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NF

NICHOLAS FINANCIAL INC (NICK)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 filing (8‑K 2.02) delivered FY2024 Q4 results: net loss narrowed to $1.349M with diluted EPS of $(0.19) as interest and fee income fell to $3.870M; operating expenses decreased materially, partly offset by fair value adjustments tied to the held‑for‑sale loan portfolio .
  • Operating expenses declined 49.0% YoY to $3.038M, while net charge‑offs improved to 23.89% from 30.93% YoY; management cited seasonal tax‑time collections as a tailwind for delinquencies and collections .
  • Strategic pivot advanced: 51% acquisition of Amplex Electric closed for $11.563M plus an additional $3.000M purchase of 1,674 shares; the Company reiterated plans to redeploy capital and utilize NOLs, and continues to pursue the Westlake asset sale to unlock value .
  • No quantitative guidance provided; near‑term stock catalysts include progress on the Westlake portfolio sale, initial purchase price allocation for Amplex, and further clarity on capital deployment and NOL utilization .

What Went Well and What Went Wrong

What Went Well

  • Operating expense discipline: OpEx fell 49.0% YoY to $3.038M, reflecting outsourcing and restructuring (servicing moved to WPM), payroll down 57.7%, and branch/admin costs down 46.7% .
  • Credit metrics sequentially improved: net charge‑off percentage dropped to 23.89% vs. 34.83% in Q3 FY2024, helped by tax‑season collections .
  • Strategic repositioning: “Management believes the Loan Portfolio Sale will free up capital and permit the Company to allocate excess capital and utilize net operating losses to increase shareholder returns…” .

What Went Wrong

  • Revenue pressure: interest and fee income declined 55.5% YoY to $3.9M due to reduced finance receivables following discontinued originations and restructuring .
  • Fair value headwinds: the reclassification to held‑for‑sale triggered fair value adjustments (Q4 FY2024: $2.192M; Q3 FY2024: $23.110M), weighing on reported results .
  • Portfolio contraction: average finance receivables decreased to $59.130M (Q4) from $99.704M (Q2) amid cessation of loan originations and portfolio runoff .

Financial Results

Quarterly financials (USD millions except per-share; oldest → newest):

MetricQ2 FY2024 (Sep 30, 2023)Q3 FY2024 (Dec 31, 2023)Q4 FY2024 (Mar 31, 2024)
Interest & fee income on finance receivables ($)$6.330 $4.954 $3.870
Operating expenses ($)$4.295 $4.000 $3.038
Provision for credit losses ($)$12.407 $(10.482) $0.000 (—)
Fair value & other adjustments, net ($)—$23.110 $2.192
Interest expense ($)$0.258 $0.068 $0.103
Net loss ($)$(10.485) $(11.661) $(1.349)
Diluted EPS ($)$(1.44) $(1.60) $(0.19)

Portfolio KPIs (oldest → newest):

KPIQ2 FY2024Q3 FY2024Q4 FY2024
Average finance receivables ($)$99.704M $70.204M $59.130M
Average indebtedness ($)$9.566M $0.578M — ($0)
Portfolio yield (%)25.40% 28.23% 26.18%
Net charge‑off percentage (%)58.20% 34.83% 23.89%
Net interest & fee income ($)$6.072M $4.886M $3.767M
Book value per share ($)$9.70 $8.10 $8.07

Segment/portfolio delinquency and balances (oldest → newest):

MetricQ2 FY2024Q3 FY2024Q4 FY2024
Contracts outstanding ($)$76.490M $62.664M $50.832M
Contracts total delinquency (%)16.57% 18.33% 16.90%
Direct loans outstanding ($)$10.781M $8.319M $6.083M
Direct loans total delinquency (%)15.45% 18.76% 16.09%

Portfolio composition KPIs (oldest → newest):

MetricQ2 FY2024Q3 FY2024Q4 FY2024
Active contracts (Contracts)10,550 9,088 7,720
Active loans (Direct Loans)3,205 2,485 1,866
Contracts avg APR (%)22.7% 22.7% 22.7%
Contracts avg discount (%)6.7% 6.4% 6.6%
Contracts avg term (months)49 49 50

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue, margins, EPSQ1 FY2025None providedNone providedMaintained (no formal guidance)
Strategic action – Loan Portfolio Sale to WestlakeOngoingAnnounced sale of substantially all assets (Q2 FY2024) Pursuing sale; portfolio reclassified held‑for‑sale; valuation allowance recorded; servicing via WPM continues Maintained strategic course
Acquisition – Amplex Electric (51%)Q1 FY2025N/AClosed on June 15, 2024; preliminary PPA to follow in Q1 New acquisition
Capital and NOL utilizationFY2025Exploring strategic alternatives Intent to redeploy capital and maximize DTA/NOLs Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4/FY2024 reported in Q1 FY2025)Trend
Restructuring & servicing outsourcingWPM servicing; ceased new originations Continued outsourcing; personnel reductions; OpEx down 49% YoY Ongoing execution
Asset sale to WestlakeAnnounced purchase agreement (~$65.6M) Pursuing sale; reclassified receivables as held‑for‑sale; valuation allowance Advancing process
Credit performanceQ2: net charge‑offs 58.20%; Q3: 34.83% Q4: 23.89%; tax season aided collections Improving sequentially
Revenue trajectoryInterest & fee income fell YoY in Q2/Q3 Q4: −55.5% YoY to $3.9M Downward given portfolio runoff
Capital positionReduced debt; paid down credit facility (YTD) Fully repaid $29.1M credit facility; cash up $18.5M (FY) Strengthening liquidity
Acquisition strategyN/AAcquired 51% of Amplex Electric; $11.563M + $3.000M New vector for capital deployment

Management Commentary

  • “Management believes the Loan Portfolio Sale will free up capital and permit the Company to allocate excess capital and utilize net operating losses to increase shareholder returns, whether by acquiring businesses or by investing outside of the Company's traditional business.”
  • “The Company…expects to have preliminary allocations of the purchase consideration to the assets acquired and liabilities assumed in the first quarter of the current fiscal year.” (Amplex PPA timing)
  • “Following management's decision to pursue the Loan Portfolio Sale, the Company discontinued loan originations and further reduced its personnel, while its loan portfolio was serviced by a third‑party provider.”
  • “The customers typically experience lighted economic pressure during the tax season, which temporarily enhances collections and shortens loan delinquencies.”

Q&A Highlights

  • No Q&A was included in the 8‑K press releases; analysis relies on filed press releases and accompanying financial tables .

Estimates Context

  • Wall Street consensus estimates via S&P Global were unavailable for NICK for Q1 FY2025 due to missing mapping; therefore, no comparison vs consensus is provided.
  • Investors should anchor expectations to the reported interest & fee income, EPS, credit metrics, and disclosed strategic actions in lieu of consensus benchmarks .

Key Takeaways for Investors

  • Bottom‑line improvement: net loss narrowed to $(1.349)M and EPS to $(0.19), driven by sharp OpEx cuts and lower charge‑offs, partially offset by fair value adjustments on held‑for‑sale receivables .
  • Revenue under pressure: interest & fee income fell 55.5% YoY to $3.9M due to portfolio runoff and discontinued originations; expect continued top‑line softness near‑term .
  • Credit stabilization: sequential net charge‑off improvement (Q2→Q3→Q4: 58.20% → 34.83% → 23.89%) and seasonal collections support a better loss outlook, improving earnings trajectory potential .
  • Liquidity and capital flexibility: credit facility fully repaid ($29.1M) with cash up $18.5M (FY), positioning the Company to redeploy capital and pursue acquisitions/asset purchases .
  • Strategic catalysts: closing and integration of Amplex (51%) with PPA forthcoming, and progress on Westlake transaction are pivotal to valuation and the medium‑term thesis .
  • No formal guidance provided: monitor filings for sale closing, servicing economics under WPM, and NOL monetization pathways; absence of consensus estimates heightens focus on reported KPIs and strategic updates .
  • Risk watchlist: fair value adjustments tied to held‑for‑sale classification, servicing performance by WPM, and macro pressure on consumer credit remain key variables for earnings volatility .