Thursday, July 31, 2008
Nicholas Financial (NICK) Q1 Results
Period ending June 30, 2008
Once again, I'm going to compare it to the previous quarter, Q4.
Revenue increased 3%.
Operating expenses increased 7%
Provision for credit losses was increased to $3.4 million from $2.5 million.
Taxes dropped to $0.9 million from $1.3 million
Net income dropped to 15 cents per diluted share from 20 cents per diluted share.
Share count increased about 1%.
The balance sheet is fairly similar.
Weighted ave contract rate decreased slightly to 24.28% from 24.50%
Provision for credit losses was 6.76% of ave finance receivables vs 5.20% (net of unearned interest)
Net portfolio yield was 16.25% vs 17.83%
Most of the categories increased somewhat, both in absolute terms and in percentages of receivables.
With $203 million ave finance receivables on the books:
30 to 59 day delinquencies increased by $319K
60 to 89 day delinquencies increased by $936K
90+ day delinquencies increased by $275K
Total as a percentage of receivables is now 3.86%.
30 to 59 day delinquencies decreased by $58K
60 to 89 day delinquencies increased by about $10K
90+ day delinquencies decreased by about $14K
Total as a percentage of receivables is now 2.47%
This quarter vs last quarter:
Purchases: $33 million vs $35 million
Weighted ave APR: 24.19% vs 24.47%
Ave discount: 8.87% vs 8.66%
Ave term (months): 49 vs 48
3,488 contracts vs 3,813 contracts
Overall, I'm quite happy with these results. I continue to own the stock.
On the upside, their cost of funds is lower and dealer discounts are better. The difficulties in securitizing subprime paper have to be good for NICK. CPSS, which relies on securitizations and competes with NICK in the subprime space purchased less than one fourth the value of contracts in their most recent quarter compared to the comparable quarter last year.
I like it that book value/diluted share continues to increase sequentially. It's now $7.86, up 3% over last quarter. I think that NICK will again sell for 2x book or more toward the peak of the next cycle. When will that be..maybe 3 years? Still a good return from here. But I won't add to my position until some of the bad numbers start to turn. I have a bad habit of being way early and I'm trying to break it.
I don't know if we're at the bottom yet. Perhaps not. But the delinquencies aren't growing all that much.
This information about CPSS is interesting. This is what I'm hoping will happen: that the weak players will drop out leaving a big market for the strong ones to expand into.
I think with their expansion and when the sub-prime smoke clears NICK will end up fully valued.
I also tend to be way too early into things. I was buying Fannie Mae put options back in 2004.
Great job tracking NICK -- and even better comments.
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