What changed in WORLD ACCEPTANCE CORP's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of WORLD ACCEPTANCE CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+228 added−227 removedSource: 10-K (2023-06-01) vs 10-K (2022-05-27)
Top changes in WORLD ACCEPTANCE CORP's 2023 10-K
228 paragraphs added · 227 removed · 178 edited across 7 sections
- Item 1A. Risk Factors+89 / −87 · 64 edited
- Item 7. Management's Discussion & Analysis+80 / −72 · 57 edited
- Item 1. Business+46 / −53 · 45 edited
- Item 2. Properties+3 / −5 · 3 edited
- Item 5. Market for Registrant's Common Equity+5 / −5 · 5 edited
Item 1. Business
Business — how the company describes what it does
45 edited+1 added−8 removed85 unchanged
Item 1. Business
Business — how the company describes what it does
45 edited+1 added−8 removed85 unchanged
2022 filing
2023 filing
Biggest changeAs of March 31, 2022, annual percentage rates applicable to our gross loans receivable as defined by the Truth in Lending Act were as follows: Low High Amount Percentage of total gross loans receivable — % 36 % $ 691,711,646 45.4 37 % 50 % 342,213,621 22.5 51 % 60 % 168,837,346 11.1 61 % 70 % 50,246,002 3.3 71 % 80 % 23,031,267 1.5 81 % 90 % 123,828,541 8.1 91 % 100 % 122,800,448 8.1 101 % 120 % 107,901 — 121 % >121% 12,088 — 1,522,788,860 100 3 Table of Contents Insurance Related Operations.
Biggest changeAs of March 31, 2023, annual percentage rates applicable to our gross loans receivable as defined by the Truth in Lending Act were as follows: Low High Amount Percentage of total gross loans receivable — % 36 % $ 680,805,765 48.9 37 % 50 % 316,345,789 22.8 51 % 60 % 121,292,968 8.7 61 % 70 % 57,976,907 4.2 71 % 80 % 19,808,244 1.4 81 % 90 % 91,386,549 6.6 91 % 100 % 102,377,024 7.4 101 % 120 % 9,556 1 — 121 % >121% 12,766 2 — $ 1,390,015,568 100 1 Gross loans receivable with an APR between 101% and 120% are a result of acquired loans receivable, and not loans originated by the Company. 2 Gross loans receivable with an APR of 121% or greater are a result of acquired loans receivable, and not loans originated by the Company. 3 Table of Contents Insurance Related Operations.
Credit life insurance provides for the payment in full of the borrower's credit obligation to the lender in the event of death. The Company offers credit insurance for all loans originated in Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, and South Carolina, and on a more limited basis in Alabama, Oklahoma, Tennessee, Texas, New Mexico, Idaho, and Utah.
Credit life insurance provides for the payment in full of the borrower's credit obligation to the lender in the event of death. The Company offers credit insurance for all loans originated in Alabama, Idaho, Indiana, Kentucky, New Mexico, Oklahoma, South Carolina, Tennessee, Texas and Utah, and on a more limited basis in Georgia, Louisiana, Mississippi, and Missouri.
We provide competitive pay, as well as a wide array of benefits including the following: • Healthcare benefits, including medical, dental and vision, flexible spending accounts • A 401(k) Plan (with an employer matching contribution) • Company-paid basic life insurance and long-term and short-term disability • Vacation, sick and holiday paid-time off, as well as volunteer paid time off and paid parental leave • Time off donation program for Team Members experiencing medical emergencies • Financial assistance program for Team Members impacted by natural disasters Training and Development.
We provide competitive pay, as well as a wide array of benefits including the following: • Healthcare benefits, including medical, dental and vision, and flexible spending accounts • A 401(k) Plan (with an employer matching contribution) • Company-paid basic life insurance and long-term and short-term disability • Vacation, sick and holiday paid-time off, as well as volunteer paid time off and paid parental leave • Time off donation program for Team Members experiencing medical emergencies • Financial assistance program for Team Members impacted by natural disasters Training and Development.
These documents are available for access as soon as reasonably practicable after we electronically file these documents with the SEC. The Company files these reports with the SEC via the SEC’s EDGAR filing system, and such reports also may be accessed via the SEC’s EDGAR database at www.sec.gov .
These documents are available for access as soon as reasonably practicable after we electronically file these documents with the SEC. The Company files these reports with the SEC via the SEC’s EDGAR filing system, and such reports also may be accessed via the SEC’s EDGAR database at www.sec.gov/edgar.
The Company maintains an Internet website, “www.LoansByWorld.com,” where interested persons will be able to access free of charge, among other information, the Company’s annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K as well as amendments to these filings via a link to a third-party website.
Available Information . The Company maintains an Internet website, “www.LoansByWorld.com,” where interested persons will be able to access free of charge, among other information, the Company’s annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K as well as amendments to these filings via a link to a third-party website.
The following table sets forth the composition of the Company's gross loans receivable by state at March 31 of each year from 2013 through 2022: At March 31, State 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Alabama 7 % 6 % 5 % 5 % 5 % 4 % 6 % 5 % 4 % 4 % Georgia 13 13 13 13 14 15 13 13 13 14 Idaho (1) 1 1 1 1 — — — — — — Illinois 10 8 8 7 7 7 7 7 8 7 Indiana (2) 3 2 2 2 2 2 1 1 1 — Kentucky 6 7 8 8 9 10 10 10 9 10 Louisiana 3 3 3 3 2 2 2 2 2 2 Mississippi (3) 2 2 1 1 1 1 — — — — Missouri 7 8 8 7 7 7 8 8 7 7 New Mexico 2 2 2 2 2 2 2 2 2 2 Oklahoma 6 6 6 7 7 7 8 8 7 7 South Carolina 8 10 10 9 10 11 10 11 12 12 Tennessee 10 11 11 12 13 13 13 13 13 14 Texas 20 19 19 21 19 18 19 19 21 20 Utah (4) 1 1 1 — — — — — — — Wisconsin (5) 1 1 2 2 2 1 1 1 1 1 Total 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % _______________________________________________________ (1) The Company commenced operations in Idaho in October 2014.
The following table sets forth the composition of the Company's gross loans receivable by state at March 31 of each year from 2014 through 2023: At March 31, State 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Alabama 6 % 7 % 6 % 5 % 5 % 5 % 4 % 6 % 5 % 4 % Georgia 13 13 13 13 13 14 15 13 13 13 Idaho (1) 1 1 1 1 1 — — — — — Illinois 10 10 8 8 7 7 7 7 7 8 Indiana 2 3 2 2 2 2 2 1 1 1 Kentucky 6 6 7 8 8 9 10 10 10 9 Louisiana 4 3 3 3 3 2 2 2 2 2 Mississippi (2) 2 2 2 1 1 1 1 — — — Missouri 7 7 8 8 7 7 7 8 8 7 New Mexico 4 2 2 2 2 2 2 2 2 2 Oklahoma 6 6 6 6 7 7 7 8 8 7 South Carolina 8 8 10 10 9 10 11 10 11 12 Tennessee 9 10 11 11 12 13 13 13 13 13 Texas 20 20 19 19 21 19 18 19 19 21 Utah (3) 1 1 1 1 — — — — — — Wisconsin 1 1 1 2 2 2 1 1 1 1 Total 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % _______________________________________________________ (1) The Company commenced operations in Idaho in October 2014.
The Company's highest loan demand occurs generally from October through December, its third fiscal quarter. Loan demand is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the Company experiences significant seasonal fluctuations in its operating results and cash needs.
The Company's highest loan demand generally occurs from October to December, its third fiscal quarter. Loan demand is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the Company experiences significant seasonal fluctuations in its operating results and cash needs.
The table below shows the types of insurance and ancillary products the Company sells by state as of March 31, 2022: Credit Life Credit Accident and Health Credit Property and Auto Unemployment Accidental Death & Dismemberment Non-file Automobile Club Membership Alabama (1) X X X X Georgia X X X X X X Idaho X X X X X Illinois Indiana X X X X X X X Kentucky X X X X X X Louisiana X X X X X X Mississippi X X X X Missouri X X X X New Mexico X X X X X X Oklahoma (1) X X X X X South Carolina X X X X X X Tennessee (1) X X X X X Texas (1) X X X X X Utah X X X X X X Wisconsin X _______________________________________________________ (1) Credit insurance is offered for certain loans.
The table below shows the types of insurance and ancillary products the Company sells by state as of March 31, 2023: Credit Life Credit Accident and Health Credit Property and Auto Unemployment Accidental Death & Dismemberment Non-file Automobile Club Membership Alabama (1) X X X X X Georgia X X X X X X Idaho X X X X X Illinois Indiana X X X X X X X Kentucky X X X X X X Louisiana X X X X X X Mississippi X X X X Missouri X X X X New Mexico Oklahoma (1) X X X X X South Carolina X X X X X X Tennessee (1) X X X X X Texas (1) X X X X X Utah X X X X X X Wisconsin X _______________________________________________________ (1) Credit insurance is offered for certain loans.
The Company's captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies, where the subsidiary is organized and domiciled. In addition, state authorities regulate and supervise our insurance operations.
The Company's captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies, where the subsidiary is organized and domiciled. In addition, state authorities regulate and supervise the Company's insurance operations.
Each branch generally has one or two financial service representatives who take loan applications, process loan applications, apply payments, and assist in the preparation of operational reports, collection efforts, and marketing activities. Larger branches may employ additional account specialists. New employees are required to review detailed training materials that explain the Company's operating policies and procedures.
Each branch generally has one or two financial service representatives who take loan applications, process loan applications, apply payments, and assist in the preparation of operational reports, collection efforts, and marketing activities. Larger branches may employ additional financial service representatives. New employees are required to review detailed training materials that explain the Company's operating policies and procedures.
See Part I, Item 1A, “Risk Factors - Federal legislative or regulatory proposals, initiatives, actions or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us to modify, suspend, or cease part or all of our nationwide operations,” for further information regarding the potential impact of adverse legislative and regulatory changes.
See Part I, Item 1A, “Risk Factors” - Federal legislative or regulatory proposals, initiatives, actions or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us to modify, suspend, or cease part or all of our nationwide operations,” for further information regarding the potential impact of adverse legislative and regulatory changes.
In fiscal 2023, the Company may open or acquire new branches in its existing market areas or commence operations in new states where it believes demographic profiles and state regulations are attractive. The Company may merge other branches on a case-by-case basis based on profitability or other factors.
In fiscal 2024, the Company may open or acquire new branches in its existing market areas or commence operations in new states where it believes demographic profiles and state regulations are attractive. The Company may merge other branches on a case-by-case basis based on profitability or other factors.
During fiscal 2022, our human capital efforts were focused on accelerating the transformation of our technology for workforce management through investments in upgraded systems and processes, and continuing to increase our agility to meet the quickly changing needs of the business.
During fiscal 2023, our human capital efforts were focused on accelerating the transformation of our technology for workforce management through investments in upgraded systems and processes, and continuing to increase our agility to meet the quickly changing needs of the business.
Umstetter (42) Senior Vice President, General Counsel, Chief Compliance Officer and Secretary • Senior Vice President, Secretary and General Counsel since August 2018 • General Counsel and Chief Compliance Officer for Shellpoint Mortgage Servicing from December 2015 to August 2018 • General Counsel for Global Lending Services from May 2015 to December 2015; Managing Counsel for Resurgent Capital Services, June 2009 to May 2015.
Umstetter (43) Senior Vice President, General Counsel, Chief Compliance Officer and Secretary • Senior Vice President, Secretary and General Counsel since August 2018 • General Counsel and Chief Compliance Officer for Shellpoint Mortgage Servicing from December 2015 to August 2018 • General Counsel for Global Lending Services from May 2015 to December 2015; Managing Counsel for Resurgent Capital Services, June 2009 to May 2015.
Lindsay Caulder (46) Senior Vice President, Human Resources • Senior Vice President, Human Resources since October 2018 • Vice President, Human Resources from February 2016 to October 2018 • Divisional Vice President - Human Resources of Family Dollar Corporation, a nationwide variety retail chain, from 2012 to 2016 • Director - Learning and Talent Acquisition of Family Dollar Corporation from 2009-2012.
Lindsay Caulder (47) Senior Vice President, Human Resources • Senior Vice President, Human Resources since October 2018 • Vice President, Human Resources from February 2016 to October 2018 • Divisional Vice President - Human Resources of Family Dollar Corporation, a nationwide variety retail chain, from 2012 to 2016 • Director - Learning and Talent Acquisition of Family Dollar Corporation from 2009-2012.
See Part I, Item 1A, “Risk Factors". Various legislative proposals addressing consumer credit transactions have been passed in recent years or are currently pending in the U.S. Congress. Congressional members continue to receive pressure from consumer activists and other industry opposition groups to adopt legislation to address various aspects of consumer credit transactions.
See Part I, Item 1A, “Risk Factors". 11 Table of Contents Various legislative proposals addressing consumer credit transactions have been passed in recent years or are currently pending in the U.S. Congress. Congressional members continue to receive pressure from consumer activists and other industry opposition groups to adopt legislation to address various aspects of consumer credit transactions.
Clinton Dyer (49) Executive Vice President and Chief Branch Operations Officer • Executive Vice President and Chief Branch Operations Officer since February 2018 • Executive Vice President of Branch Operations from September 2016 to February 2018 • Senior Vice President, Southeastern Division from November 2015 to September 2016 • Senior Vice President, Central Division from June 2005 to November 2015; Vice President, Operations –Tennessee and Kentucky from April 2002 to June 2005.
Clinton Dyer (50) Executive Vice President and Chief Branch Operations Officer • Executive Vice President and Chief Branch Operations Officer since February 2018 • Executive Vice President of Branch Operations from September 2016 to February 2018 • Senior Vice President, Southeastern Division from November 2015 to September 2016 • Senior Vice President, Central Division from June 2005 to November 2015; Vice President, Operations –Tennessee and Kentucky from April 2002 to June 2005.
Jason E. Childers (47) Senior Vice President, Information Technology • Senior Vice President, Information Technology since October 2018 • Vice President of IT Strategic Solutions from April 2016 to October 2018 • Partner and Head of IT at Sabal Financial Group, LP from March 2009 until April 2016.
Jason E. Childers (48) Senior Vice President, Information Technology • Senior Vice President, Information Technology since October 2018 • Vice President of IT Strategic Solutions from April 2016 to October 2018 • Partner and Head of IT at Sabal Financial Group, LP from March 2009 until April 2016.
See “Federal legislation” below and Part I, Item 1A, “Risk Factors,” for a further discussion of the potential impact of regulatory changes on our business. 11 Table of Contents Federal legislation . In addition to state and local laws and regulations, we are subject to numerous federal laws and regulations that affect our lending operations.
See “Federal legislation” below and Part I, Item 1A, “Risk Factors,” for a further discussion of the potential impact of regulatory changes on our business. Federal legislation . In addition to state and local laws and regulations, we are subject to numerous federal laws and regulations that affect our lending operations.
The following table sets forth information about our tax advance loan product for fiscal 2022: Minimum Origination Maximum Origination Minimum Term (Months) Maximum Term (Months) Tax advance loans 500 5,000 8 8 Loan Receivables.
The following table sets forth information about our tax advance loan product for fiscal 2023: Minimum Origination Maximum Origination Minimum Term (Months) Maximum Term (Months) Tax advance loans $ 500 $ 5,000 8 8 Loan Receivables.
Advertising expenses as a percent of revenue were approximately 3.1%, 3.3%, and 4.1% in fiscal 2022, 2021, and 2020, respectively. 7 Table of Contents Competition . The small-loan consumer finance industry is highly fragmented, with numerous competitors. The majority of the Company's competitors are independent operators with generally less than 100 branches.
Advertising expenses as a percent of revenue were approximately 1.0%, 3.1%, and 3.3% in fiscal 2023, 2022, and 2021, respectively. 7 Table of Contents Competition . The small-loan consumer finance industry is highly fragmented, with numerous competitors. The majority of the Company's competitors are independent operators with generally less than 100 branches.
See Part I, Item 1A, Risk Factors, for a discussion of the risks related to our extensive regulation. State Regulations and Legislation . The Company is subject to numerous state laws and regulations that affect our lending activities. Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and operations.
See Part I, Item 1A, “Risk Factors”, for a discussion of the risks related to our extensive regulation. State Regulations and Legislation . The Company is subject to numerous state laws and regulations that affect our lending activities. Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and operations.
We value feedback from our team and participated in an annual engagement survey that resulted in being named by Energage as a Top Workplaces USA winner in 2022 and 2021.
We value feedback from our team and participate in an annual engagement survey that resulted in being named by Energage as a Top Workplaces USA winner in 2023, 2022, and 2021.
The Company and its operations are regulated by a variety of state agencies in the jurisdictions in which the Company has branches, including those related to banking, finance, financial institutions and consumer credit.
The Company and its operations are regulated by a variety of state agencies in the jurisdictions in which the Company operates, including those related to banking, finance, financial institutions and consumer credit.
The Company's ability to continue existing operations and expand its operations in existing or new states is dependent upon, among other things, laws and regulations that permit the Company to operate its business profitably and its ability to obtain necessary regulatory approvals and licenses.
The Company's ability to continue existing operations and expand its operations in existing or new states is dependent upon, among other things, laws and regulations that permit the Company to operate its 2 Table of Contents business profitably and its ability to obtain necessary regulatory approvals and licenses.
These refinancings also provide a resolution to temporary financial setbacks for these borrowers and sustain their credit rating. Refinancings of delinquent loans represented 1.1%, 1.5%, and 1.3% of the Company’s loan volume in fiscal 2022, 2021, and 2020, respectively.
These refinancings also provide a resolution to temporary financial setbacks for these borrowers and sustain their credit rating. Refinancings of delinquent loans represented 1.4%, 1.1%, and 1.5% of the Company’s loan volume in fiscal 2023, 2022, and 2021, respectively.
Approximately 15.0%, 14.7%, and 12.7% of the Company's loans were generated through the origination of new loans to previous customers in fiscal 2022, 2021, and 2020, respectively. Collection Operations . To reduce late payment risk, local branch staff encourage customers to inform the Company in advance of expected payment problems.
Approximately 16.9%, 15.0%, and 14.7% of the Company's loans were generated through the origination of new loans to previous customers in fiscal 2023, 2022, and 2021, respectively. Collection Operations . To reduce late payment risk, local branch staff encourage customers to inform the Company in advance of expected payment problems.
The Company offers traditional installment loans generally between $500 and $6,000, with the average loan origination being $2,085 in fiscal 2022. The Company operates 1,167 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Utah, and Wisconsin as of March 31, 2022.
The Company offers traditional installment loans generally between $500 and $6,000, with the average loan origination being $2,359 in fiscal 2023. The Company operates 1,073 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Utah, and Wisconsin as of March 31, 2023.
Scott McIntyre (45) Senior Vice President, Accounting • Senior Vice President of Accounting since October 2018 • Vice President of Accounting-US from June 2013 to October 2018 • Controller-US from June 2011 to June 2013. 10 Table of Contents Government Regulation Small-loan consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal and state statutes, ordinances, and regulations.
Scott McIntyre (46) Senior Vice President, Accounting • Senior Vice President of Accounting since October 2018 • Vice President of Accounting-US from June 2013 to October 2018 • Controller-US from June 2011 to June 2013. Government Regulation Small-loan consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal and state statutes, ordinances, and regulations.
In many cases the existing customer’s past performance and established creditworthiness with the Company qualifies that customer for a larger loan. For fiscal 2022, 2021, and 2020, the percentages of the Company's loan originations that were refinancings of existing loans were 63.9%, 69.2%, and 66.9%, respectively.
In many cases the existing customer’s past performance and established creditworthiness with the Company qualifies that customer for a larger loan. For fiscal 2023, 2022, and 2021, the percentages of the Company's loan originations that were refinancings of existing loans were 71.4%, 63.9%, and 69.2%, respectively.
Chad Prashad (41) President and Chief Executive Officer • President and Chief Executive Officer since June 2018 • Senior Vice President, Chief Strategy & Analytics Officer from February 2018 to June 2018 • Vice President of Analytics from June 2014 to February 2018 • Senior Director of Strategy Development for Resurgent Capital Services (a consumer debt managing and servicing company) from 2013 to June 2014Director of Legal Strategy for Resurgent Capital Services from 2009 to 2013 9 Table of Contents John L.
Chad Prashad (42) President and Chief Executive Officer • President and Chief Executive Officer since June 2018 • Senior Vice President, Chief Strategy & Analytics Officer from February 2018 to June 2018 • Vice President of Analytics from June 2014 to February 2018 • Senior Director of Strategy Development for Resurgent Capital Services (a consumer debt managing and servicing company) from 2013 to June 2014 • Director of Legal Strategy for Resurgent Capital Services from 2009 to 2013 John L.
(42) Executive Vice President, Chief Financial and Strategy Officer, and Treasurer • Executive Vice President, Chief Financial and Strategy Officer and Treasurer since October 2018 • Senior Vice President, Chief Financial Officer and Treasurer from November 2015 to October 2018 • Vice President, Chief Financial Officer and Treasurer from December 2013 to November 2015 • Director of Finance - Corporate and Investment Banking Division of Bank of Tokyo-Mitsubishi UFJ in 2013 • Senior Manager of PricewaterhouseCoopers from 2011 to 2013; Manager of PricewaterhouseCoopers from 2008 to 2011.
(43) Executive Vice President, Chief Financial and Strategy Officer, and Treasurer • Executive Vice President, Chief Financial and Strategy Officer and Treasurer since October 2018 • Senior Vice President, Chief Financial Officer and Treasurer from November 2015 to October 2018 • Vice President, Chief Financial Officer and Treasurer from December 2013 to November 2015 • Director of Finance - Corporate and Investment Banking Division of Bank of Tokyo-Mitsubishi UFJ in 2013 • Senior Manager of PricewaterhouseCoopers from 2011 to 2013; Manager of PricewaterhouseCoopers from 2008 to 2011. 9 Table of Contents D.
A Louisiana statute prohibits any person from acquiring control of 50% or more of the shares of stock of a licensed consumer lender, such as the Company, without first obtaining a license as a consumer lender.
A Louisiana statute prohibits any person from acquiring control of 25% or more of the shares of stock of a licensed consumer lender, such as the Company, 10 Table of Contents without first obtaining a license as a consumer lender.
As of March 31, 2022, we employed 3,121 full and part time employees across our sixteen-state footprint, approximately 332 of whom were corporate Team Members located in our main corporate office in Greenville, South Carolina and approximately 2,789 of whom were branch-based Team Members located in 16 states throughout the United States.
As of March 31, 2023, we employed 3,075 full and part-time employees across our sixteen-state footprint, approximately 287 of whom were corporate Team Members located in our main corporate office in Greenville, South Carolina and approximately 2,788 of whom were branch-based Team Members located in 16 states throughout the United States.
Product Offerings Installment Loans. We primarily offer pre-computed and interest bearing consumer installment loans with interest and fee income from such loans accounting for 83.4%, 85.8%, and 86.2% of our total revenues in fiscal years 2022, 2021, and 2020, respectively.
Product Offerings Installment Loans. We primarily offer pre-computed and interest bearing consumer installment loans with interest and fee income from such loans accounting for 82.4%, 83.0%, and 85.4% of our total revenues in fiscal years 2023, 2022, and 2021, respectively.
Information included on or linked to our website is not incorporated by reference into this annual report. 12 Table of Contents
Information included on or linked to our website is not incorporated by reference into this annual report.
As of March 31, 2022, we no longer offer loans with annual percentage rates, including interest, fees and other charges as calculated in accordance with the Federal Truth in Lending Act, above 100%. The average annual percentage rate of our portfolio was 47.4% as of March 31, 2022.
As of March 31, 2021, we no longer offered loans with annual percentage rates, including interest, fees and other charges as calculated in accordance with the Federal Truth in Lending Act, above 100%. The average annual percentage rate of our portfolio was 45.8% as of March 31, 2023.
Some examples of these programs include: • BOLT – developing high performing and high potential Account Specialists to prepare them for Branch Manager roles • Emerging Leaders – developing high performing and high potential Branch Managers to prepare them for District Manager roles COVID Response.
Some examples of these programs include: • BOLT – developing high performing and high potential Account Specialists to prepare them for Branch Manager roles • Emerging Leaders – developing high performing and high potential Branch Managers to prepare them for District Manager roles Information about our Executive Officers .
The following table sets forth information about our loan products for fiscal 2022: Minimum Origination (1) Maximum Origination (1) Minimum Term (Months) Maximum Term (Months) Small loans $ 500 $ 2,450 7 36 Large loans $ 2,500 $ 25,000 9 60 _______________________________________________________ (1) Gross loan net of finance charges. Specific allowable interest, fees, and other charges vary by state.
The following table sets forth information about our loan products for fiscal 2023: Minimum Origination (1) Maximum Origination (1) Minimum Term (Months) Maximum Term (Months) Small loans $ 500 $ 2,450 5 31 Large loans $ 2,500 $ 33,450 10 60 _______________________________________________________ (1) Gross loan net of finance charges. Specific allowable interest, fees, and other charges vary by state.
In fiscal 2022, the captive insurance subsidiary reinsured approximately 10.9% of the credit insurance sold by the Company and contributed approximately $2.3 million to the Company's total revenue.
In fiscal 2023, the captive insurance subsidiary reinsured approximately 11.1% of the credit insurance sold by the Company and contributed approximately $3.1 million to the Company's total revenue.
(2) The Company commenced operations in Indiana in September 2012. (3) The Company commenced operations in Mississippi in September 2013.
(2) The Company commenced operations in Mississippi in September 2013.
This program is provided in all but a few of the Company’s branches. The Company prepared approximately 81,000, 77,000 and 84,000 returns in fiscal years 2022, 2021, and 2020, respectively. Net revenue generated by the Company from this program during fiscal 2022, 2021, and 2020 amounted to approximately $21.7 million, $18.1 million, and $20.9 million, respectively.
This program is provided in all but a few of the Company’s branches. The Company prepared approximately 75,000, 81,000 and 77,000 returns in fiscal years 2023, 2022, and 2021, respectively. Net revenue generated by the Company from this program during fiscal 2023, 2022, and 2021 amounted to approximately $24.0 million, $24.5 million, and $20.6 million, respectively.
As of March 31, 2022, our Team Members had the following gender, race and ethnicity demographics: Gender - All Team Members Female 85.19% Male 14.78% Undeclared 0.03% Race/Ethnicity - All Team Members White 57.62% Hispanic or Latino 21.00% Black or African American 16.39% 8 Table of Contents Other Race/Ethnicity 3.61% Not provided 1.38% Total Rewards.
As of March 31, 2023, our Team Members had the following gender, race and ethnicity demographics: Gender - All Team Members Female 85.94% Male 13.96% Undeclared 0.10% Race/Ethnicity - All Team Members White 55.76% Hispanic or Latino 22.27% Black or African American 16.31% 8 Table of Contents Other Race/Ethnicity 4.65% Not provided 1.01% Total Rewards.
During fiscal 2022, the Company did not purchase or otherwise open any new branches, but merged 38 branches into other existing branches due to their inability to generate sufficient returns or for efficiency reasons.
During fiscal 2023, the Company opened 2 new branches and merged 96 branches into other existing branches due to their inability to generate sufficient returns or for efficiency reasons.
See Part I, Item 1A for a discussion of our risks related to COVID-19. 2 Table of Contents Branch Expansion and Consolidation. As of March 31, 2022, the Company had 1,167 branches in 16 states, with over 100 branches located in each of Texas, Georgia, and Tennessee.
Federal laws also prohibit misleading advertising, protect against discriminatory lending practices and prohibit unfair, deceptive, and abusive credit practices. Branch Expansion and Consolidation. As of March 31, 2023, the Company had 1,073 branches in 16 states, with over 100 branches located in Texas and Georgia.
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Federal laws also prohibit misleading advertising, protect against discriminatory lending practices and prohibit unfair, deceptive, and abusive credit practices. Impact of COVID-19 . COVID-19 has continued to have a widespread and unprecedented global impact. While most locations have remained open throughout the pandemic, we have implemented enhanced safety measures in all of our branches.
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(3) The Company commenced operations in Utah in October 2018. 5 Table of Contents The following table sets forth the total number of loans, the average gross loan balance, and the gross loan balance by state at March 31, 2023: Total Number of Loans Average Gross Loan Balance Gross Loan Balance (thousands) Alabama 46,330 $ 1,889 $ 87,538 Georgia 82,572 2,182 180,202 Idaho 6,366 1,709 10,877 Illinois 43,232 3,185 137,705 Indiana 19,835 1,723 34,176 Kentucky 42,577 2,096 89,235 Louisiana 29,886 1,752 52,368 Mississippi 21,252 1,348 28,650 Missouri 32,402 2,992 96,944 New Mexico 25,979 2,164 56,230 Oklahoma 40,078 2,014 80,718 South Carolina 50,623 2,141 108,365 Tennessee 60,203 2,050 123,409 Texas 162,921 1,698 276,596 Utah 4,389 2,017 8,854 Wisconsin 9,300 1,952 18,149 Total 677,945 $ 2,050 $ 1,390,016 Seasonality .
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In each branch, steps have been taken to reduce the spread of the virus and ensure the safety of our employees and customers. Branch team members have remained a positive and dedicated resource for customers during these uncertain times.
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(4) The Company commenced operations in Utah in October 2018. 5 Table of Contents The following table sets forth the total number of loans, the average gross loan balance, and the gross loan balance by state at March 31, 2022: Total Number of Loans Average Gross Loan Balance Gross Loan Balance (thousands) Alabama 57,034 $ 1,745 $ 99,519 Georgia 101,014 1,988 200,847 Idaho 8,362 1,652 13,815 Illinois 49,377 2,970 146,640 Indiana 24,589 1,676 41,209 Kentucky 48,008 2,026 97,250 Louisiana 31,718 1,620 51,373 Mississippi 25,086 1,298 32,573 Missouri 40,405 2,664 107,635 New Mexico 19,530 1,885 36,810 Oklahoma 46,712 1,915 89,459 South Carolina 65,749 1,899 124,829 Tennessee 75,268 1,897 142,749 Texas 198,674 1,534 304,716 Utah 5,821 1,904 11,086 Wisconsin 12,477 1,786 22,279 Total 809,824 $ 1,880 $ 1,522,789 Seasonality .
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The impact of the global health crisis brought numerous changes, requiring everyone to embrace a spirit of flexibility, adaptability, and innovation. In addition to the adoption of virtual and remote technology for company communications, our corporate Team Members, branch managers, and auditors shifted to remote work as early as mid-March of 2020.
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Team Members who were directly impacted by COVID were given an additional five days of paid leave to allow them time to recover and not fully use all sick or vacation time.
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We added flexible branch hours to better accommodate the needs of essential workers and parents impacted by school closures, as well as a digital loan application and funding process and curbside service to support social distancing while maintaining customers access to our products. Information about our Executive Officers .
Removed
Mexico Exit. On August 3, 2018 the Company and its affiliates completed the sale of the Company's Mexico operating segment in its entirety. The Company sold all of the issued and outstanding capital stock and equity interest of WAC de Mexico and SWAC to the Purchasers, effective as of July 1, 2018, for a purchase price of approximately $44.36 million.
Removed
The Company has not and will not have any other involvement with the Mexico operating segment subsequent to the sale's effective date. The Company and its subsidiaries no longer operate in Mexico. Available Information .
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
64 edited+25 added−23 removed161 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
64 edited+25 added−23 removed161 unchanged
2022 filing
2023 filing
Biggest changeIn addition, any adverse change in existing laws or regulations, or any adverse interpretation or litigation relating to existing laws and regulations in any state in which we operate, could subject us to liability for prior operating activities or could lower or eliminate the profitability of our operations going forward by, among other things, reducing the amount of interest and fees we can charge in connection with our loans.
Biggest changeWe can give no assurance that the laws and regulations that govern our business, or the interpretation or administration of those laws and regulations, will remain unchanged or that any such future changes will not materially and adversely affect or in the worst case, eliminate the Company’s lending practices, operations, profitability, or prospects. 22 Table of Contents In addition, any adverse change in existing laws or regulations, or any adverse interpretation or litigation relating to existing laws and regulations in any state in which we operate, could subject us to liability for prior operating activities or could lower or eliminate the profitability of our operations going forward by, among other things, reducing the amount of interest and fees we can charge in connection with our loans.
Investors are advised that it is impossible to identify or predict all risks, and those risks not currently known to us or those we currently deem immaterial also could affect us in the future.
Investors are advised that it is impossible to identify or predict all risks, and those risks not currently known to us or those we currently deem immaterial could also affect us in the future.
Furthermore, we may not be able to detect immediately any such breach, which may increase the losses that we would suffer. In addition, our existing insurance policies may not reimburse us for all of the damages that we might incur as a result of a breach or other information system failure or network disruption.
Furthermore, we may not be able to immediately detect any such breach, which may increase the losses that we would suffer. In addition, our existing insurance policies may not reimburse us for all of the damages that we might incur as a result of a breach or other information system failure or network disruption.
Additional information regarding our revolving credit facility is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position, liquidity and results of operations.
Additional information regarding our revolving credit facility and Notes is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position, liquidity and results of operations.
Additional information regarding our allowance for credit losses is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Credit Quality.” In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL).
Additional information regarding our allowance for credit losses is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Allowance for Credit Losses.” In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL).
Additionally, a variety of factors could cause the price of the common stock to fluctuate, perhaps substantially, including: general market fluctuations resulting from factors not directly related to the Company’s operations or the inherent value of its common stock; state or federal legislative or regulatory proposals, initiatives, actions or changes that are, or are perceived to be, adverse to our operations or the broader consumer finance industry in general; announcements of developments related to our business; fluctuations in our operating results and the provision for loan losses; low trading volume in our common stock; decreased availability of our common stock resulting from stock repurchases and concentrations of ownership by large or institutional investors; general conditions in the financial service industry, the domestic or global economy, including inflationary pressures, or the domestic or global credit or capital markets; changes in financial estimates by securities analysts; our failure to meet the expectations of securities analysts or investors; negative commentary regarding our Company and corresponding short-selling market behavior; adverse developments in our relationships with our customers; investigations or legal proceedings brought against the Company or its officers; or significant changes in our senior management team.
Additionally, a variety of factors could cause the price of the common stock to fluctuate, perhaps substantially, including: general market fluctuations resulting from factors not directly related to the Company’s operations or the inherent value of its common stock; state or federal legislative or regulatory proposals, initiatives, actions or changes that are, or are perceived to be, adverse to our operations or the broader consumer finance industry in general; announcements of developments related to our business; fluctuations in our operating results and the provision for credit losses; low trading volume in our common stock; decreased availability of our common stock resulting from stock repurchases and concentrations of ownership by large or institutional investors; general conditions in the financial service industry; disruption to the domestic financial services industry, the domestic or global economy, including inflationary pressures, or the domestic or global credit or capital markets; changes in financial estimates by securities analysts; our failure to meet the expectations of securities analysts or investors; negative commentary regarding our Company and corresponding short-selling market behavior; adverse developments in our relationships with our customers; investigations or legal proceedings brought against the Company or its officers; or significant changes in our senior management team.
In addition, if we cannot locate original documents (or copies, in some cases) for certain finance receivables, we may not be able to collect on those finance receivables. Our off-site data center and centralized IT functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations, and financial condition.
In addition, if we cannot locate original documents (or copies, in some cases) for certain loans receivables, we may not be able to collect on those loans receivables. Our off-site data center and centralized IT functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations, and financial condition.
Moreover, if our regulators conclude that we have not met the standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have a materially adverse effect on our business, reputation, financial condition and operating results.
Moreover, if our regulators conclude that we have not met the standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have a material adverse effect on our business, reputation, financial condition and operating results.
At March 31, 2022 our total assets contained $7.4 million of goodwill. Under GAAP, goodwill is subject to periodic review and testing to determine if it is impaired. Unfavorable trends in our industry and unfavorable events or disruptions to our operations resulting from adverse legislative or regulatory actions or from other unpredictable causes could result in goodwill impairment charges.
At March 31, 2023, our total assets contained $7.4 million of goodwill. Under GAAP, goodwill is subject to periodic review and testing to determine if it is impaired. Unfavorable trends in our industry and unfavorable events or disruptions to our operations resulting from adverse legislative or regulatory actions or from other unpredictable causes could result in goodwill impairment charges.
On August 6, 2020, the Company announced that it has reached resolution with both the SEC and the DOJ with respect to the FCPA matter in Mexico. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters,” for more information.
On August 6, 2020, the Company announced that it had reached resolution with both the SEC and the DOJ with respect to the FCPA matter in Mexico. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters,” for more information.
In particular, our revolving credit agreement requires, among other things, that we maintain (i) at all 19 Table of Contents times a specified minimum consolidated net worth, (ii) as of the end of each fiscal quarter, a minimum ratio of consolidated net income available for fixed charges for the period of four consecutive fiscal quarters most recently ended to consolidated fixed charges for that period of not less than a specified minimum, (iii) at all times a specified maximum ratio of total debt on a consolidated basis to consolidated adjusted net worth and (iv) at all times a specified maximum collateral performance indicator.
In particular, our revolving credit agreement requires, among other things, that we maintain (i) at all times a specified minimum consolidated net worth, (ii) as of the end of each fiscal quarter, a minimum ratio of consolidated net income available for fixed charges for the period of four consecutive fiscal quarters most recently ended to consolidated fixed charges for that period of not less than a specified minimum, (iii) at all times a specified maximum ratio of total debt on a consolidated basis to consolidated adjusted net worth and (iv) at all times a specified maximum collateral performance indicator.
The CFPB and other regulators have issued regulatory guidance focusing on the need for financial institutions to perform due diligence and ongoing monitoring of third-party vendor relationships, which increases the scope of management involvement and decreases the benefit that we receive from using third-party vendors.
The CFPB and other regulators have issued regulatory guidance focusing on the need for financial institutions to perform due diligence and ongoing monitoring of third-party vendor and service provider relationships, which increases the scope of management involvement and decreases the benefit that we receive from using third-party vendors.
Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly affecting our lending activities have been under review and subject to change in recent years as a result of various developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and media focus on issues of consumer and borrower protection.
Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly affecting our lending activities have been under review and subject to change in recent years as a result of various developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and 20 Table of Contents media focus on issues of consumer and borrower protection.
Any of the risk factors described in this annual report, as well as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in harm to our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in our Company.
Any of the risk factors described in this annual report, as well as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in 12 Table of Contents harm to our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in our Company.
Our financial results may be negatively affected as weak or deteriorating economic conditions 14 Table of Contents are forecasted and alter our expectations for credit losses. In addition, due to the expansion of the time horizon over which we are required to estimate future credit losses under CECL, we may experience increased volatility in our future provisions for credit losses.
Our financial results may be negatively affected as weak or deteriorating economic conditions are forecasted and alter our expectations for credit losses. In addition, due to the expansion of the time horizon over which we are required to estimate future credit losses under CECL, we may experience increased volatility in our future provisions for credit losses.
Any such catastrophic event or other unexpected disruption of our headquarter's functions or off-site data center could have a material adverse effect on our business, results of operations, and financial condition.
Any such catastrophic event or other unexpected disruption of our headquarters' functions or off-site data center could have a material adverse effect on our business, results of operations, and financial condition.
We have previously acquired, and in the future may acquire, assets or businesses, including large portfolios of finance receivables, either through the direct purchase of such assets or the purchase of the equity of a company with such a portfolio.
We have previously acquired, and in the future may acquire, assets or businesses, including large portfolios of loans receivables, either through the direct purchase of such assets or the purchase of the equity of a company with such a portfolio.
Negative publicity regarding our Company (or others engaged in a similar business or similar activities), whether or not accurate, may damage our reputation, which could have a material adverse effect on our business, results of operations, and financial condition. We have goodwill, which is subject to periodic review and testing for impairment.
Negative publicity regarding our Company (or others engaged in a similar business or similar activities), whether or not accurate, may damage our reputation, which could have a material adverse effect on our business, results of operations, and financial condition. 24 Table of Contents We have goodwill, which is subject to periodic review and testing for impairment.
As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we 25 Table of Contents could be required to change certain assumptions or estimates we previously used in preparing our financial statements, which could negatively impact how we record and report our results of operations and financial condition.
As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain assumptions or estimates we previously used in preparing our financial statements, which could negatively impact how we record and report our results of operations and financial condition.
The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences or financial condition, regulatory restrictions that decrease customer access to particular products, or the 15 Table of Contents availability of competing products, including through alternative or competing marketing channels.
The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences or financial condition, regulatory restrictions that decrease customer access to particular products, or the availability of competing products, including through alternative or competing marketing channels.
Although the CFPB has not yet developed a “larger participant” rule that directly covers the Company’s installment lending business, the Company believes that the implementation of any such rules would 20 Table of Contents likely bring the Company’s business under the CFPB’s direct supervisory authority.
Although the CFPB has not yet developed a “larger participant” rule that directly covers the Company’s installment lending business, the Company believes that the implementation of any such rules would likely bring the Company’s business under the CFPB’s direct supervisory authority.
Employee or third-party misconduct could prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect violations of such rules.
Employee or third-party misconduct could prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect 23 Table of Contents violations of such rules.
The enactment of one or more of such regulatory changes, or the exercise of broad regulatory authority by regulators, including but not limited to, the CFPB, having jurisdiction over the Company’s business or discretionary consumer financial transactions generically, could materially and adversely affect our business, results of operations and prospects.
The enactment of one or more of such regulatory changes, or the exercise of broad regulatory authority by regulators, including but not limited to, the CFPB, having jurisdiction or supervisory authority over the Company’s business or discretionary consumer financial transactions, generically, could materially and adversely affect our business, results of 21 Table of Contents operations and prospects.
As of March 31, 2022, based on filings made with the SEC and other information made available to us, Prescott General Partners, LLC and its affiliates beneficially owned approximately 43.0% of our common stock.
As of March 31, 2023, based on filings made with the SEC and other information made available to us, Prescott General Partners, LLC and its affiliates beneficially owned approximately 43.8% of our common stock.
Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our branches and increases our costs of operations, which could have an adverse effect on our business, results of operations and financial condition. The annual turnover as of March 31, 2022 among our branch employees was approximately 44.4%.
Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our branches and increases our costs of operations, which could have an adverse effect on our business, results of operations and financial condition. The annual turnover as of March 31, 2023 among our branch employees was approximately 47.1%.
As of March 31, 2022, we had $287.7 million available for borrowing under our revolving credit agreement, subject to borrowing base limitations and other specified terms and conditions.
As of March 31, 2023, we had $318.7 million available for borrowing under our revolving credit agreement, subject to borrowing base limitations and other specified terms and conditions.
We operate in a highly competitive market, and we cannot ensure that the competitive pressures we face will not have a material adverse effect on our results of operations, financial condition and liquidity. The consumer lending industry is highly competitive.
As a result, our results of operations and financial condition could be negatively impacted. We operate in a highly competitive market, and we cannot ensure that the competitive pressures we face will not have a material adverse effect on our results of operations, financial condition and liquidity. The consumer lending industry is highly competitive.
See Part I, Item 1, “Business-Government Regulation” for more information regarding legislation we are subject to and related risks.
See Part I, Item 1, “Description of Business-Government Regulation” for more information regarding legislation we are subject to and related risks.
In addition, the FASB is currently reviewing or proposing changes to several financial accounting and reporting standards that govern key aspects of our financial statements, including areas where assumptions or estimates are required.
In addition, the FASB may propose changes to several financial accounting and reporting standards that govern key aspects of our financial statements, including areas where assumptions or estimates are required.
Furthermore, our industry is highly regulated, and announcements regarding new or expected governmental and regulatory action regarding consumer lending may adversely impact perceptions of our business even if such actions are not targeted at our operations and do not directly impact us.
Furthermore, our industry is highly regulated, and announcements regarding new or expected governmental and regulatory action regarding consumer lending may adversely impact perceptions of our business even if such actions are not targeted at our operations and do not directly impact us. Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.
In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient assets to repay that debt, and our financial condition, liquidity and results of operations would suffer.
In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient assets to repay that debt, and our financial condition, liquidity and results of operations would suffer. A breach of our covenants under the Notes would have similar consequences.
Further, federal and state regulators have been scrutinizing the practices of lead aggregators and providers recently. If regulators place restrictions on certain practices by lead aggregators or providers, our ability to use them as a source for applicants could be affected. General Risk Factor s Our risk management efforts may not be effective.
Further, federal and state regulators have been scrutinizing the practices of lead aggregators and providers recently. If regulators place restrictions on certain practices by lead aggregators or providers, our ability to use them as a source for applicants could be affected.
Turbulence in the global capital markets can result in disruptions in the financial sector and affect lenders with which we have relationships, including members of the syndicate of banks that are lenders under our revolving credit agreement.
Turbulence in the global or domestic capital markets or other macro-economic factors can result in disruptions in the financial sector, including bank failures, and can affect lenders with which we have relationships, including members of the syndicate of banks that are lenders under our revolving credit agreement.
Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity. 13 Table of Contents Our profitability may be directly affected by the level of and fluctuations in interest rates, whether caused by changes in economic conditions or other factors that affect our borrowing costs.
In addition, our profitability may be directly affected by the level of and fluctuations in interest rates, whether caused by changes in economic conditions or other factors that affect our borrowing costs.
In addition, the FASB is currently reviewing or proposing changes to several financial accounting and reporting standards that govern key aspects of our financial statements, including areas where assumptions or estimates are required.
In addition, the FASB may propose changes to financial accounting and reporting standards that govern key aspects of our financial statements, including areas where assumptions or estimates are required.
The Company’s common stock price has been and is likely to continue to be subject to significant volatility. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance.
Our risk management policies, procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify additional risks to which we may become subject in the future. We also face evolving risks resulting from the ongoing COVID-19 pandemic.
Our risk management policies, procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify additional risks to which we may become subject in the future.
If we fail to successfully attract and appoint permanent replacements with the appropriate expertise, we could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition.
If we fail to successfully attract and appoint permanent replacements with the appropriate expertise, we could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition. The search for permanent replacements could also result in significant recruiting and relocation costs.
A breach of any of the covenants in our revolving credit agreement would result in an event of default thereunder. Any event of default would permit the creditors to accelerate the related debt, which could also result in the acceleration of any other or future debt containing a cross-acceleration or cross-default provision.
Any event of default would permit the creditors to accelerate the related debt, which could also result in the acceleration of any other or future debt containing a cross-acceleration or cross-default provision.
Additional information regarding the similar effect of laws in certain states in which we operate is described in Part 1, Item 1, “Description of Business - Government Regulation.” Overall stock market volatility may materially and adversely affect the market price of our common stock.
Additional information regarding the similar effect of laws in certain states in which we operate is described in Part 1, Item 1, “Description of Business - Government Regulation.” Overall stock market volatility may materially and adversely affect the market price of our common stock. 25 Table of Contents The Company’s common stock price has been and is likely to continue to be subject to significant volatility.
See Part I, Item 1, “Business-Government Regulation” and “Federal Legislation,” for more information regarding this legislation and related risks.
See Part I, Item 1, “Description of Business-Government Regulation” for more information regarding this legislation and related risks.
If in any legal proceeding we incur liability or defense costs that exceed our insurance coverage or that are not within the scope of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations. 21 Table of Contents Certain legal actions include claims for substantial compensatory and punitive damages, or claims for indeterminate amounts of damages.
If in any legal proceeding we incur liability or defense costs that exceed our insurance coverage or that are not within the scope of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations.
Our revolving credit agreement contains covenants that restrict our ability to, among other things: • incur and guarantee debt; • pay dividends or make other distributions on or redeem or repurchase our stock; • make investments or acquisitions; • create liens on our assets; • sell assets; • merge with or into other companies; • enter into transactions with shareholders and other affiliates; and • make capital expenditures.
Our revolving credit agreement contains covenants that restrict our ability to, among other things: • incur and guarantee debt; • pay dividends or make other distributions on or redeem or repurchase our stock; • make investments or acquisitions; • create liens on our assets; • sell assets; • merge with or into other companies; • enter into transactions with shareholders and other affiliates; and • make capital expenditures. 19 Table of Contents Our revolving credit agreement also imposes requirements that we maintain specified financial measures not in excess of, or not below, specified levels.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board.
Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial condition. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board.
Misconduct by our employees or third-party contractors, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.
Misconduct by our employees or third-party contractors, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business. General Risk Factor s Our risk management efforts may not be effective.
If we are unable to maintain effective controls and procedures we could lose investor confidence in the accuracy and completeness of our financial reports, and we may be subject to investigation or sanctions by the SEC.
If we are unable to maintain effective controls and procedures we could lose investor confidence in the accuracy and completeness of our financial reports, and we may be subject to investigation or sanctions by the SEC. Any such consequence or other negative effect could adversely affect our operations, financial condition, and the trading price of our common stock.
For example, if an employee or a third-party contractor were to engage in, or be accused of engaging in, illegal or suspicious activities including fraud or theft, we could suffer direct losses from the activity. Additionally, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships and ability to attract future customers.
Additionally, for example, if an employee or a third-party contractor were to engage in, or be accused of engaging in, illegal or suspicious activities including fraud or theft, we could suffer direct losses from the activity.
Additionally, we may face new or heightened cybersecurity risk due to the COVID-19 pandemic and the resulting increase in our remote workforce and digital operations. 16 Table of Contents If one or more of such events occur, personal, confidential, and other information processed and stored in, and transmitted through our computer systems and networks, or those of third-party vendors, could be compromised or could cause interruptions or malfunctions in our operations that could result in significant losses, loss of confidence by and business from customers, customer dissatisfaction, significant litigation, regulatory exposures, and harm to our reputation and brand.
We also routinely transmit and receive personal, confidential and proprietary information through third parties, which may be vulnerable to interception, misuse, or mishandling. 16 Table of Contents If one or more of such events occur, personal, confidential, and other information processed and stored in, and transmitted through our computer systems and networks, or those of third-party vendors, could be compromised or could cause interruptions or malfunctions in our operations that could result in significant losses, loss of confidence and business from customers, customer dissatisfaction, significant litigation, regulatory exposures, and harm to our reputation and brand.
While the arbitration provisions in our customer agreements historically have limited our exposure to consumer class action litigation, there can be no assurance that we will be successful in enforcing our arbitration clause in the future.
Certain legal actions include claims for substantial compensatory and punitive damages, or claims for indeterminate amounts of damages. While the arbitration provisions in our customer agreements historically have limited our exposure to consumer class action litigation, there can be no assurance that we will be successful in enforcing our arbitration clause in the future.
Additional information regarding our credit risk is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Credit Quality.” Our insurance operations are subject to a number of risks and uncertainties, including claims, catastrophic events, underwriting risks and dependence on a primary distribution channel.
Additional information regarding our credit risk is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Allowance for Credit Losses.” Our insurance operations are subject to a number of risks and uncertainties, including claims, catastrophic events, underwriting risks and dependence on a primary distribution channel. 13 Table of Contents Insurance claims and policyholder liabilities are difficult to predict and may exceed the related reserves set aside for claims (losses) and associated expenses for claims adjudication (loss adjustment expenses).
See Part I, Item 1, “Description of Business” for information regarding the size of our business in the various states in which we operate. We may be unable to execute our business strategy due to economic conditions. Uncertainty and deterioration in general economic conditions in the U.S. historically have created a difficult operating environment for consumer lending.
See Part I, Item 1, “Description of Business” for information regarding the size of our business in the various states in which we operate. We may be unable to execute our business strategy due to economic conditions and these economic conditions could have a material adverse effect on our business, financial position, results of operations, and cash flows.
We cannot predict the timing or the duration of any inflation or downturn in the economy and we are not immune to the effects of general worldwide economic conditions.
Currently, due to a number of factors, the global economy is experiencing inflationary pressures not seen in a significant period of time. We cannot predict the timing or the 14 Table of Contents duration of any inflation or downturn in the economy and we are not immune to the effects of general worldwide economic conditions.
The search for permanent replacements could also result in significant recruiting and relocation costs. 23 Table of Contents The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected.
The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected. Our future success significantly depends on the continued service and performance of our key management personnel. Competition for these employees is intense.
Changes in federal, state and local tax law, interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition or results of operations. We are subject to taxation at the federal, state and local levels. Furthermore, we are subject to regular review and audit by tax authorities.
If costs to retain our skilled employees increase, then our business and financial results may be negatively affected. Changes in federal, state and local tax law, interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition or results of operations.
Additionally, many of our customers are primarily non-prime borrowers, who have historically been more likely to be affected by adverse macro-economic factors than prime borrowers.
These macro-economic factors include general inflation, unemployment levels, housing markets, commodity prices, energy costs, volatile interest rates, natural disasters, acts of war and terrorism. Additionally, many of our customers are primarily non-prime borrowers, who have historically been more likely to be affected by adverse macro-economic factors than prime borrowers.
As our employees gain experience and develop their knowledge and skills, they become highly desired by other businesses. Therefore, to retain our employees, we must provide a satisfying work environment and competitive compensation and benefits. If costs to retain our skilled employees increase, then our business and financial results may be negatively affected.
In order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior management, and operational positions. As our employees gain experience and develop their knowledge and skills, they become highly desired by other businesses. Therefore, to retain our employees, we must provide a satisfying work environment and competitive compensation and benefits.
Any shares of common stock issued in connection with acquisitions, the exercise of outstanding stock options, or otherwise would dilute the percentage ownership held by our existing shareholders. The coronavirus (COVID-19) pandemic has adversely affected and is expected to continue adversely affecting our business, liquidity, results of operations and financial position.
Any shares of common stock issued in connection with acquisitions, the exercise of outstanding stock options, or otherwise would dilute the percentage ownership held by our existing shareholders. 26 Table of Contents
Insurance claims and policyholder liabilities are difficult to predict and may exceed the related reserves set aside for claims (losses) and associated expenses for claims adjudication (loss adjustment expenses). Additionally, events such as cyber security attacks and breaches and other types of catastrophes, and prolonged economic downturns, could adversely affect our financial condition and results of operations.
Additionally, events such as cyber security attacks and breaches and other types of catastrophes, and prolonged economic downturns, could adversely affect our financial condition and results of operations.
Like most businesses, our employees are important to our success and we are dependent in part on our ability to retain the services of our key management, operational, compliance, finance, and administrative personnel. We have built our business on a set of core values, and we attempt to hire employees who are committed to these values.
Our operating results could be adversely affected by higher employee turnover or increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in part on our ability to retain the services of our key management, operational, compliance, finance, and administrative personnel.
Many factors, including factors that are beyond our control, may impact our financial position, liquidity, and results of operations and depend on management’s ability to execute our business strategy. These macro-economic factors include general inflation, unemployment levels, housing markets, commodity prices, energy costs, volatile interest rates, natural disasters, acts of war and terrorism.
Many factors, including factors that are beyond our control, may impact our financial position, liquidity, and results of operations and depend on management’s ability to execute our business strategy. The U.S. economy is undergoing a period of significant uncertainty.
We are subject to numerous federal laws and regulations that affect our lending operations.
We are subject to numerous federal laws and regulations that affect our lending operations. From time to time, we may become involved in formal and informal reviews, investigations, examinations, proceedings, and information-gathering requests by federal and state government and self-regulatory agencies.
We want to hire and retain employees who will fit our culture of compliance and of providing exceptional service to our customers. In order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior management, and operational positions.
We have built our business on a set of core values, and we attempt to hire employees who are committed to these values. We want to hire and retain employees who will fit our culture of compliance and of providing exceptional service to our customers.
As of March 31, 2022, we had approximately $697.0 million of total debt outstanding and a total debt-to-equity ratio of approximately 1.9 to 1.
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 a total debt-to-equity ratio of approximately 1.6 to 1.
We may be exposed to liabilities under the FCPA, and any determination that the Company or any of its subsidiaries has violated the FCPA could have a material adverse effect on our business and liquidity. 22 Table of Contents We are subject to the FCPA and various other anti-corruption and anti-bribery laws.
We may be exposed to liabilities under follow-on litigation from our previous settlement with the SEC and DOJ for our previously disclosed FCPA issue in Mexico, which could have a material adverse effect on our business and liquidity.
Removed
Currently, due to a number of factors including the ongoing conflict between Russia and Ukraine and supply chain problems caused in part by the COVID-19 pandemic, the global economy is experiencing inflationary pressures not seen in a significant period of time.
Added
In response to elevated inflation, the Federal Reserve Board has increased interest rates on several occasions since early 2022. The Federal Reserve Board has indicated that it will raise rates further, if deemed necessary, to combat continued inflation growth.
Removed
We also routinely transmit and receive personal, confidential and proprietary information through third parties, which may be vulnerable to interception, misuse, or mishandling.
Added
Our customers generally do not qualify for, or have difficulty qualifying for, credit from traditional sources of consumer credit. These traditional sources of consumer credit typically impose more stringent credit requirements than the personal loan products that we provide.
Removed
Our revolving credit agreement also imposes requirements that we maintain specified financial measures not in excess of, or not below, specified levels.
Added
As a result, the historical delinquency and default experience on our loans may be higher than those experienced by financial products arising from traditional sources of consumer credit.
Removed
We can give no assurance that the laws and regulations that govern our business, or the interpretation or administration of those laws and regulations, will remain unchanged or that any such future changes will not materially and adversely affect or in the worst case, eliminate the Company’s lending practices, operations, profitability, or prospects.
Added
Additionally, delinquency and default experience on our loans is likely to be more sensitive to changes in the economic climate in the areas in which our borrowers reside.
Removed
We face significant risks and liability if we fail to comply with these laws, which generally prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties or candidates, employees of public international organizations, or private-sector recipients for the corrupt purpose of obtaining or retaining business, directing business to any person, or securing any advantage.
Added
Uncertainty and deterioration in general economic conditions in the U.S. historically have created a difficult operating environment for consumer lending.
Removed
The Company could be subject to fines, civil and criminal penalties, equitable remedies, including profit disgorgement and related interest, and injunctive relief for any future violations of the FCPA. In addition, any disposition of these matters could adversely impact the Company’s access to debt financing and capital funding and result in further modifications to our business practices and compliance programs.
Added
Our financial performance generally, and in particular the ability of our borrowers to make payments on outstanding loans, is highly dependent upon the business and economic environments in the markets where we operate and in the United States as a whole.
Removed
Any disposition of any future violations could also potentially require that a monitor be appointed to review future business practices with the goal of ensuring compliance with the FCPA and other applicable laws.
Added
During an economic downturn or recession, demand for credit products often decreases and credit losses in the financial services industry generally increase. Additionally, during an economic downturn, our loan servicing costs and collection costs may increase as we may have to expend greater time and resources on these activities.
Removed
The Company is currently facing a shareholder derivative complaint that was filed on behalf of the Company against certain of its current and former directors in relation to WAC de Mexico, which the Company is contesting, and could also face additional third-party claims by shareholders and/or other stakeholders of the Company.
Added
Our policies and procedures for underwriting, processing, and servicing loans are subject to potential failure or circumvention, which may adversely affect our results of operations. We rely on certain inputs and verifications in the underwriting process to be performed by individual personnel at the branch level or a centralized location.
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Item 2. Properties
Properties — owned and leased real estate
3 edited+0 added−2 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
3 edited+0 added−2 removed0 unchanged
2022 filing
2023 filing
Biggest changeItem 2. Properties In the fourth quarter of fiscal 2020 the Company moved its corporate headquarters from properties it owned outright in Greenville, South Carolina to leased office space in downtown Greenville, South Carolina. The Company leases approximately 45,000 square feet at this location. This lease expires on January 31, 2030 and includes two five-year options.
Biggest changeItem 2. Properties Our headquarters is located in approximately 45,000 square feet of leased space in downtown Greenville, South Carolina. This lease expires on January 31, 2030 and includes two five-year renewal options. We also lease approximately 8,000 square feet of space in Greenville, South Carolina which expires in January 31, 2032.
During the fiscal year ended March 31, 2022, operating lease cost for office space was approximately $27.1 million, or an average of approximately $22.6 thousand per branch. The Company's leases generally provide for an initial three- to five-year term with renewal options. The Company's branches are typically located in shopping centers, malls and the first floors of downtown buildings.
As of March 31, 2023, we had 1,073 branches, most of which are leased and are classified as operating leases. Our branch leases generally provide for an initial three-to-five-year term with renewal options. Our branches are typically located in shopping centers, malls and the first floors of downtown buildings. Branches have an average size of 1,600 square feet.
The Company owns all of the furniture, fixtures and computer terminals located in each of its branches. As of March 31, 2022, the Company had 1,167 branches, most of which are leased and are classified as operating leases.
We own all of the furniture, fixtures and computer terminals located in each of its branches.
Removed
The Company’s previous corporate headquarters, which consisted of approximately 42,000 square feet in Greenville, South Carolina, was classified as held for sale as of March 31, 2020. During the second quarter of fiscal 2021 the Company completed the sale of two of the three buildings. The remaining third building was sold during the second quarter of fiscal 2022.
Removed
Branches have an average size of 1,600 square feet.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+1 added−1 removed6 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+1 added−1 removed6 unchanged
2022 filing
2023 filing
Biggest changeHowever, the Company may be required to advance, and ultimately be responsible for, the legal fees and costs incurred by the individual defendants. General In addition, from time to time the Company is involved in litigation matters relating to claims arising out of its operations in the normal course of business.
Biggest changeGeneral In addition, from time to time the Company is involved in litigation matters relating to claims arising out of its operations in the normal course of business.
Based on information currently available, the Company does not believe that any reasonably probable losses arising from currently pending legal matters will be material to the Company’s results of operations or financial conditions.
Based on information currently available, the Company does not believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results of operations or financial conditions.
Removed
The complaint seeks unspecified monetary damages from the individual defendants, equitable and/or injunctive relief, disgorgement of compensation from the individual defendants, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary damages from the Company.
Added
On April 19, 2023, the Court preliminarily approved a Stipulation and Agreement of Settlement dated March 31, 2023 (the “Stipulation”), by and among: the plaintiff, derivatively on behalf of the Company; (ii) the individual defendants; and (iii) the Company. If approved, the Stipulation will result in a non-material payment by the Company.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed4 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed4 unchanged
2022 filing
2023 filing
Biggest changeThe following table details purchases of the Company's common stock, if any, made by the Company during the three months ended March 31, 2022: (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Approximate dollar value of shares that may yet be purchased under the plans or programs January 1 through January 31, 2022 100,703 $ 218.53 100,703 $ 24,297,325 February 1 through February 28, 2022 121,315 201.07 121,315 30,000,000 March 1 through March 31, 2022 78,357 185.14 78,357 15,435,424 Total for the quarter 300,375 $ 202.77 300,375 Stock Performance Graph 28 Table of Contents
Biggest changeThe following table details purchases of the Company's common stock, if any, made by the Company during the three months ended March 31, 2023: (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Approximate dollar value of shares that may yet be purchased under the plans or programs January 1 through January 31, 2023 — $ — — $ 1,123,544 February 1 through February 28, 2023 — — — 1,123,544 March 1 through March 31, 2023 — — — 1,123,544 Total for the quarter — $ — — 28 Table of Contents Stock Performance Graph
The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, available funds, alternative uses of capital, restrictions under the revolving credit agreement, and other market and economic conditions. The Company’s stock repurchase program may be suspended or discontinued at any time.
The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, available funds, alternative uses of capital, 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.
Holders As of May 19, 2022, there were 24 holders of record of our common stock and a significant number of persons or entities who hold their stock in nominee or “street” names through various brokerage firms. Dividends Since April 1989, the Company has not declared or paid any cash dividends on its common stock.
Holders As of May 26, 2023, there were 23 holders of record of our common stock and a significant number of persons or entities who hold their stock in nominee or “street” names through various brokerage firms. Dividends Since April 1989, the Company has not declared or paid any cash dividends on its common stock.
Its policy has been to retain earnings for use in its business and selectively use cash to repurchase its common stock on the open market. In addition, the Company’s credit agreements contain certain restrictions on the payment of cash dividends on its capital stock.
Its policy has been to retain earnings for use in its business and selectively use cash to repurchase its common stock on the open market. In addition, the Company’s revolving credit agreement and indenture governing the Notes contain certain restrictions on the payment of cash dividends on its capital stock.
As of March 31, 2022, the Company had $15.4 million in aggregate remaining repurchase capacity under its current share repurchase program.
As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its current share repurchase program.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
57 edited+23 added−15 removed39 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
57 edited+23 added−15 removed39 unchanged
2022 filing
2023 filing
Biggest changeThe 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; (iii) a maximum collateral performance indicator of 24% as of the end of each calendar month; and (iv) a minimum fixed charges coverage ratio as further discussed below. 36 Table of Contents As further discussed in Note 18 to the Consolidated Financial Statements, on May 3rd, 2022, the Company entered into the Seventh Amendment to its Amended and Restated Revolving Credit Agreement (the “Seventh Amendment”) to, among other things, reduce the required ratio for Net Income Available for Fixed Charges to Fixed Charges from 2.75 to 1.0 to 2.10 to 1.0 for each fiscal quarter from March 31, 2022 to June 30, 2023, with the ratio increasing to 2.75 to 1.0 for each fiscal quarter thereafter.
Biggest changeThe agreement's 36 Table of Contents 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.
However, our revolving credit facility and the Notes limit share repurchases 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 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.
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 finance 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.
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.
Loan volume and average balances typically remain relatively level during the remainder of the year. This seasonal trend affects quarterly operating performance through corresponding fluctuations in interest and fee income and insurance commissions earned and the provision for loan losses recorded, as well as fluctuations in the Company's cash needs.
Loan volume and average balances typically remain relatively level during the remainder of the year. This seasonal trend affects quarterly operating performance through corresponding fluctuations in interest and fee income and insurance commissions earned and the provision for credit losses recorded, as well as fluctuations in the Company's cash needs.
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. The Company was in compliance with these covenants at March 31, 2022 and does not believe that these covenants will materially limit its business and expansion strategy.
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. The Company was in compliance with these covenants at March 31, 2023 and does not believe that these covenants will materially limit its business and expansion strategy.
The net charge-off rate benefited from a change in branch level incentives during the year, which allows managers to continue collection efforts on accounts that are 91 days or more past due without having their monthly bonus negatively impacted.
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.
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 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).
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).
See Part I, Item 1, “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.
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.
Income Taxes Management uses certain assumptions and estimates in determining income taxes payable or refundable, deferred income tax liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense. Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations.
Income Taxes 34 Table of Contents Management uses certain assumptions and estimates in determining income taxes payable or refundable, deferred income tax liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense. Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations.
However, these covenants are subject to a number of important detailed qualifications and exceptions. 35 Table of Contents 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, these covenants are subject to a number of important detailed qualifications and exceptions. 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.
Consequently, operating results for the Company's third fiscal quarter generally are significantly lower than in other quarters and operating results for its fourth fiscal quarter are significantly higher than in other quarters. 34 Table of Contents The following table sets forth, on a quarterly basis, certain items included in the Company's unaudited Consolidated Financial Statements and shows the number of branches open during fiscal years 2022 and 2021.
Consequently, operating results for the Company's third fiscal quarter generally are significantly lower than in other quarters and operating results for its fourth fiscal quarter are significantly higher than in other quarters. 33 Table of Contents The following table sets forth, on a quarterly basis, certain items included in the Company's unaudited Consolidated Financial Statements and shows the number of branches open during fiscal years 2023 and 2022.
The Company plans to enter into new markets through opening new branches and acquisitions as opportunities arise. The Company offers an income tax return preparation and electronic filing program in all but a few of its branches. The Company prepared approximately 81,000, 77,000, and 84,000 returns in each of the fiscal years 2022, 2021, and 2020, respectively.
The Company plans to enter into new markets through opening new branches and acquisitions as opportunities arise. The Company offers an income tax return preparation and electronic filing program in all but a few of its branches. The Company prepared approximately 75,000, 81,000, and 77,000 returns in each of the fiscal years 2023, 2022, and 2021, respectively.
The $300,000 letter of credit outstanding under the subfacility expires on December 31, 2022; however, it automatically extends for one year on the expiration date.
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.
Share Repurchase Program On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations. As of March 31, 2022, the Company had $15.4 million in aggregate remaining repurchase capacity under its current share repurchase program.
Share Repurchase Program On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations. As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its current share repurchase program.
CFPB Rulemaking Initiative On October 5, 2017, the CFPB issued a final rule (the "Rule") imposing limitations on (i) short-term consumer loans, (ii) longer-term consumer installment loans with balloon payments, and (iii) higher-rate consumer installment loans repayable by a payment authorization.
CFPB Rulemaking Initiative 32 Table of Contents On October 5, 2017, the CFPB issued a final rule (the "Rule") imposing limitations on (i) short-term consumer loans, (ii) longer-term consumer installment loans with balloon payments, and (iii) higher-rate consumer installment loans repayable by a payment authorization.
For the year ended March 31, 2022, the effective interest rate, including the commitment fee, on borrowings under the revolving credit facility was 5.0%. The Company pays a commitment fee equal to 0.50% per annum of the daily unused portion of the commitments.
For the year ended March 31, 2023, the effective interest rate, including the commitment fee, on borrowings under the revolving credit facility was 7.0%. The Company pays a commitment fee equal to 0.50% per annum of the daily unused portion of the commitments.
As of March 31, 2022, subject to further approval from our Board of Directors, we could repurchase approximately $32.9 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.
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.
As expected, the change resulted in an increase in accounts 91 days or 31 Table of Contents more past due and fewer 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.
As expected, the change resulted in an increase in accounts 91 31 Table of Contents 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%.
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: 29 Table of Contents Years Ended March 31, 2022 2021 2020 (Dollars in thousands) Gross loans receivable $ 1,522,789 $ 1,104,746 $ 1,209,871 Average gross loans receivable (1) $ 1,377,740 $ 1,143,186 $ 1,256,389 Net loans receivable (2) $ 1,119,758 $ 825,382 $ 900,891 Average net loans receivable (3) $ 1,014,984 $ 848,732 $ 928,408 Expenses as a percentage of total revenue: Provision for credit losses 32.0 % 16.4 % 30.8 % General and administrative 51.0 % 57.5 % 58.9 % Interest expense 5.7 % 4.9 % 4.4 % Operating income as a % of total revenue (4) 17.0 % 26.1 % 10.3 % Loan volume (5) 3,267,860 2,371,981 2,929,265 Net charge-offs as percent of average net loans receivable 14.2 % 14.1 % 18.0 % Return on average assets (trailing 12 months) 4.8 % 9.1 % 2.7 % Return on average equity (trailing 12 months) 13.4 % 22.8 % 6.1 % Branches opened or acquired (merged or closed), net (38) (38) 50 Branches open (at period end) 1,167 1,205 1,243 _______________________________________________________ (1) Average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period, excluding tax advances.
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: 29 Table of Contents Years Ended March 31, 2023 2022 2021 (Dollars in thousands) Gross loans receivable $ 1,390,016 $ 1,522,789 $ 1,104,746 Average gross loans receivable (1) $ 1,555,655 $ 1,377,740 $ 1,143,186 Net loans receivable (2) $ 1,013,341 $ 1,119,758 $ 825,382 Average net loans receivable (3) $ 1,133,051 $ 1,014,984 $ 848,732 Expenses as a percentage of total revenue: Provision for credit losses 42.1 % 31.8 % 16.3 % General and administrative 45.3 % 51.3 % 57.7 % Interest expense 8.2 % 5.7 % 4.9 % Operating income as a % of total revenue (4) 12.6 % 16.9 % 26.0 % Loan volume (5) 3,078,672 3,267,860 2,371,981 Net charge-offs as percent of average net loans receivable 23.7 % 14.2 % 14.1 % Return on average assets (trailing 12 months) 1.7 % 4.8 % 9.1 % Return on average equity (trailing 12 months) 5.8 % 13.4 % 22.8 % Branches opened or acquired (merged or closed), net (94) (38) (38) Branches open (at period end) 1,073 1,167 1,205 _______________________________________________________ (1) Average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period, excluding tax advances.
Insurance commissions increased by $12.1 million, or 27.3%, from fiscal 2021 to fiscal 2022 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.
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 30 Table of Contents large loans in several states in which we operate.
Comparison of Fiscal 2021 Versus Fiscal 2020 For a comparison of our results of operations for the years ended March 31, 2021 and March 31, 2020, 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, 2021 (which was filed with the SEC on June 2, 2021), which comparison is incorporated herein by reference.
Comparison of Fiscal 2022 Versus Fiscal 2021 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).
The Company did not acquire any branches during fiscal 2022. 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 acquired $28.3 million in loans receivable, net during fiscal 2023. 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.
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 have increased a relative 2.2% year over year. These "new to World" customers now account for 31.7% of the portfolio, an increase from 31.0% last year.
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.
Since March 31, 2018, gross loans receivable have increased at a 10.97% annual compounded rate from $1.00 billion to $1.52 billion at March 31, 2022. We believe we were able to improve our gross loans receivable growth rates through acquisitions, improved marketing processes, and analytics.
Since March 31, 2019, gross loans receivable have increased at a 5.36% annual compounded rate from $1.13 billion to $1.39 billion at March 31, 2023. We believe we were able to improve our gross loans receivable growth rates through acquisitions, improved marketing processes, and analytics.
On March 31, 2022 $397.0 million was outstanding under this facility, and there was $287.7 million of unused borrowing availability under the borrowing base limitations.
On March 31, 2023, $307.9 million was outstanding under this facility, and there was $318.7 million of unused borrowing availability under the borrowing base limitations.
The borrowing base limitation is equal to the product of (a) the Company’s eligible finance receivables, less unearned finance charges, insurance premiums and insurance commissions, and (b) an advance rate percentage that ranges from 74% to 80% based on a collateral performance indicator, as more completely described below.
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.
Income tax expense decreased $11.5 million, or 49.6% for fiscal 2022 compared to the prior fiscal year. The effective tax rate decreased to 17.8% for fiscal 2022 compared to 20.8% for fiscal 2021.
Income tax expense decreased $5.7 million, or 49.3% for fiscal 2023 compared to the prior fiscal year. The effective tax rate increased to 21.8% for fiscal 2023 compared to 17.8% for fiscal 2022.
Comparison of Fiscal 2022 Versus Fiscal 2021 Net income for fiscal 2022 was $53.9 million, a 38.9% decrease from the $88.3 million earned during fiscal 2021. The decrease in net income from was primarily due to a $100.0 million increase in the provision for credit losses partially offset by a $56.9 million increase in revenue.
Comparison of Fiscal 2023 Versus Fiscal 2022 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.
As the Company's gross loans receivable increased from $1.13 billion at March 31, 2019 to $1.52 billion at March 31, 2022, net cash provided by operating activities for fiscal years 2022, 2021, and 2020 was $281.5 million, $217.3 million, and $281.0 million, respectively.
As the Company's gross loans receivable increased from $1.21 billion at March 31, 2020 to $1.39 billion at March 31, 2023, net cash provided by operating activities for fiscal years 2023, 2022, and 2021 was $291.6 million, $272.4 million, and $227.0 million, respectively.
Operating income (revenues less provision for credit losses and general and administrative expenses) during fiscal 2022 decreased $38.1 million. Total revenues increased $56.9 million, or 10.8%, to $582.4 million in fiscal 2022, from $525.5 million in fiscal 2021. At March 31, 2022, the Company had 1,167 branches in operation, a decrease of 38 branches from March 31, 2021.
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. At March 31, 2023, the Company had 1,073 branches in operation, a decrease of 94 branches from March 31, 2022.
Interest expense increased by $7.7 million, or 30.1%, during fiscal 2022 when compared to the previous fiscal year as a result of an increase in average debt outstanding of 33.1% partially offset by a decrease in the effective interest rate from 5.8% to 5.7%.
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%.
In addition, because the Company’s loans have a relatively short contractual term and average life, it is unlikely that loans made at any given point in time will be repaid with significantly inflated dollars.
In addition, because the Company’s loans have a relatively short contractual term and average life, it is unlikely that loans made at any given point in time will be repaid with significantly inflated dollars. Legal Matters From time to time the Company is involved in litigation relating to claims arising out of its operations in the normal course of business.
The Company has generally applied its cash flows from operations to fund its loan volume, fund acquisitions, repay long-term indebtedness and repurchase its common stock.
Liquidity and Capital Resources The Company has financed and continues to finance its operations, acquisitions and branch expansion through a combination of cash flows from operations and borrowings from its institutional lenders. The Company has generally applied its cash flows from operations to fund its loan volume, fund acquisitions, repay long-term indebtedness and repurchase its common stock.
Certain critical accounting policies involve significant judgment by the Company’s management, including the use of estimates and assumptions which affect the reported amounts of assets, liabilities, revenues, and expenses. As a result, changes in these estimates and assumptions could significantly affect the Company’s financial position and results of operations.
The significant accounting policies used in the preparation of the Consolidated Financial Statements are discussed in Note 1 to the Consolidated Financial Statements. Certain critical accounting policies involve significant judgment by the Company’s management, including the use of estimates and assumptions which affect the reported amounts of assets, liabilities, revenues, and expenses.
The Company's year-over-year charge-off ratio (net charge-offs as a percentage of average net loans receivable) increased from 14.1% for the year ended March 31, 2021 to 14.2% for the year ended March 31, 2022.
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.
Interest and fee income during fiscal 2022 increased by $34.6 million, or 7.7%, from fiscal 2021. The increase was primarily due to an increase in average net loans receivable. Net loans receivable outstanding at March 31, 2022 increased 35.7% compared to March 31, 2021, and average net loans receivable outstanding increased 19.6% during fiscal 2022 compared to fiscal 2021.
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.
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. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.
Our first priority is to ensure we have enough capital to fund loan growth. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.
Revenues from the Company’s tax preparation business in fiscal 2022 amounted to approximately $21.7 million, a 19.9% increase over the $18.1 million earned during fiscal 2021.
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.
Regular payroll expense decreased $1.7 million year over year primarily due to decreases in headcount and benefit expense increased $0.2 million. Occupancy and equipment expense totaled $52.1 million for fiscal 2022, a $4.1 million, or 7.3%, decrease over fiscal 2021. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the year.
Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the year. In fiscal 2023, the expense per average open branch increased to $46.7 thousand, up from $43.4 thousand in fiscal 2022. Advertising expense totaled $6.1 million for fiscal 2023, a $12.2 million, or 66.7%, decrease over fiscal 2022.
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. 33 Table of Contents Allowance for Credit Losses 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.
Allowance for Credit Losses 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.
General and administrative expenses during fiscal 2022 decreased by $5.0 million, or 1.7%, over the previous fiscal year. General and administrative expenses, when divided by average open branches, decreased 1.0% from fiscal 2021 to fiscal 2022 and, overall, general and administrative expenses as a percent of total revenues decreased to 51.0% in fiscal 2022 from 57.5% in fiscal 2021.
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. The change in general and administrative expense is explained in greater detail below.
This increase can mostly be attributed to overall growth in the portfolio along with an increase in delinquency and charge-off rates during the year. Accounts that were 91 days or more past due represented 4.5% and 3.1% of our loan portfolio on a recency basis at March 31, 2022 and March 31, 2021, respectively.
Accounts that were 91 days or more past due represented 3.5% and 4.5% of our loan portfolio on a recency basis at March 31, 2023 and March 31, 2022, respectively.
Amortization of intangible assets totaled $5.0 million for fiscal 2022, a $0.5 million, or 8.5%, decrease over fiscal 2021, which primarily relates to a corresponding decrease in total intangible assets during the comparative periods due to acquisition activity during the current and prior year.
The decrease was primarily due to decreased spending in our digital marketing and new customer acquisition programs. Amortization of intangible assets totaled $4.5 million for fiscal 2023, a $0.5 million, or 10.9%, decrease over fiscal 2022, which primarily relates to a corresponding decrease in intangible assets acquired in the current fiscal year compared to the previous fiscal year.
Legal Matters 37 Table of Contents From time to time the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. See Part I, Item 3, “Legal Proceedings” and Note 16 to our audited Consolidated Financial Statements for further discussion of legal matters.
See Part I, Item 3, “Legal Proceedings” and Note 16 to our audited Consolidated Financial Statements for further discussion of legal matters.
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. Any regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations.
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.
As of March 31, 2022, the Company's debt outstanding was $697.0 million and its shareholders' equity was $373.0 million resulting in a debt-to-equity ratio of 1.9:1.0.
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.
Inflation 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, 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.
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 37 Table of Contents would result in an increase in the size of loans demanded by its customer base.
The following table presents the Company's charge-off ratios since 2012. _______________________________________________________ 2015 In fiscal 2015 the Company's net charge-off rate decreased to 12.8%.
The net charge-off rate for the past ten fiscal years averaged 16.0%, 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. _______________________________________________________ 2015 In fiscal 2015, the Company's net charge-off rate decreased to 12.8%.
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.
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. 35 Table of Contents 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.
Other income increased by $10.2 million, or 33.9%, from fiscal 2021 to fiscal 2022 primarily due to an increase in tax preparation income of $3.6 million and increase in revenue from the Company's motor club product of $6.9 million. The provision for losses during fiscal 2022 increased by $100.0 million, or 115.9%, from the previous year.
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 decrease was primarily due to an increase in the permanent tax benefit related to non-qualified stock option exercises and vesting of restricted stock and state tax credits recognized in the current fiscal year. This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current year.
This was partially offset by a decrease in the disallowed executive compensation under Section 162(m) in the current fiscal year.
Under the terms of our revolving credit facility and the Notes, we have, subject to certain restrictions, the ability to make total share repurchases of at least $90.0 million from March 26, 2021 through June 30, 2022.
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.
In September of 2021, the credit facility was amended in connection with the Company’s Notes offering to permit the issuance of the Notes. Subject to a borrowing base formula, the Company may borrow at the rate of LIBOR plus 3.5% with a minimum rate of 4.5%.
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%. At March 31, 2023, the aggregate commitments under the revolving credit facility were $685.0 million.
At or for the Three Months Ended 2022 2021 June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, (Dollars in thousands) Total revenues $ 129,659 $ 137,827 $ 148,572 $ 166,329 $ 123,867 $ 124,441 $ 130,946 $ 146,280 Provision for credit losses $ 30,266 $ 42,044 $ 56,459 $ 57,439 $ 25,661 $ 26,090 $ 28,857 $ 5,636 General and administrative expenses $ 73,351 $ 74,989 $ 74,229 $ 74,607 $ 71,608 $ 75,293 $ 77,875 $ 77,411 Net income $ 15,771 $ 12,439 $ 7,327 $ 18,382 $ 15,509 $ 13,398 $ 14,491 $ 44,884 Gross loans receivable $ 1,223,139 $ 1,394,827 $ 1,606,111 $ 1,522,789 $ 1,067,877 $ 1,109,366 $ 1,264,530 $ 1,104,746 Number of branches open 1,205 1,202 1,202 1,167 1,240 1,232 1,230 1,205 Liquidity and Capital Resources The Company has financed and continues to finance its operations, acquisitions and branch expansion through a combination of cash flows from operations and borrowings from its institutional lenders.
At or for the Three Months Ended 2023 2022 June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, (Dollars in thousands) Total revenues $ 157,918 $ 151,258 $ 146,532 $ 160,837 $ 129,659 $ 137,827 $ 149,046 $ 168,656 Provision for credit losses $ 85,822 $ 68,620 $ 59,609 $ 45,412 $ 30,266 $ 42,044 $ 56,459 $ 57,439 General and administrative expenses $ 73,174 $ 71,218 $ 66,475 $ 68,607 $ 73,351 $ 74,989 $ 74,703 $ 76,934 Net income (loss) $ (8,803) $ (1,366) $ 5,759 $ 25,643 $ 15,771 $ 12,439 $ 7,327 $ 18,382 Gross loans receivable $ 1,641,798 $ 1,598,362 $ 1,553,985 $ 1,390,016 $ 1,223,139 $ 1,394,827 $ 1,606,111 $ 1,522,789 Number of branches open 1,146 1,104 1,084 1,073 1,205 1,202 1,202 1,167 Critical Accounting Policies The Company’s accounting and reporting policies are in accordance with GAAP and conform to general practices within the finance company industry.
Customers who were with the Company for less than five months have increased 56.0% from 8.4% to 13.1%. This increased weighting of new borrowers, our riskiest customer type, in the portfolio contributed to the increase in delinquency and charge-off rates of the overall portfolio.
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.
Advertising expense totaled $18.3 million for fiscal 2022, a $1.1 million, or 6.4%, increase over fiscal 2021. The increase was primarily due to increased spending in our digital marketing.
Personnel expense totaled $177.7 million for fiscal 2023, a $5.4 million, or 2.9%, decrease over fiscal 2022. 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 August 6, 2020, the Company announced that it reached resolution with both the SEC and the DOJ regarding allegations primarily involving the Company’s former subsidiary in Mexico. 32 Table of Contents In connection with the resolution of the investigations, the Company agreed to the terms contained in a Declination Letter with the DOJ, dated August 5, 2020 (the “Declination Letter”).
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.
Removed
Interest and fee income was also impacted by decreasing yields as the portfolio mix shifted to larger lower rate loans during the year.
Added
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.
Removed
We expect the portfolio to continue to shift towards larger lower rate loans in the near term which should continue to decrease interest and fee yields in the future. 30 Table of Contents Insurance commissions and other income increased by $22.3 million, or 30.0%, from fiscal 2021 to fiscal 2022.
Added
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.
Removed
In addition to the increase in portfolio weighting towards less tenured customers during the last 12 months. Charge-off rate for the past ten fiscal years averaged 15.0%, with a high of 18.0% (fiscal 2020) and a low of 12.8% (fiscal 2015). In fiscal 2022 the charge-off rate was 14.2%.
Added
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.
Removed
The change in general and administrative expense is explained in greater detail below. Personnel expense totaled $183.1 million for fiscal 2022, a $1.6 million, or 0.8%, decrease over fiscal 2021. The decrease was largely due to a $2.5 million decrease related to the deferred origination payroll expense under ASC 310 as a result of higher originations during the year.
Added
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. General and administrative expenses during fiscal 2023 decreased by $20.5 million, or 6.8%, over the previous fiscal year.
Removed
In fiscal 2022 the expense per average open branch decreased to $43.4 thousand, down from $45.5 thousand in fiscal 2021. Occupancy and equipment expense decreased by $2.5 million due to the timing of write down of signage as a result of rebranding our branch offices beginning in fiscal 2021.
Added
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.
Removed
Other expense totaled $38.7 million for fiscal 2022, remaining relatively flat when compared to fiscal year 2021.
Added
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.
Removed
Regulatory Matters Mexico Investigation As previously disclosed, the Company voluntarily contacted the SEC and DOJ in June 2017 to advise both agencies that an internal investigation of its historical operations in Mexico was underway. The Company has fully cooperated with both agencies.
Added
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.
Removed
The Company sold its Mexican subsidiaries in 2018 and the Company and its subsidiaries no longer operate in Mexico.
Added
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. However, on October 19, 2022, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit ruled, in Community Financial Services Association of America v.
Removed
Pursuant to the terms of the Declination Letter, the DOJ declined to prosecute the Company and closed its investigation into the Company citing as the bases for this decision, among other things, the following: prompt, voluntary self-disclosure of the misconduct; full and proactive cooperation in this matter (including its provision of all known relevant facts about the misconduct); and full remediation, including the additional FCPA training added to the Company’s compliance program, separation from executives under whom the misconduct took place; and discontinuing relationships with third parties in Mexico involved in the misconduct.
Added
Consumer Financial Protection Bureau, that the funding mechanism for the CFPB violates the appropriations clause of the U.S. 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.
Removed
The SEC approved the Offer of Settlement on August 6, 2020 and issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (the “SEC Order”).
Added
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.
Removed
Pursuant to the terms of the SEC Order, the Company consented to 1) cease and desist from committing or causing any violations and any future violations of Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act of 1934, and 2) pay disgorgement, prejudgment interest and civil penalties totaling $21,726,000 to the SEC.
Added
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.
Removed
Critical Accounting Policies The Company’s accounting and reporting policies are in accordance with GAAP and conform to general practices within the finance company industry. The significant accounting policies used in the preparation of the Consolidated Financial Statements are discussed in Note 1 to the Consolidated Financial Statements.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
2 edited+0 added−0 removed1 unchanged
2022 filing
2023 filing
Biggest changeInterest Rate Risk The Company’s outstanding debt under its revolving credit facility was $397.0 million at March 31, 2022. Interest on borrowings under this facility is based on the greater of 4.5% or one month LIBOR plus an applicable margin of 3.5%.
Biggest changeInterest Rate Risk The Company’s outstanding debt under its revolving credit facility was $307.9 million at March 31, 2023. Interest on borrowings under this facility is based on the greater of 4.5% or one month SOFR plus 0.10% and an applicable margin of 3.5%.
Based on the outstanding balance under the Company's revolving credit facility at March 31, 2022, a change of 1% in the LIBOR interest rate would cause a change in interest expense of approximately $4.0 million on an annual basis. 38 Table of Contents Part II
Based on the outstanding balance under the Company's revolving credit facility at March 31, 2023, a change of 1% in the interest rate would cause a change in interest expense of approximately $3.1 million on an annual basis. 38 Table of Contents Part II