WORLD ACCEPTANCE CORP

Previous wording

These and other risks are discussed in more detail in Part I, Item 1A “Risk Factors” in the Company's most recent annual report on Form 10-K for the fiscal year ended March 31, 2023 filed with the SEC, and in the Company’s other reports filed with, or furnished to, the SEC from time to time. The Company does not undertake any obligation to update any forward-looking statements it may make, except to the extent required by law.

Current wording

These and other risks are discussed in more detail in Part I, Item 1A “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed with the SEC, and in the Company’s other reports filed with, or furnished to, the SEC from time to time. The Company does not undertake any obligation to update any forward-looking statements it may make, except to the extent required by law.

Previous wording

(1) Average gross loans receivable has been determined by averaging month-end gross loans receivable over the indicated period, excluding tax advances.

Current wording

(1) Average gross loans receivable has been determined by averaging month-end gross loans receivable over the indicated period, excluding TALs.

Previous wording

(3) Average net loans receivable has been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period, excluding tax advances.

Current wording

(3) Average net loans receivable has been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period, excluding tax TALs.

Previous wording

Gross loans outstanding decreased to $1.40 billion as of December 31, 2023, a 9.9% decrease from the $1.55 billion of gross loans outstanding as of December 31, 2022. During the most recent quarter, gross loans outstanding increased sequentially 1.5%, or $21.1 million, from $1.38 billion as of September 30, 2023, compared to a decrease of 2.8%, or $44.4 million, in the comparable quarter of the prior year. Additionally, we saw an increase in borrowing from new, former, and refinance customers compared to the same quarter of fiscal 2023 as we took incremental steps to ease the historically stringent underwriting standards implemented in prior quarters. We also continued to improve the gross yield to expected loss ratio for all new, former, and refinance customer originations. During the three months ended December 31, 2023 our unique borrowers increased by 2.4% compared to a decrease of 4.9% during the three months ended December 31, 2022.

Current wording

Gross loans outstanding decreased to $1.275 billion as of June 30, 2024, an 8.8% decrease from the $1.398 billion of gross loans outstanding as of June 30, 2023. During the most recent quarter, gross loans outstanding decreased sequentially 0.2%, from $1.277 million as of March 31, 2024, compared to an increase of 0.6%, or $8.0 million, in the comparable quarter of the prior year. Our customer base decreased by 2.6% during the twelve-month period ended June 30, 2024, compared to a decrease of 14.8% for the comparable period ended June 30, 2023. During the three months ended June 30, 2024 our unique borrowers increased by 0.5% compared to an increase of 1.5% during the three months ended June 30, 2023. We continued to improve the gross yield to expected loss ratio for all new, former and refinance customer originations and will continue to monitor performance indicators and intend to adjust underwriting accordingly.

Previous wording

Net income for the three months ended December 31, 2023 increased to $16.7 million, a 187.1% increase from net income of $5.8 million for the same period of the prior year. Operating income, which is revenue less provision for credit losses and general and administrative expenses, increased by $9.2 million, or 42.0%, compared to the same period of the prior fiscal year.

Current wording

Net income for the three months ended June 30, 2024 increased to $9.9 million, a 4.3% increase from net income of $9.5 million for the same period of the prior year. Operating income, which is revenue less provision for credit losses and general and administrative expenses, decreased by $1.9 million, or 7.7%, compared to the same period of the prior year.

Previous wording

Revenues for the three months ended December 31, 2023 decreased by $8.8 million, or 6.0%, to $137.7 million from $146.5 million for the same period of the prior year. Interest and fee income for the three months ended December 31, 2023 decreased by $7.5 million, or 6.0%, from the same period of the prior year due to a decrease in loans outstanding. The large loan portfolio decreased from 56.4% of the overall portfolio as of December 31, 2022, to 55.2% as of December 31, 2023.

Current wording

Revenues for the three months ended June 30, 2024 decreased by $9.8 million, or 7.0%, to $129.5 million from $139.3 million for the same period of the prior year. Interest and fee income for the three months ended June 30, 2024 decreased by $5.5 million, or 4.7%, from the same period of the prior year due to a decrease in loans outstanding. The large loan portfolio decreased from 57.4% of the overall portfolio as of June 30, 2023, to 54.5% as of June 30, 2024.

Previous wording

Insurance and other income for the three months ended December 31, 2023 decreased by $1.2 million, or 6.1%, from the same period of the prior year. Insurance income decreased by approximately $2.7 million, or 15.9%, during the three months ended December 31, 2023 when compared to the three months ended December 31, 2022. Insurance commissions decreased primarily due to a decrease in loans where our insurance products are available to our customer. Other income increased by $1.5 million.

Current wording

Insurance and other income for the three months ended June 30, 2024 decreased by $4.3 million, or 19.1%, from the same period of the prior year. Insurance income decreased by approximately $3.1 million, or 19.4%, during the three months ended June 30, 2024 when compared to the three months ended June 30, 2023. Insurance commissions decreased primarily due to a decrease in loans where our insurance products are available to our customer. Other income decreased by $1.2 million, primarily due to a decrease in revenue from the Company's motor club product and tax preparations.

Previous wording

The provision for credit losses decreased $19.0 million, or 31.8%, to $40.6 million from $59.6 million when comparing the third quarter of fiscal 2024 to the third quarter of fiscal 2023. The table below itemizes the key components of the CECL allowance and provision impact during the quarter.

Current wording

The provision for credit losses decreased $1.2 million, or 2.5%, to $45.4 million from $46.6 million when comparing the first quarter of fiscal 2025 to the first quarter of fiscal 2024. The table below itemizes the key components of the CECL allowance and provision impact during the quarter.

Previous wording

Net charge-offs for the quarter decreased 22.6 million, from $71.0 million in the third quarter of fiscal 2023 to $48.4 million in the third quarter of fiscal 2024. Net charge-offs as a percentage of average net loan receivables on an annualized basis decreased from 25.1% in the third quarter of fiscal 2023 to 19.1% in the third quarter of fiscal 2024. Net charge-offs during the period include $3.7 million in proceeds related to the sale of charge-offs, for which $0.8 million relates to bulk sales of charge-offs from prior periods and $2.9 million relates to recurring sales of charge-offs.

Current wording

Net charge-offs for the quarter decreased $4.1 million, from $42.8 million in the first quarter of fiscal 2024 to $38.7 million in the first quarter of fiscal 2025. Net charge-offs as a percentage of average net loan receivables on an annualized basis decreased from 16.9% in the first quarter of fiscal 2024 to 16.4% in the first quarter of fiscal 2025. Net charge-offs during the current quarter include $2.6 million in proceeds related to recurring sales of charge-offs.

Previous wording

The Company's allowance for credit losses as a percentage of net loans was 11.8% at December 31, 2023 compared to 12.9% at December 31, 2022. Accounts that were 61 days or more past due on a recency basis were 5.8% of the portfolio at December 31, 2023 and 7.4% of the portfolio at December 31, 2022.

Current wording

The Company's allowance for credit losses as a percentage of net loans was 11.6% at June 30, 2024 compared to 12.7% at June 30, 2023. Accounts that were 61 days or more past due on a recency basis remained flat at 5.6% at June 30, 2024 and June 30, 2023.

Previous wording

We experienced significant improvement in recency delinquency on accounts at least 90 days past due, improving from 4.9% at December 31, 2022, to 3.7% at December 31, 2023.

Current wording

We experienced a slight improvement in recency delinquency on accounts at least 90 days past due, improving from 3.5% at June 30, 2023, to 3.4% at June 30, 2024.

Previous wording

G&A expenses for the three months ended December 31, 2023 increased by $1.0 million, or 1.5%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses increased from 44.3% during the three months ended December 31, 2022 to 47.8% during the three months ended December 31, 2023. G&A expenses per average open branch increased by 5.4% when comparing the two three-month periods. The change in G&A expense is explained in greater detail below.

Current wording

G&A expenses for the three months ended June 30, 2024 decreased by $6.7 million, or 9.9%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses decreased from 48.9% during the three months ended June 30, 2023 to 47.4% during the three months ended June 30, 2024. G&A expenses per average open branch increased by 8.6% when comparing the two three-month periods. The change in G&A expense is explained in greater detail below.

Previous wording

Personnel expense totaled $39.9 million for the three months ended December 31, 2023, a $0.8 million, or 2.0%, decrease over the three months ended December 31, 2022. Benefit expense increased approximately $0.6 million, or 8.1%, when comparing the quarterly periods ended December 31, 2023 and 2022. Incentive expense decreased $1.0 million, or 24.5%. Salary expense totaled $32.0 million staying relatively flat, when comparing the two quarterly periods ended December 31, 2023 and 2022. The decrease in incentive expense is mostly due to a decrease in bonuses paid.

Current wording

Personnel expense totaled $37.0 million for the three months ended June 30, 2024, a $4.8 million, or 11.5%, decrease over the three months ended June 30, 2023. Salary expense decreased approximately $0.3 million, or 0.9%, during the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. Our headcount as of June 30, 2024, decreased 5.4% compared to June 30, 2023. Benefit expense decreased approximately $0.9 million, or 11.1%, when comparing the quarterly periods ended June 30, 2024 and 2023. Incentive expense decreased $3.5 million, or 54.8%. The decrease in incentive expense is mostly due to a decrease in share-based compensation.

Previous wording

Occupancy and equipment expense totaled $12.1 million for the three months ended December 31, 2023, a $0.8 million, or 6.5%, decrease over the three months ended December 31, 2022. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. The prior year's third quarter includes $0.4 million in expense related to the merger of branches during the quarter. For the three months ended December 31, 2023, the average open branches decreased 3.8% compared to the three months ended December 31, 2022.

Current wording

Occupancy and equipment expense totaled $12.2 million for the three months ended June 30, 2024, a $0.5 million, or 3.6%, decrease over the three months ended June 30, 2023. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. The prior year's first quarter includes $0.3 million in expense related to the merger of branches during the quarter. For the three months ended June 30, 2024, the average open branches decreased 1.4% compared to the three months ended June 30, 2023.

Previous wording

Advertising expense increased $2.4 million, or 181.1%, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 due to increased spending on customer acquisition programs.

Current wording

Advertising expense decreased $1.1 million, or 39.8%, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 due to decreased spending on customer acquisition programs.

Previous wording

Amortization of intangible assets totaled $1.1 million for the three months ended December 31, 2023, a $63.6 thousand, or 5.7%, decrease over the three months ended December 31, 2022.

Current wording

Amortization of intangible assets totaled $1.0 million for the three months ended June 30, 2024, a $63.6 thousand, or 5.9%, decrease over the three months ended June 30, 2023.

Previous wording

Other expense totaled $9.2 million for the three months ended December 31, 2023, a $0.3 million, or 3.1%, increase over the three months ended December 31, 2022.

Current wording

Other expense totaled $9.6 million for the three months ended June 30, 2024, a $0.3 million, or 2.9%, decrease over the three months ended June 30, 2023.

Previous wording

Interest expense for the three months ended December 31, 2023 decreased by $2.4 million, or 16.9%, from the corresponding three months of the previous year. The decrease in interest expense was due to a 22.8% decrease in the average debt outstanding from $734.3 million to $567.1 million partially offset by a 12.5% increase in the effective interest rate from 7.6% to 8.6%. The Company’s debt-to-equity ratio decreased from 2.0:1 at December 31, 2022 to 1.4:1 at December 31, 2023. The Company repurchased and extinguished $4.75 million of its Notes, net of $48.0 thousand unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $4.1 million.

Current wording

Interest expense for the three months ended June 30, 2024 decreased by $2.5 million, or 20.2%, from the corresponding three months of the previous year. The decrease in interest expense was due to a 17.5% decrease in the average debt outstanding from $593.2 million to $489.2 million partially offset by a 1.4% increase in the effective interest rate from 8.5% to 8.6%. The Company’s debt-to-equity ratio decreased from 1.5:1 at June 30, 2023 to 1.2:1 at June 30, 2024. The Company repurchased and extinguished $21.8 million of its Notes, net of $0.2 million unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $21.0 million during the first quarter of fiscal 2025.

Previous wording

Other key return ratios for the three months ended December 31, 2023 included a 6.0% return on average assets and a return on average equity of 17.3% (both on a trailing 12-month basis), as compared to a 1.2% return on average assets and a return on average equity of 4.1% (both on a trailing 12-month basis) for the three months ended December 31, 2022.

Current wording

Other key return ratios for the three months ended June 30, 2024 included a 7.1% return on average assets and a return on average equity of 18.9% (both on a trailing 12-month basis), as compared to a 3.3% return on average assets and a return on average equity of 10.7% (both on a trailing 12-month basis) for the three months ended June 30, 2023.

Previous wording

The Company’s effective income tax rate decreased to 14.6% for the three months ended December 31, 2023 compared to 26.5% for the corresponding period of the previous year. The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises and vesting of restricted stock along with provision to return adjustments as discrete items in the current quarter.

Current wording

The Company’s effective income tax rate increased to 23.1% for the three months ended June 30, 2024 compared to 22.8% for the corresponding period of the previous year. The effective tax rate remained substantially unchanged from the prior year quarter with the slight increase related to return to provision adjustments recorded as discrete items in the prior year quarter.

Previous wording

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. The Rule originally required lenders originating short-term loans and longer-term balloon payment loans to evaluate whether each consumer has the ability to repay the loan along with current obligations and expenses (“ability to repay requirements”); however, the ability to repay requirements were rescinded in July 2020. The Rule also curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an annual percentage rate over 36% (“payment requirements”). However, on October 19, 2022, a three-judge panel of the Fifth Circuit Court of Appeals held in Cmty. Fin.l Servs. Ass’n of Am., Ltd. v. Consumer Fin. Prot. Bureau, ruled that the CFPB’s funding structure violated the U.S. Constitution’s Appropriations Clause, which requires that all expenditures of federal funds be approved by Congress. On this ground, it vacated the Rule. The decision will be binding in the Fifth Circuit’s jurisdiction, covering Louisiana, Texas and Mississippi, and persuasive in other circuits until there’s a competing case to contradict it. The CFPB has filed a certiorari petition asking the U.S. Supreme Court to review the Fifth Circuit’s panel decision. The Supreme Court heard oral arguments on October 3, 2023 and it is possible that a decision may not be issued until the end of the Court’s term in June 2024. Implementation of the Rule’s payment requirements is uncertain, but if it were to take effect it could require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.

Current wording

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. The Rule originally required lenders originating short-term loans and longer-term balloon payment loans to evaluate whether each consumer has the ability to repay the loan along with current obligations and expenses (“ability to repay requirements”); however, the ability to repay requirements was rescinded in July 2020. The Rule also curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an annual percentage rate over 36% (“payment requirements”). Implementation of the Rule’s payment requirements may require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.

Previous wording

Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a “leveraged payment mechanism” under the Rule. If the payment provisions of the Rule apply, the Company will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the final rule.

Current wording

In July 2020, the CFPB rescinded provisions of the Rule governing the ability to repay requirements. The payment requirements were 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. 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 October 3, 2023, the U.S. Supreme Court held oral argument to decide the constitutionality of the CFPB's funding mechanism. On May 16, 2024, the Supreme Court held that the funding mechanism for the CFPB complies with the appropriations clause of the U.S. Constitution, reversing the judgment of the Court of Appeals, and remanding the cause for further proceedings. To the extent that the Rule is reinstated and takes effect, any regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations. Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a “leveraged payment mechanism” under the Rule. If the payment provisions of the Rule apply, the Company will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the final rule.

Previous wording

In its Fall 2015 rulemaking agenda, the CFPB stated that it expected to conduct a rulemaking to identify larger participants in the installment lending market for purposes of its supervision program. However, this initiative was classified as “inactive” on the CFPB’s Spring 2018 rulemaking, and its Fall 2023 rulemaking agenda showed no planned activity in this area. Though the likelihood and timing of any such rulemaking is uncertain, the Company believes that the implementation of such rules would likely bring the Company’s business under the CFPB’s supervisory authority which, among other things, would subject the Company to reporting obligations to, and on-site compliance examinations by, the CFPB. While the CFPB has not yet initiated rulemaking for defining larger participants in the installment lending market, its Fall 2023 rulemaking agenda indicates that the CFPB is considering rules to define larger participants in markets for consumer payments, suggesting that the CFPB has renewed its focus on further identifying larger participants for purposes of its supervision program. Even in the absence of a larger participant rule, the CFPB has the power to order individual nonbank financial institutions to submit to supervision where the CFPB has reasonable cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12 USC 5514(a)(1)(C). On April 25, 2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities that pose risks to consumers. The CFPB has determined under its dormant authority that the Company is subject to its supervisory authority, and therefore is subject to reporting obligations to, and on-site examinations by, the CFPB. In light of this, we expect a supervisory review by the CFPB in the near future.

Current wording

The CFPB also has stated that it expects to conduct separate rulemaking to identify larger participants in the installment lending market for purposes of its supervision program. This initiative was classified as “inactive” on the CFPB’s Spring 2018 rulemaking agenda and has remained inactive since, but the CFPB indicated that such action was not a decision on the merits. Though the likelihood and timing of any such rulemaking is uncertain, the Company believes that the implementation of such rules would likely bring the Company’s business under the CFPB’s supervisory authority which, among other things, would subject the Company to reporting obligations to, and on-site compliance examinations by, the CFPB. In addition, even in the absence of a “larger participant” rule, the CFPB has the power to order individual nonbank financial institutions to submit to supervision where the CFPB has reasonable cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12 USC 5514(a)(1)(C). In 2022, the CFPB announced that it had begun using this “dormant authority” to examine nonbank entities and the CFPB is attempting to expand the number of nonbank entities it currently supervises. Specifically, the CFPB previously notified the Company that it was seeking to establish such supervisory authority over the Company. Since then, the CFPB issued a public designation order setting forth its determination that the Company has met the legal requirements for supervision (the "Order"). Pursuant to the terms of the Order, the CFPB has supervisory authority over the Company pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010 until such time as the Order is terminated consistent with 12 C.F.R. 1091.113. Importantly, while the Order establishes that the CFPB has supervisory authority over the Company, it does not constitute a finding that the Company has engaged in wrongdoing, nor does it require any immediate action on the part of the Company. However, the outcome of such supervision could result in operational changes which could reduce our ability to operate profitably or increase compliance costs. The supervision could also result in additional examinations, investigations, litigation, consent orders or administrative proceedings, which could require considerable resources, time, effort and attention from our management, and may result in operational changes, monetary penalties or declines in our stock price.

Previous wording

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,” in the Company’s Form 10-K for the year ended March 31, 2023 for more information regarding these regulatory and related risks.

Current wording

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,” in each case, in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 for more information regarding these regulatory and related risks.

Previous wording

The Company has historically financed and continues to finance its operations, acquisitions and branch expansion primarily through a combination of cash flows from operations and borrowings from its institutional lenders. As discussed below, the Company has also issued debt securities to finance its operations and repay a portion of its outstanding indebtedness. 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. Net cash provided by operating activities for the nine months ended December 31, 2023 was $182.0 million.

Current wording

The Company has historically financed and continues to finance its operations, acquisitions and branch expansion primarily through a combination of cash flows from operations and borrowings from its institutional lenders. As discussed below, the Company has also issued debt securities to finance its operations and repay a portion of its outstanding indebtedness. 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. Net cash provided by operating activities for the three months ended June 30, 2024 was $48.4 million.

Previous wording

On September 27, 2021, we issued a $300 million in aggregate principal amount of 7.0% senior notes due 2026. The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s existing and certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the Notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023, the Company could have redeemed the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. At any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, at any time prior to November 1, 2023, the Company could have used the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

Current wording

On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due November 2026. The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s existing and certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the Notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023, the Company could have redeemed the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. At any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, at any time prior to November 1, 2023, the Company could have used the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

Previous wording

During the first nine months of fiscal 2024, the Company repurchased and extinguished $8.25 million of its Notes, net of $88.1 thousand unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $7.0 million. For the three and nine months ended December 31, 2023, the Company recognized a $0.6 million and $1.2 million gain on extinguishment, respectively. In accordance with ASC 470, the Company recognized the gain on extinguishment as a component of interest expense in the Company's Consolidated Statements of Operations.

Current wording

For the three months ended June 30, 2024 and 2023, the Company recognized a $0.8 million and $0.4 million gain on extinguishment, respectively. In accordance with ASC 470, the Company recognized the gain on extinguishment as a component of interest expense in the Company's Consolidated Statements of Operations.

Previous wording

The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises. However, our revolving credit facility and the Notes limit share repurchases to up to 50% of consolidated adjusted net income for the period commencing January 1, 2019. As of December 31, 2023, subject to further approval from our Board of Directors, we could repurchase approximately $33.2 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.

Current wording

The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises. However, our revolving credit facility and the Notes limit share repurchases to up to 50% of consolidated adjusted net income for the period commencing January 1, 2019. As of June 30, 2024, subject to further approval from our Board of Directors, we could repurchase approximately $23.6 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.

Previous wording

The Company has a revolving credit facility with a syndicate of banks. The revolving credit facility provides for revolving borrowings of up to the lesser of (a) the aggregate commitments under the facility and (b) a borrowing base, and it includes a $524.0 thousand letter of credit under a $1.5 million subfacility.

Current wording

The Company has a revolving credit facility with a syndicate of banks. The revolving credit facility provides for revolving borrowings of up to the lesser of (a) the aggregate commitments under the facility and (b) a borrowing base, and it includes $725.8 thousand in outstanding standby letters of credit.

Previous wording

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 December 31, 2023, the aggregate commitments under the revolving credit facility were $580.0 million. The $524.0 thousand letter of credit outstanding under the subfacility expires on December 31, 2024 and automatically extends for one year on the expiration date. 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 applicable to such eligible finance receivables, and (b) an advance rate percentage that ranges from 70% to 80% based on a collateral performance indicator, as more completely described below. Further, under the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.

Current wording

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 June 30, 2024, the aggregate commitments under the revolving credit facility were $580.0 million. The Company had $725.8 thousand in outstanding standby letters of credit which include (i) $300.0 thousand related to worker's compensation expiring on December 31, 2024 and (ii) $425.8 thousand related to the Company's investment in captive insurance expiring on April 12, 2025. Both letters of credit automatically extend for one year on their expiration dates. The borrowing base limitation is equal to the product of (a) the Company’s eligible finance receivables, less unearned finance charges, insurance premiums and insurance commissions applicable to such eligible finance receivables, and (b) an advance rate percentage that ranges from 70% to 80% based on a collateral performance indicator, as more completely described below. Further, under the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.

Previous wording

For the nine months ended December 31, 2023 and fiscal year ended March 31, 2023, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, as it relates to the revolving credit facility was 9.8% annualized and 7.0%, respectively. At December 31, 2023, the unused amount available under the revolving credit facility was $274.4 million and borrowings under the revolving credit facility mature on June 7, 2026.

Current wording

For the three months ended June 30, 2024 and fiscal year ended March 31, 2024, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, as it relates to the revolving credit facility was 10.1% annualized and 9.9%, respectively. At June 30, 2024, the unused amount available under the revolving credit facility was $337.5 million. Borrowings under the revolving credit facility mature on June 7, 2026.

Previous wording

The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement allows the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement. The agreement's financial covenants include (i) a minimum consolidated net worth of $325 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 2.25 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, other than for the fiscal quarter ending September 30, 2023, in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity.

Current wording

The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement allows the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement. The agreement's financial covenants include (i) a minimum consolidated net worth of $325 million on and after December 31, 2020; (ii) a maximum ratio of total debt to consolidated adjusted net worth of 2.25 to 1.0 for the fiscal quarter ended December 31, 2023 and each fiscal quarter thereafter; (iii) a maximum collateral performance indicator of 26.0% as of the end of each calendar month; and (iv) a minimum fixed charges coverage ratio of 2.0 to 1.0 for the fiscal quarters ending December 31, 2023 through December 31, 2024, and 2.25 to 1.0 for each fiscal quarter thereafter, where the ratio for the most recent four consecutive fiscal quarters (other than for the fiscal quarter ended September 30, 2023) must be at least 2.0 to 1.0, in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity.

Previous wording

As of December 31, 2023, the Company's debt outstanding was $585.0 million, net of $2.7 million unamortized debt issuance costs related to the unsecured senior notes payable, and its shareholders' equity was $407.0 million resulting in a debt-to-equity ratio of 1.4:1.0. Management will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.

Current wording

As of June 30, 2024, the Company's debt outstanding was $492.7 million, net of $2.0 million unamortized debt issuance costs related to the unsecured senior notes payable, and its shareholders' equity was $422.6 million resulting in a debt-to-equity ratio of 1.2:1.0. Management will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.

Previous wording

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). Except as otherwise discussed in this report including, but not limited to, any discussions in Part 1, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K (as supplemented by any subsequent disclosures in information the Company files with or furnishes to the SEC from time to time), management is not currently aware of any trends, demands, commitments, events or uncertainties that it believes will or could result in, or are or could be reasonably likely to result in, any material adverse effect on the Company’s liquidity.

Current wording

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). Except as otherwise discussed in this report including, but not limited to, any discussions in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (as supplemented by any subsequent disclosures in information the Company files with or furnishes to the SEC from time to time), management is not currently aware of any trends, demands, commitments, events or uncertainties that it believes will or could result in, or are or could be reasonably likely to result in, any material adverse effect on the Company’s liquidity.

Previous wording

On November 9, 2023, the Board of Directors authorized the Company to repurchase up to $20.0 million of the Company’s outstanding common stock, inclusive of the amount that remained available for repurchase under prior repurchase authorizations. As of December 31, 2023, the Company had $2.8 million in aggregate remaining repurchase capacity under its current share repurchase program. 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.

Current wording

On May 15, 2024, the Board of Directors authorized the Company to repurchase up to $20.0 million of the Company’s outstanding common stock, inclusive of the amount that remained available for repurchase under prior repurchase authorizations. As of June 30, 2024, the Company had $20.0 million in aggregate remaining repurchase capacity under its current share repurchase program. 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.

Previous wording

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. Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit facility and the Notes. Our first priority is to ensure we have enough capital to fund loan growth. As of December 31, 2023, subject to further approval from our Board of Directors, we could repurchase approximately $33.2 million of shares under the terms of our debt facilities. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.

Current wording

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. Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit facility and the Notes. Our first priority is to ensure we have enough capital to fund loan growth. As of June 30, 2024, subject to further approval from our Board of Directors, we could repurchase approximately $23.6 million of shares under the terms of our debt facilities. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.

Previous wording

The Company does not believe that inflation, within reasonably anticipated rates, will have a material, 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. It is reasonable to anticipate that such a change in customer preference would result in an increase in total loans receivable and an increase in absolute revenue to be generated from that larger amount of loans receivable. The Company believes that this increase in absolute revenue should offset any increase in operating costs. 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.

Current wording

The Company does not believe that inflation will have a materially adverse effect on its financial condition, unless changes in inflation are particularly severe and sudden in nature. 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. It is reasonable to anticipate that such a change in customer preference would result in an increase in total loans receivable and an increase in absolute revenue to be generated from that larger amount of loans receivable. The Company believes that this increase in absolute revenue should offset any increase in operating costs. 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.

Previous wording

See Note 2 to the unaudited Consolidated Financial Statements.

Current wording

See Note 2 to the Consolidated Financial Statements.