7,268,012 | | Weighted average remaining lease term — operating leases | 6.4 years | 6.7 years | | Weighted-average discount rate — operating leases | 7.1 % | 6.4 % | - The total undiscounted lease liability for operating leases as of June 30, 2025, was $96,079,706[74] NOTE 6 – AVERAGE SHARE INFORMATION This note presents the basic and diluted weighted average common shares outstanding for the three months ended June 30, 2025, and 2024, which are used in EPS calculations Weighted Average Common Shares Outstanding (Three months ended June 30, 2025 vs 2024) | Metric | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Basic weighted average common shares outstanding | 5,224,004 | 5,480,205 | | Diluted weighted average common shares outstanding | 5,288,643 | 5,567,818 | NOTE 7 – STOCK-BASED COMPENSATION This note details the Company's stock incentive plans, including Service Options, Performance Options, Restricted Stock, and Performance Shares. It outlines vesting conditions, EPS targets, and the recognition of stock-based compensation expense, noting a significant reversal in prior periods due to unachieved performance targets and new grants in fiscal 2026 - As of June 30, 2025, 302,532 shares of common stock remained available for grant under the 2017 Plan[78] - During Q2 fiscal 2025, $18.5 million in previously recognized stock-based compensation related to the $20.45 Performance Shares was reversed as the target was no longer probable of being achieved[85][86] - For the 2025 Performance Shares, a new target of $18.40 trailing 4-Quarter EPS was established for 100% vesting over the period July 1, 2025, through March 31, 2027[94][96] Total Stock-Based Compensation (Three months ended June 30, 2025 vs 2024) | Metric | 2025 ($) | 2024 ($) | | :-------------------------------- | :--------- | :--------- | | Stock-based compensation related to stock options | 275,881 | 143,720 | | Stock-based compensation (reversal) related to restricted stock | 2,830,826 | (1,207,565) | | Total stock-based compensation (reversal) related to equity classified awards | 3,106,707 | (1,063,845) | NOTE 8 – ACQUISITIONS This note explains the Company's accounting treatment for acquisitions, differentiating between business combinations and asset purchases. It states that there was no acquisition activity for the three months ended June 30, 2025, and 2024 - There was no acquisition activity for the three months ended June 30, 2025, and 2024[105] NOTE 9 – INTANGIBLE ASSETS This note provides a summary of the Company's definite-lived intangible assets, primarily consisting of customer lists and non-compete agreements, along with their gross carrying amounts and accumulated amortization Definite-Lived Intangible Assets (June 30, 2025 vs March 31, 2025) | Intangible Asset | June 30, 2025 Net ($) | March 31, 2025 Net ($) | | :---------------- | :-------------------- | :--------------------- | | Customer lists | 6,547,732 | 7,369,462 | | Non-compete agreements | 15,834 | 25,119 | | Total | 6,563,566 | 7,394,581 | - Estimated amortization expense for intangible assets for the remainder of fiscal year 2026 is $2.4 million[112] NOTE 10 – DEBT This note details the Company's senior notes payable (revolving credit facility) and senior unsecured notes payable, including outstanding amounts, interest rates, and debt repurchases. It also covers compliance with debt covenants and notes the termination of the revolving credit facility and its replacement post-period end - At June 30, 2025, $302.7 million was outstanding under the Company's $580.0 million senior revolving credit facility, with an effective interest rate of 8.7% annualized for the three months ended June 30, 2025[114][115] - During the three months ended June 30, 2025, the Company repurchased and extinguished $15.5 million of its 7.0% senior unsecured notes due November 2026[118] - The Company was in compliance with all debt covenants under its revolving credit facility at June 30, 2025[123] - The revolving credit facility was terminated on July 22, 2025, and replaced with a new facility, as detailed in Note 13[116] NOTE 11 – INCOME TAXES This note discusses the Company's income tax position, including unrecognized tax benefits, investment in Historic Tax Credits (HTC), and the effective income tax rate. The effective tax rate increased significantly for the three months ended June 30, 2025, due to a settlement with taxing authorities and changes in executive compensation - As of June 30, 2025, the Company had $1.7 million in total gross unrecognized tax benefits[127] - The effective income tax rate increased to 30.9% for the three months ended June 30, 2025, compared to 23.1% for the prior year quarter[130] - The increase in the effective tax rate was primarily due to a settlement with taxing authorities and a decrease in pretax book income relative to an increase in disallowed executive compensation, partially offset by permanent tax benefits from stock option exercises and restricted stock vesting[130] NOTE 12 – COMMITMENTS AND CONTINGENCIES This note addresses the Company's involvement in litigation matters arising in the normal course of business. Management believes that any reasonably possible losses from currently pending legal matters will not be material to the Company's results of operations or financial condition - The Company does not believe that any reasonably possible losses arising from currently pending legal matters will be material to its results of operations or financial conditions[132] NOTE 13 – SUBSEQUENT EVENTS This note reports on significant events that occurred after the balance sheet date of June 30, 2025. These include the enactment of the One Big Beautiful Bill Act (OBBBA), the termination of the prior revolving credit facility and the establishment of a new one, the full redemption of outstanding senior unsecured notes, and the approval of a new $100.0 million share repurchase program - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, but is not expected to have a material impact on the Company's financial statements[133] - On July 22, 2025, the Company entered into a new three-year senior secured asset-based credit facility for $640.0 million, replacing the prior facility[134][135] - An irrevocable notice of full redemption for all $168.3 million outstanding senior unsecured notes was delivered on July 22, 2025, with a redemption date of August 29, 2025[138] - On July 22, 2025, the Board of Directors approved a new share repurchase program authorizing up to $100.0 million of common stock repurchases[139] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and future outlook. It includes a comparison of results for the three months ended June 30, 2025, and 2024, discusses regulatory matters, liquidity, capital resources, and identifies critical accounting policies Cautionary Note Regarding Forward-Looking Information - The report contains forward-looking statements based on management's beliefs and assumptions, which are subject to risks, uncertainties, and assumptions that could cause actual financial results to vary materially[141] Results of Operations Key Financial and Operating Data (Three months ended June 30, 2025 vs 2024) | Metric | 2025 (Thousands $) | 2024 (Thousands $) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :--------- | | Gross loans receivable | 1,264,341 | 1,274,819 | (0.8%) | | Net income | 1,344 | 9,947 | (86.5%) | | Total revenues | 132,452 | 129,527 | 2.3% | | Provision for credit losses | 50,516 | 45,419 | 11.2% | | General and administrative expenses | 70,360 | 61,412 | 14.6% | | Interest expense | 9,630 | 9,769 | (1.4%) | | Net charge-offs as percent of average net loans receivable (annualized) | 19.4% | 16.4% | 18.3% | | Return on average assets (trailing 12 months) | 7.7% | 7.1% | 8.5% | | Return on average equity (trailing 12 months) | 19.0% | 18.9% | 0.5% | - Interest and fee income increased by $4.1 million (3.7%) due to an increase in interest yields, while insurance and other income decreased by $1.2 million (6.6%), primarily from a 10.8% decrease in insurance income[149][150] - Personnel expense increased by $8.8 million (23.8%), driven by a $4.2 million increase in share-based compensation expense and a $1.6 million increase in field bonus expense[157][158] - The effective income tax rate increased to 30.9% for the three months ended June 30, 2025, from 23.1% in the prior year, due to a settlement with taxing authorities and changes in executive compensation[164] Regulatory Matters - The CFPB's Rule payment requirements became effective on March 30, 2025, but the CFPB announced it would not prioritize enforcement or supervision of these provisions[167] - On May 12, 2025, the CFPB withdrew its public designation order to establish supervisory authority over the Company, citing a shift in supervisory priorities[168] Liquidity and Capital Resources - Net cash provided by operating activities for the three months ended June 30, 2025, was $58.2 million[169] - The Company repurchased and extinguished $15.5 million of its senior unsecured notes during the three months ended June 30, 2025[173] - As of June 30, 2025, the Company's debt-to-equity ratio was 1.1:1.0, down from 1.2:1 at June 30, 2024[162][186] - On July 22, 2025, the Company's Board of Directors approved a new share repurchase program authorizing up to $100.0 million of common stock repurchases[177] Share Repurchase Program - On July 22, 2025, the Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to $100.0 million of its outstanding common stock[188] - As of June 30, 2025, the Company had $7.0 million in aggregate remaining repurchase capacity under its current share repurchase program[188] Inflation - The Company does not believe inflation will have a materially adverse effect on its financial condition, as increased loan demand and revenue are expected to offset rising operating costs due to the short-term nature of its loans[190] Quarterly Information and Seasonality - Refer to Note 2 to the Consolidated Financial Statements for information regarding seasonality[191] Recently Adopted Accounting Pronouncements - There were no new accounting pronouncements recently adopted during the period[192] Critical Accounting Policies - The Company considers its policies regarding the allowance for credit losses, share-based compensation, and income taxes to be its most critical accounting policies due to the significant degree of management judgment involved[193] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section primarily addresses the Company's exposure to interest rate risk. It quantifies the potential impact of changes in interest rates on its revolving credit facility - A 1.0% change in the interest rate on the Company's $302.7 million outstanding revolving credit facility at June 30, 2025, would cause an approximate $3.0 million change in annual interest expense[200] Item 4. Controls and Procedures This section confirms that there were no material changes to the Company's internal control over financial reporting during the period. The CEO and CFO concluded that the disclosure controls and procedures were effective in providing reasonable assurance for financial reporting - There were no changes to the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[201] - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period, providing reasonable assurance that information is recorded, processed, summarized, and reported timely[202] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 12 of the Consolidated Financial Statements for detailed information regarding legal proceedings - Information regarding legal proceedings is provided in Note 12 to the Consolidated Financial Statements[205] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Company's fiscal 2025 Annual Report - There have been no material changes to the risk factors disclosed in Part I, Item 1A of the Company's fiscal 2025 Annual Report[206] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's share repurchase activities, including the approval of a new $100.0 million share repurchase program on July 22, 2025, and the shares repurchased during the quarter ended June 30, 2025 - On July 22, 2025, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $100.0 million of its outstanding common stock[207] - As of June 30, 2025, the Company had $7.0 million in aggregate remaining repurchase capacity under its current share repurchase program[207] Common Stock Purchases (Three months ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share ($) | | :----------------------- | :----------------------------- | :----------------------------- | | April 1 through April 30, 2025 | — | — | | May 1 through May 31, 2025 | 67,054 | 146.32 | | June 1 through June 30, 2025 | 20,555 | 153.65 | | Total for the quarter | 87,609 | 148.04 | Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[209] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[210] Item 5. Other Information This section reports on Rule 10b5-1 trading arrangements adopted or terminated by a director and an officer during the quarter ended June 30, 2025 - On May 1, 2025, Charles Way, a Board member, adopted a Rule 10b5-1 trading arrangement for potential sales of 6,567 shares[211] - On April 30, 2025, Luke Umstetter, General Counsel, Chief Compliance Officer, and Secretary, terminated a Rule 10b5-1 trading arrangement[213] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, the new revolving credit agreement, various certifications, and Inline XBRL financial data - Exhibit 10.1 is the Revolving Credit Agreement, dated July 22, 2025, filed as exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 24, 2025[215] - Includes Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer and Chief Financial and Strategy Officer (Exhibits 31.01, 31.02) and Section 1350 Certifications (Exhibits 32.01, 32.02)[215] - Exhibit 101.01 includes the Consolidated Financial Statements for the fiscal quarter ended June 30, 2025, formatted in Inline XBRL[215]