Nicholas Financial : Reports 4th Quarter Fiscal Year 2023 Results

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) June 21, 2023

NICHOLAS FINANCIAL, INC.

(Exact name of registrant as specified in its Charter)

British Columbia, Canada	0-26680	59-2506879
(State or Other Jurisdiction of	(Commission	(I.R.S. Employer
Incorporation or Organization)	File Number)	Identification No.)
26133 US HWY 19 North, Suite 300
Clearwater, Florida		33763
(Address of Principal Executive Offices)		(Zip Code)

[phone]

(Registrant's telephone number, Including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

• Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
• Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
• Pre-commencementcommunications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
• Pre-commencementcommunications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
  Securities registered pursuant to Section 12(b) of the Act:

		Trading
Title of each class		Symbol(s)		Name of each exchange on which registered
Common Stock		NICK		NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On June 21, 2023 Nicholas Financial, Inc. (the "Company") issued a press release announcing the Company's financial results for its quarter ended March 31, 2023. A copy of this press release is attached hereto as Exhibit 99.1.

The information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) is furnished pursuant to this Item 2.02 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. In addition, the information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference into such filing.

Item 9.01 Financial Statements and Exhibits

Exhibit # Description

99.1Earnings release dated June 21, 2023

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

	NICHOLAS FINANCIAL, INC.
		(Registrant)
Date: June 21, 2023		/s/ Irina Nashtatik
		Irina Nashtatik
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 99.1

FOR IMMEDIATE RELEASE

NICHOLAS	Contact: Irina Nashtatik	NASDAQ: NICK
Nicholas Financial, Inc.	CFO	Web site: www.nicholasfinancial.com
Corporate Headquarters	Ph # (727)-726-0763
26133 U.S. Hwy 19 North,
Suite 300,
Clearwater, Florida 33763	Nicholas Financial Reports
	4th Quarter Fiscal Year 2023 Results

• The Company continues implementation of the restructuring plan to strategically reduce operating expenses and free up capital. As part of this plan, the Company closed all of its brick and mortar branches and now conducts its operations through its regional virtual network.
• During the three months ended March 31, 2023, the Company incurred $0.8 million in restructuring expenses associated with branch closures, cease-use of contractual services, professional fees, and other expenses.

June 21, 2023 - Clearwater, Florida - Nicholas Financial, Inc. (NASDAQ: NICK, the "Company") announced a net loss for the three months ended March 31, 2023 of $15.8 million compared to net income of $0.4 million for the three months ended March 31, 2022. Basic and diluted net loss per share was $2.18 for the three months ended March 31, 2023 as compared to basic and diluted net earnings per share of $0.05 for the three months ended March 31, 2022.

Interest and fee income on finance receivables decreased 29.4% to $8.7 million for the three months ended March 31, 2023 as compared to $12.3 million for the three months ended March 31, 2022.

Operating expenses decreased 35.8% to $6.0 million for the three months ended March 31, 2023 compared to $9.3 million for the three months ended March 31, 2022. The decrease in operating expenses was primarily attributable to the change in operating strategy and restructuring plan the Company previously announced, which included outsourcing its servicing operation. Specifically, the Company reduced its payroll and employee related expenses by 85.3% to $0.8 million from $5.6 million for the three months ended March 31, 2023, and 2022, respectively. Similarly, branch related expenses, loan origination costs, and other administrative expenses, exclusive of servicing and restructuring expenses, reduced by 57.5% to $1.3 million from $3.0 million for the three months ended March 31, 2023, and 2022, respectively.

Provision for credit losses increased 727.5% to $17.4 million for the three months ended March 31, 2023 as compared to $2.1 million for the three months ended March 31, 2022, due to an increase in net charge-off percentage to 30.93% from 6.45% for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023 and 2022, the Company continued utilizing incurred loss methodology applying a trailing twelve-month net charge-off as a percentage of average finance receivables to the ending finance receivables to estimate probable credit losses.

As announced on January 18, 2023 the Company entered into a loan and security agreement for a senior secured revolving credit facility with Westlake Capital Finance, LLC. Concurrently, the Company recognized $0.4 million of additional interest expense related to previously incurred but unamortized debt issuance costs on the extinguishment of the Wells Fargo credit facility.

The Company reported a loss before income taxes for the three months ended March 31, 2023 of $15.8 million compared to income before income taxes of $0.5 million for the three months ended March 31, 2023.

The Company reported a net loss for the twelve months ended March 31, 2023 of $34.1 million compared to net income of $3.0 million for the twelve months ended March 31, 2022. Basic and diluted net loss per share was $4.65 for the twelve months ended March 31, 2023 as compared to basic and diluted net income per share of $0.39 for the twelve months ended March 31, 2022.

Interest and fee income on finance receivables decreased 11.1% to $44.3 million for the twelve months ended March 31, 2023 as compared to $49.8 million for the twelve months ended March 31, 2022.

Provision for credit losses increased 581.6% to $40.7 million for the twelve months ended March 31, 2023 as compared to $6.0 million for the twelve months ended March 31, 2022 due to increase in delinquency trends and net charge-off percentage of 15.86% and 5.13% for the twelve months ended March 31, 2023 and 2022, respectively. During twelve months ended Match 31, 2023, the

Company continued utilizing incurred loss methodology applying a trailing twelve-month net charge-off as a percentage of average finance receivables to the ending finance receivables to estimate probable credit losses.

Operating expenses decreased 5.7% to $32.5 million for the twelve months ended March 31, 2023 from $34.4 million for the twelve months ended March 31, 2022. The decrease in operating expenses was primarily attributable to the change in operating strategy, and was partially offset by the restructuring cost that was incurred totaling $4.8 million associated with branch closures, severance expenses, impairment charges for leased assets and cease-use of contractual services.

The Company reported a loss before income taxes for the twelve months ended March 31, 2023 of $32.7 million compared to income before taxes of $4.0 million for the twelve months ended March 31, 2022.

For the twelve months ended March 31, 2023, the Company originated $63.3 million in finance receivables, collected $93.1 million in principal payments, reduced debt by $25.9 million and decreased cash by $4.3 million.

"The net losses for the fiscal quarter and the twelve months ended March 31, 2023, were driven by a significant rise in delinquencies and charge offs, which substantially increased our provision for credit losses. The Company also continued to incur expenses related to our restructuring plan. The downturn in the economy coupled with our restructuring initiatives led to a setback on our collection efforts that we believe is temporary and caused a rise in delinquencies and credit losses. We are working closely with our customers to help them adapt to our new servicing practice." commented Mike Rost, CEO of the Company.

"The transition of the Company's servicing process is a crucial piece to our restructured business model and operating strategy. This has allowed us to reduce expenses and maintain the quality of our service. The focus on maximizing shareholder equity and the shift to outsourcing our servicing is a major step in that direction. We continue to originate new business on a much smaller scale with the emphasis on quality indirect loans with the goal of returning the Company to profitability," Rost concluded.

Key Performance Indicators on Contracts Purchased

(Purchases in thousands)

		Number of						Average
Fiscal Year		Contracts			Principal Amount			Amount		Average				Average				Average
/Quarter		Purchased			Purchased#			Financed*^		APR*				Discount%*				Term*
2023		4,040		$	47,526		$	11,932		22.5		%		6.5		%		48
4	127			1,579			12,433	22.2	%	6.2	%	49
3	383			4,511			11,778	22.4	%	6.8	%	48
2	1,595			19,082			11,964	22.7	%	6.4	%	48
1	1,935			22,354			11,552	22.9	%	6.6	%	48
2022	7,793	$	85,804	$	11,002	23.1	%	6.9	%	47
4	2,404			27,139			11,289	22.9	%	6.9	%	47
3	1,735			19,480			11,228	23.1	%	6.8	%	47
2	1,707			18,880			11,061	23.0	%	6.7	%	47
1	1,947			20,305			10,429	23.2	%	7.0	%	46
2021	7,307	$	74,025	$	10,135	23.4	%	7.5	%	46
4	2,429			24,637			10,143	23.2	%	7.5	%	46
3	1,483			15,285			10,307	23.4	%	7.5	%	46
2	1,709			17,307			10,127	23.5	%	6.8	%	46
1	1,686			16,796			9,962	23.5	%	8.0	%	46
2020	7,647	$	76,696	$	10,035	23.4	%	7.9	%	47