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Item 7. Management’s Discussion and Analysis

2024-05-23 compared with 2023-06-01 · 71 added, 80 removed, 176 unchanged (46% of the section changed)

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The Company prepared approximately 83,000, 75,000, and 80,000 returns in each of the fiscal years 2024, 2023, and 2022, respectively.

Revenues from the Company’s tax preparation business in fiscal 2023 amounted to approximately $24.0 million, a 2.2% decrease over the $24.5 million earned during fiscal 2022.

Revenues from the Company’s tax preparation business in fiscal 2024 amounted to approximately $29.5 million, a 23.1% increase over the $24.0 million earned during fiscal 2023.

The following table sets forth certain information derived from the Company's Consolidated Statements of Operations and Balance Sheets, as well as operating data and ratios, for the periods indicated:

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Comparison of Fiscal 2024 Versus Fiscal 2023

Net income for fiscal 2023 was $21.2 million, a 60.6% decrease from the $53.9 million earned during fiscal 2022.

The decrease in net income from was primarily due to a $73.3 million increase in the provision for credit losses partially offset by a $31.4 million increase in revenue.

Operating income (revenues less provision for credit losses and general and administrative expenses) during fiscal 2023 decreased $21.4 million.

Total revenues increased $31.36 million, or 5.4%, to $616.55 million in fiscal 2023, from $585.19 million in fiscal 2022.

Net income for fiscal 2024 was $77.3 million, a 264.3% increase from the $21.2 million earned during fiscal 2023.

The increase in net income was primarily due to a $102.5 million decrease in the provision for credit losses partially offset by a $43.3 million decrease in revenue.

Operating income (revenues less provision for credit losses and general and administrative expenses) during fiscal 2024 increased $70.0 million.

Total revenues decreased $43.33 million, or 7.0%, to $573.21 million in fiscal 2024, from $616.55 million in fiscal 2023.

At March 31, 2024, the Company had 1,048 branches in operation, a decrease of 25 branches from March 31, 2023.

Interest and fee income during fiscal 2023 increased by $22.7 million, or 4.7%, from fiscal 2022.

The increase was primarily due to an increase in average net loans receivable, which increased 11.6% during fiscal 2023 compared to fiscal 2022.

Interest and fee income was also impacted by a shift to larger, lower interest rate loans.

The large loan portfolio increased from 51.8% of the overall portfolio as of March 31, 2022, to 58.1% as of March 31, 2023.

Insurance commissions and other income increased by $8.7 million, or 8.7%, from fiscal 2022 to fiscal 2023.

Insurance commissions increased by $10.9 million, or 19.3%, from fiscal 2022 to fiscal 2023 due to an increase in loan volume in states where we offer our insurance products along with the shift towards larger loans.

The sale of insurance products is limited to

large loans in several states in which we operate.

Other income decreased by $2.2 million, or 5.1%, from fiscal 2022 to fiscal 2023 primarily due to a decrease in tax preparation income of $0.5 million and a decrease in revenue from the Company's motor club product of $5.1 million offset by a $4.0 million gain from acquisitions.

The provision for losses during fiscal 2023 increased by $73.3 million, or 39.3%, from the previous year.

This increase can mostly be attributed to an increase in charge-off rates during the year.

Interest and fee income during fiscal 2024 decreased by $39.8 million, or 7.8%, from fiscal 2023.

The decrease was primarily due to a decrease in average net loans receivable, which decreased 10.6% during fiscal 2024 compared to fiscal 2023.

Interest and fee income was also impacted by a shift away from larger, lower interest rate loans.

The large loan portfolio decreased from 58.1% of the overall portfolio as of March 31, 2023, to 55.8% as of March 31, 2024.

Insurance revenue and other income decreased by $3.5 million, or 3.3%, from fiscal 2023 to fiscal 2024.

See Note 7 to the Consolidated Financial Statements for the material components of Insurance and other income for the fiscal years ended March 31, 2024, 2023 and 2022.

Insurance revenue decreased by $7.9 million, or 11.8%, from fiscal 2023 to fiscal 2024 due to a decrease in loan volume in states where we offer our insurance products along with the shift away from larger loans.

The sale of insurance products is limited to large loans in several states in which we operate.

Other income increased by $4.4 million, or 10.7%, from fiscal 2023 to fiscal 2024 primarily due to an increase in tax preparation revenue of $5.5 million, partially offset by a decrease in revenue from the Company's motor club product of $1.6 million.

The provision for credit losses during fiscal 2024 decreased by $102.5 million, or 39.5%, from the previous year.

This decrease can mostly be attributed to a decrease in charge-off rates during the year.

Accounts that were 91 days or more past due represented 3.1% and 3.5% of our loan portfolio on a recency basis at March 31, 2024 and March 31, 2023, respectively.

The Company's year-over-year net charge-off ratio (net charge-offs as a percentage of average net loans receivable) increased from 14.2% for the year ended March 31, 2022 to 23.7% for the year ended March 31, 2023.

Net charge-offs and the net charge-off rate were negatively impacted by a higher proportion of new borrowers at the beginning of the current fiscal year.

New borrowers are our riskiest customer type and typically perform worse than our longer tenured customers.

Additionally, new borrowers originated in the prior fiscal year performed worse than expected due to macro-economic factors.

Customers who are new borrowers to the Company (less than two years since their first origination at the time of their current loan) as a percentage of the year-end portfolio decreased 20.8% year over year.

These "new to World" customers now account for 25.1% of the portfolio, a decrease from 31.7% last year.

Customers who were with the Company for less than five months have decreased 54.9% from 13.1% to 5.9%.

The reduction of new borrowers in the portfolio as well as better performance of the new borrowers originated in the current fiscal year should result in lower net-charge offs in fiscal year 2024.

The Company's year-over-year net charge-off ratio (net charge-offs as a percentage of average net loans receivable) decreased from 23.7% for the year ended March 31, 2023 to 17.7% for the year ended March 31, 2024.

The net charge-off rate for the past ten fiscal years averaged 16.3%, with a high of 23.7% (fiscal 2023) and a low of 12.8% (fiscal 2015).

In fiscal 2023 the charge-off rate was 23.7%.

The following table presents the Company's net charge-off ratios since 2013.

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The net charge-off rate benefited from a change in branch level incentives during the year, which allowed branch managers to continue collection efforts on accounts that are 91 days or more past due without having their monthly bonus negatively impacted.

As expected, the change resulted in an increase in accounts 91

days or more past due and fewer net charge-offs during fiscal 2015.

As expected, the change resulted in an increase in accounts 91 days or more past due and fewer net charge-offs during fiscal 2015.

We estimate the net charge-off rate would have been approximately 14.0% for fiscal 2015 excluding the impact of the change.

2023 In fiscal 2023, the Company's net charge-off rate increased to 23.7%.

This increase is primarily attributable to the higher proportion of new borrowers at the beginning of the current fiscal year.

Additionally, new borrowers originated in the prior fiscal year performed worse than expected due to macro-economic factors.

This increase is primarily attributable to the higher proportion of NBs at the beginning of the current fiscal year.

Additionally, NBs originated in the prior fiscal year performed worse than expected as a result of the rapid rise in inflation during Q4 of fiscal 2022.

2024 In fiscal 2024, the Company's net charge-off rate decreased to 17.7%.

This decrease is primarily attributable to the Company's continued focus on credit quality and a conservative approach to its lending operations.

General and administrative expenses during fiscal 2024 decreased by $10.9 million, or 3.9%, over the previous fiscal year.

General and administrative expenses, when divided by average open branches, increased 0.3% from fiscal 2022 to fiscal 2023 and, overall, general and administrative expenses as a percent of total revenues decreased to 45.3% in fiscal 2023 from 51.3% in fiscal 2022.

General and administrative expenses, when divided by average open branches, increased 1.6% from fiscal 2023 to fiscal 2024 and, overall, general and administrative expenses as a percent of total revenues increased to 46.9% in fiscal 2024 from 45.3% in fiscal 2023.

The change in general and administrative expense is explained in greater detail below.

Personnel expense totaled $164.5 million for fiscal 2024, a $13.2 million, or 7.4%, decrease over fiscal 2023.

The decrease was largely due to an $8.5 million decrease in stock compensation expense and a $6.8 million decrease in bonus expense, offset by an $8.5 million increase in salary expense.

On July 1, 2022, we increased base wages for our financial service representatives to a minimum of approximately $15 an hour and eliminated the monthly bonus for the same position.

Occupancy and equipment expense totaled $52.1 million for fiscal 2023, remaining relatively flat when compared to fiscal year 2022.

The decrease was largely due to a $10.7 million decrease in stock compensation expense and a $2.2 million decrease in bonus expense.

Occupancy and equipment expense totaled $49.8 million for fiscal 2024, a 2.3 million, or 4.5%, decrease over fiscal 2023.

Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the year.

In fiscal 2024, the expense per average open branch increased to $47.2 thousand, up from $46.7 thousand in fiscal 2023.

Advertising expense totaled $6.1 million for fiscal 2023, a $12.2 million, or 66.7%, decrease over fiscal 2022.

The decrease was primarily due to decreased spending in our digital marketing and new customer acquisition programs.

Advertising expense totaled $9.9 million for fiscal 2024, a $3.8 million, or 62.9%, increase over fiscal 2023.

The increase was primarily due to increased spending in our new customer acquisition programs.

Amortization of intangible assets totaled $4.2 million for fiscal 2024, a $0.2 million, or 5.5%, decrease over fiscal 2023, which primarily relates to a corresponding decrease in intangible assets acquired in the current fiscal year compared to the previous fiscal year.

Other expense totaled $39.1 million for fiscal 2023, a $2.4 million, or 5.8%, decrease over fiscal 2022.

Interest expense increased by $17.0 million, or 51.0%, during fiscal 2023 when compared to the previous fiscal year as a result of an increase in average debt outstanding of 26.1% and an increase in the effective interest rate from 5.7% to 7.1%.

Income tax expense decreased $5.7 million, or 49.3% for fiscal 2023 compared to the prior fiscal year.

Other expense totaled $40.2 million for fiscal 2024, a $1.1 million, or 2.8%, increase over fiscal 2023.

Interest expense decreased by $2.2 million, or 4.4%, during fiscal 2024 when compared to the previous fiscal year as a result of a 21.1% decrease in average debt outstanding, partially offset by an increase in the effective interest rate from 7.1% to 8.6%.

Income tax expense increased $16.1 million for fiscal 2024 compared to the prior fiscal year.

The effective tax rate increased to 22.2% for fiscal 2024 compared to 21.8% for fiscal 2023.

The increase was primarily due to the Adoption of ASU 2023-02 in the current fiscal year which requires the recognition of tax credit investments as a portion of income tax expense rather than pretax other expense, along with a decrease in the permanent tax benefit related to non-qualified stock option exercises and vesting of restricted stock recognized in the current fiscal year.

This was partially offset by a decrease in the disallowed executive compensation under Section 162(m) in the current fiscal year.

The effective tax rate remained substantially unchanged from prior year with the slight increase related to the effects of increased pretax book earnings relative to the effect of permanent items included in the current fiscal year.

Comparison of Fiscal 2023 Versus Fiscal 2022

For a comparison of our results of operations for the years ended March 31, 2022 and March 31, 2021, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (which was filed with the SEC on May 27, 2022).

For a comparison of our results of operations for the years ended March 31, 2023 and March 31, 2022, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (which was filed with the SEC on June 1, 2023).

Regulatory Matters

Mexico Investigation

As previously disclosed, in August 2020, the Company reached a resolution with both the SEC and the DOJ regarding allegations primarily involving the Company's former subsidiary in Mexico (the Company divested its operations in Mexico in 2018).

The DOJ declined to prosecute the Company given its voluntary self-disclosure and full remediation.

Pursuant to a settlement and cease and desist order with the SEC, the Company paid $21,726,000 to the SEC in August of 2020.

CFPB Rulemaking Initiative

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In July 2020, the CFPB rescinded provisions of the Rule governing the ability to repay requirements.

Currently, the payment requirements are scheduled to take effect in June 2022.

The payment requirements were scheduled to take effect in June 2022.

However, on October 19, 2022, a three-judge panel of the U.S.

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Constitution, and as a result, vacated the Rule.

On February 27, 2023, the U.S.

Supreme Court announced that it would grant the CFPB’s petition for certiorari, to decide the constitutionality of the CFPB’s funding mechanism.

Because all CFPB rulemakings depend on the expenditure of CFPB funds, there is a risk that if the Court finds the CFPB’s funding mechanism to be unconstitutional, prior CFPB activities, including the promulgation of regulations impacting the lending market and upon which lenders, such as the Company, have relied in conducting their activities, may also be deemed unconstitutional.

Although the Court could issue is decision at any time after oral argument, which is anticipated to occur as part of the Court’s October 2023 Term, it is possible that a decision may not be issued until the end of the Court’s term in June 2024.

On October 3, 2023, the U.S.

Supreme Court held oral argument to decide the constitutionality of the CFPB's funding mechanism.

On May 16, 2024, the Supreme Court held that the funding mechanism for the CFPB complies with the appropriations clause of the U.S.

Constitution, reversing the judgment of the Court of Appeals, and remanding the

cause for further proceedings.

To the extent that the Rule is reinstated and takes effect, any regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations.

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In addition, even in the absence of a “larger participant” rule, the CFPB has the power to order individual nonbank financial institutions to submit to supervision where the CFPB has reasonable cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12 USC 5514(a)(1)(C).

In 2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities and the CFPB is attempting to expand the number of nonbank entities it currently supervises.

Specifically, the CFPB has notified the Company that it is seeking to establish such supervisory authority over the Company.

The Company disagrees that the CFPB has reasonable cause to to supervise the Company, has responded to the CFPB's notice, and is awaiting further response from the CFPB.

If the CFPB ultimately determines it has supervisory authority over the Company, then the Company may be subject to, among other things, examination by the CFPB.

In 2022, the CFPB announced that it had begun using this “dormant authority” to examine nonbank entities and the CFPB is attempting to expand the number of nonbank entities it currently supervises.

Specifically, the CFPB previously notified the Company that it was seeking to establish such supervisory authority over the Company.

Since then, the CFPB issued a public designation order setting forth its determination that the Company has met the legal requirements for supervision (the "Order").

Pursuant to the terms of the Order, the CFPB has supervisory authority over the Company pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010 until such time as the Order is terminated consistent with 12 C.F.R.

Importantly, while the Order establishes that the CFPB has supervisory authority over the Company, it does not constitute a finding that the Company has engaged in wrongdoing, nor does it require any immediate action on the part of the Company.

However, the outcome of such supervision could result in operational changes which could reduce our ability to operate profitably or increase compliance costs.

The supervision could also result in additional examinations, investigations, litigation, consent orders or administrative proceedings, which could require considerable resources, time, effort and attention from our management, and may result in operational changes, monetary penalties or declines in our stock price.

See Part I, Item 1, “Description of Business - Government Regulation - Federal legislation,” for a further discussion of these matters and the federal regulations to which the Company’s operations are subject and Part I, Item 1A, “Risk Factors,” for more information regarding these regulatory and related risks.

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At or for the Three Months Ended

Fiscal 2024 Fiscal 2023

30, September

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Accounting policies related to the allowance for credit losses are considered to be critical as these policies involve considerable subjective judgement and estimation by management.

As discussed in Note 1 to the Consolidated Financial Statements included in this report, our policies related to the allowances for credit losses changed on April 1, 2020 in connection with the adoption of a new accounting standard update as codified in ASC 326.

In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected.

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Management considers the timing of the reversal of deferred liabilities, projected future taxable income, tax planning strategies, and the ability to carryback tax attributes in making this assessment.

No assurance can be given that either the tax returns submitted by management or the income tax reported on the Consolidated Financial Statements will not be adjusted by either adverse rulings, changes in the tax code, or assessments made by the Internal Revenue Service or by state or foreign taxing authorities.

The Company is subject to potential adverse adjustments including, but not limited to:

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As the Company's gross loans receivable increased from $1.10 billion at March 31, 2021 to $1.28 billion at March 31, 2024, net cash provided by operating activities for fiscal years 2024, 2023, and 2022 was $265.8 million, $291.6 million, and $272.4 million, respectively.

On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026 (the “Notes”).

On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026.

The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended.

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Interest on the notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022.

At any time prior to November 1, 2023, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

At any time prior to November 1, 2023, the Company could have redeemed the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

At any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

In addition, at any time prior to November 1, 2023, the Company may use the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

In addition, at any time prior to November 1, 2023, the Company could have used the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

During fiscal 2024, the Company repurchased and extinguished $15.7 million of its Notes, net of $0.2 million unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $14.1 million.

In accordance with ASC 470, the Company recognized the $1.8 million gain on extinguishment as a component of interest expense in the Company's Consolidated Statements of Operations.

During fiscal 2023, the Company repurchased and extinguished $9.0 million of its Notes, net of $0.1 million unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $7.2 million.

As a result, the Company recognized a $1.6 million and $1.8 million gain on extinguishment for the years ended March 31, 2024 and 2023, respectively.

In accordance with ASC 470, the Company recognized the gain on extinguishment as a component of interest expense in the Company's Consolidated Statements of Operations.

The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock;

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The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises.

However, our revolving credit facility and the Notes limit share repurchases up to $90.0 million from March 26, 2021 through June 30, 2022 plus up to 50% of consolidated adjusted net income for the period commencing January 1, 2019.

However, our revolving credit facility and the Notes limit share repurchases to up to $90.0 million from March 26, 2021 through June 30, 2022 plus up to 50% of consolidated adjusted net income for the period commencing January 1, 2019.

As of March 31, 2024, subject to further approval from our Board of Directors, we could repurchase approximately $30.1 million of shares under the terms of our debt facilities.

Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit facility and the Notes.

The Company acquired $28.3 million in loans receivable, net during fiscal 2023.

The Company acquired $2.1 million and $28.3 million in loans receivable, net during fiscal 2024 and 2023, respectively.

The Company believes that attractive opportunities to acquire new branches or receivables from its competitors or to acquire branches in communities not currently served by the Company will continue to become available as conditions in local economies and the financial circumstances of owners change.

The Company has a revolving credit facility with a syndicate of banks.

The revolving credit facility provides for revolving borrowings of up to the lesser of (a) the aggregate commitments under the facility and (b) a borrowing base, and it includes a $300,000 letter of credit under a $1.5 million subfacility.

Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus 0.10% and an applicable margin of 3.5% with a minimum rate of 4.5%.

The revolving credit facility provides for revolving borrowings of up to the lesser of (a) the aggregate commitments under the facility and (b) a borrowing base, and it includes a $725.8 thousand letter of credit under a $1.5 million subfacility.

Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus a spread adjustment of 0.10% and an applicable margin of 3.5% with a minimum rate of 4.5%.

At March 31, 2024, the aggregate commitments under the revolving credit facility were $580.0 million.

The $300,000 letter of credit outstanding under the subfacility expires on December 31, 2023;

however, it automatically extends for one year on the expiration date.

The borrowing base limitation is equal to the product of (a) the Company’s eligible loans receivables, less unearned finance charges, insurance premiums and insurance commissions, and (b) an advance rate percentage that ranges from 70% (decreasing to as low as 62% for the calendar months ending October 31, 2022 through June 30, 2023) to 80% based on a collateral performance indicator, as more completely described below.

Further, under the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.

The Company had $725.8 thousand in outstanding standby letters of credit which include (i) $300.0 thousand related to worker's compensation expiring on December 31, 2024 and (ii) $425.8 thousand related to the Company's investment in captive insurance expiring on April 12, 2024.

Both letters of credit automatically extend for one year on their expiration dates.

The borrowing base limitation is equal to the product of (a) the Company’s eligible loans receivables, less unearned finance charges, insurance premiums and insurance commissions, and (b) an advance rate percentage that ranges from 70% (decreasing to as low as 62% for the calendar months ended October 31, 2022 through June 30, 2023) to 80% based on a collateral performance indicator, as more completely described below.

Further, under the revolving credit facility, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.

For the year ended March 31, 2024, the effective interest rate, including the commitment fee, on borrowings under the revolving credit facility was 9.9%.

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The agreement allows the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement.

The agreement's

financial covenants include (i) a minimum consolidated net worth of $325.0 million on and after December 31, 2020;

(ii) a maximum ratio of total debt to consolidated adjusted net worth of 2.5 to 1.0 (decreasing to 2.25 to 1.0 for the fiscal quarters ending March 31, 2023 and June 30, 2023, 2.0 to 1.0 for the fiscal quarter ending September 30, 2023, and 2.25 to 1.0 for the fiscal quarter ending December 31, 2023);

(iii) a maximum collateral performance indicator of 26.0% as of the end of each calendar month (increasing to 28.0% for the calendar months ending October 31, 2022 through June 30, 2023);

and (iv) a minimum fixed charges coverage ratio of 1.25 to 1.0 for the fiscal quarter ended December 31, 2022, 1.15 to 1.0 for the fiscal quarters ending March 31, 2023 and June 30, 2023, 1.50 to 1.0 for the fiscal quarter ending September 30, 2023, 2.0 to 1.0 for the fiscal quarter ending December 31, 2023, and 2.75 to 1.0 for each fiscal quarter thereafter, where the ratio for the most recent four consecutive fiscal quarters must be at least 2.0 to 1.0 in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity.

The agreement's financial covenants include (i) a minimum consolidated net worth of $325.0 million;

(ii) a maximum ratio of total debt to consolidated adjusted net worth of 2.25 to 1.0 for the fiscal quarter ended December 31, 2023 and each fiscal quarter thereafter);

(iii) a maximum collateral performance indicator of 26.0% as of the end of each calendar month;

and (iv) a minimum fixed charges coverage ratio of 2.0 to 1.0 for the fiscal quarters ending December 31, 2023 through December 31, 2024, and 2.25 to 1.0 for each fiscal quarter thereafter, where the ratio for the most recent four consecutive fiscal quarters (other than for the fiscal quarter ended September 30, 2023) must be at least 2.0 to 1.0 in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity.

The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty days past due and (b) an eight-month rolling average net charge-off rate.

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The agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions of subordinated debt, certain changes of control of the Company, and the occurrence of certain regulatory events (including the entry of any stay, order, judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating, holding, pledging, collecting or enforcing its eligible loans receivables that is material to the Company or any subsidiary) which remains unvacated, undischarged, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry and is reasonably likely to cause a material adverse change.

As of March 31, 2024, the Company's debt outstanding was $496.0 million, net of $2.4 million unamortized debt issuance costs related to the unsecured senior notes payable, and its shareholders' equity was $424.4 million resulting in a debt-to-equity ratio of 1.2:1.0.

Management will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the Company to continue to execute its business objectives, while not putting undue stress on its Consolidated Balance Sheets.

The Company believes that cash flow from operations and borrowings under its revolving credit facility or other sources will be adequate to fund the expected cash requirements from contractual and other obligations and cost of opening or acquiring new branches, including funding initial operating losses of new branches and funding loans receivable originated by those branches and the Company's other branches (for the next 12 months and for the foreseeable future beyond that).

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The timing and actual number of shares of common stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the Company's debt agreements and other market and economic conditions.

The Company’s stock repurchase program may be suspended or discontinued at any time.

The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises.

As of March 31, 2023, subject to further approval from our Board of Directors, we could repurchase approximately $29.2 million of shares under the terms of our debt facilities.

Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit facility and the Notes.

Our first priority is to ensure we have enough capital to fund loan growth.

As of March 31, 2024, subject to further approval from our Board of Directors, we could repurchase approximately $30.1 million of shares under the terms of our debt facilities.

To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.

As of March 31, 2023, the Company's debt outstanding was $595.3 million, net of $3.5 million unamortized debt issuance costs related to the unsecured senior notes payable, and its shareholders' equity was $385.2 million resulting in a debt-to-equity ratio of 1.6:1.0.

The Company does not believe that inflation, within reasonably anticipated rates, will have a materially adverse effect on its financial condition.

Although inflation would increase the Company’s operating costs in absolute terms and may impact the ability or willingness of borrowers to repay their loans, the Company expects that the same decrease in the value of money

would result in an increase in the size of loans demanded by its customer base.

The Company does not believe that inflation will have a materially adverse effect on its financial condition, unless changes in inflation are particularly severe and sudden in nature.

It is reasonable to anticipate that such a change in customer preference would result in an increase in total loan receivables and an increase in absolute revenues to be generated from that larger amount of loans receivable.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis