[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show total assets increased to $927.5 million, driven by higher net loans receivable, with corresponding increases in liabilities and equity Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2018 | Mar 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $11,132 | $12,474 | | Loans receivable, net | $829,470 | $679,154 | | Total assets | $927,513 | $840,987 | | **Liabilities & Equity** | | | | Senior notes payable | $308,040 | $244,900 | | Total liabilities | $353,444 | $299,879 | | Total shareholders' equity | $574,069 | $541,108 | - Assets and liabilities of discontinued operations, related to the Mexico business, were present on the March 31, 2018 balance sheet ($79.5M in assets, $7.4M in liabilities) but were zero as of December 31, 2018, following the sale[10](index=10&type=chunk)[11](index=11&type=chunk) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For Q3 FY2019, revenues grew to $137.6 million, but increased provisions and expenses led to lower pre-tax income, while the nine-month period saw a net loss due to discontinued operations Three Months Ended December 31, (in thousands) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Total revenues | $137,639 | $125,703 | | Provision for loan losses | $48,944 | $40,456 | | Total expenses | $130,545 | $110,306 | | Income from continuing operations | $6,260 | $193 | | Net income (loss) | $6,260 | $1,680 | | Diluted EPS from continuing operations | $0.67 | $0.02 | Nine Months Ended December 31, (in thousands) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Total revenues | $387,545 | $361,270 | | Provision for loan losses | $119,893 | $100,990 | | Income from continuing operations | $35,957 | $23,437 | | Loss from discontinued operations | ($36,662) | $1,110 (income) | | Net income (loss) | ($705) | $24,547 | | Diluted EPS (loss) | ($0.08) | $2.76 | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating activities provided $164.2 million, investing activities used $248.4 million (primarily for loans), and financing activities provided $60.6 million, resulting in a $21.0 million decrease in cash Cash Flow Summary for Nine Months Ended Dec 31, (in thousands) | Category | 2018 | 2017 | | :--- | :--- | :--- | | Net cash provided by operating activities | $164,154 | $145,574 | | Net cash used in investing activities | ($248,383) | ($219,461) | | Net cash provided by financing activities | $60,606 | $84,458 | | Net change in cash and cash equivalents | ($20,955) | $9,771 | - The sale of the Mexico business provided **$37.5 million** in cash, which was a significant investing cash inflow during the nine-month period ended December 31, 2018[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, the sale of Mexico operations, loan loss allowance, debt facilities, and the ongoing FCPA investigation - **Discontinued Operations (Note 2):** The company sold its Mexico operations (WAC de Mexico and SWAC) effective July 1, 2018, for approximately **$44.36 million**, resulting in a pre-tax loss on disposal of **$38.4 million** for the nine months ended Dec 31, 2018[27](index=27&type=chunk)[29](index=29&type=chunk) - **Allowance for Loan Losses (Note 5):** The allowance for loan losses increased to **$91.3 million** at Dec 31, 2018, from **$66.1 million** at March 31, 2018, reflecting growth in the loan portfolio and higher provisions[48](index=48&type=chunk) - **Stock-Based Compensation (Note 7):** A new long-term incentive program was adopted in October 2018, comprising service options, performance options, restricted stock, and performance shares, leading to a significant increase in stock-based compensation expense[56](index=56&type=chunk)[57](index=57&type=chunk) - **Commitments and Contingencies (Note 11):** The company is under investigation by the SEC and DOJ regarding potential improper payments in its former Mexico operations between 2010 and 2017, which may violate the FCPA, with the ultimate financial impact not yet reasonably estimable[93](index=93&type=chunk)[94](index=94&type=chunk)[97](index=97&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong U.S. loan growth driving revenues, offset by increased loan loss provisions and G&A expenses, alongside the Mexico operations sale, liquidity, and regulatory matters - Gross loans receivable in the U.S. increased **11.7%** year-over-year to **$1.26 billion** as of December 31, 2018[108](index=108&type=chunk) - For the nine months ended Dec 31, 2018, the company recognized a **~$38.4 million** loss on the disposal of its Mexico operations, leading to a net loss of **$0.7 million** for the period[124](index=124&type=chunk) - Personnel expense for Q3 FY19 increased by **$10.6 million** (**29.2%**) year-over-year, primarily due to **$6.2 million** in share-based compensation from a new long-term incentive program[116](index=116&type=chunk) - The company's debt-to-equity ratio decreased from **0.8:1** at Dec 31, 2017 to **0.5:1** at Dec 31, 2018[120](index=120&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q3 FY2019 revenues rose 9.5% due to loan growth, but higher loan loss provisions and G&A expenses impacted profitability, with a nine-month net loss from the Mexico operations sale Key Operating Metrics (Three Months Ended Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Gross Loans Receivable | $1.26B | $1.13B | | Total Revenues | $137.6M | $125.7M | | Provision for Loan Losses | $48.9M | $40.5M | | G&A Expenses | $77.0M | $64.8M | | Net Charge-offs as % of Avg. Net Loans | 17.0% | 15.4% | - Delinquencies on a contractual basis for accounts 61+ days past due increased slightly to **7.5%** at Dec 31, 2018, from **7.3%** at Dec 31, 2017[113](index=113&type=chunk) [Regulatory Matters](index=32&type=section&id=Regulatory%20Matters) The company continues to cooperate with SEC and DOJ investigations into potential FCPA violations by its former Mexico subsidiary, while the CFPB rule is not expected to materially impact lending - An ongoing investigation addresses potential improper payments by the former Mexico subsidiary to government officials, which could violate the FCPA, with the company cooperating with the SEC and DOJ[139](index=139&type=chunk)[140](index=140&type=chunk) - Potential consequences of the investigation include fines, civil and criminal penalties, profit disgorgement, and injunctive relief, though the company cannot reasonably estimate the potential liability[141](index=141&type=chunk) - The company believes the CFPB's final rule from October 2017 will not have a material impact on its existing lending procedures as it does not make the types of loans subject to the rule's most stringent requirements[145](index=145&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Operations are financed by cash flow and a $480.0 million revolving credit facility, with a new $75.0 million share repurchase program authorized and an improved debt-to-equity ratio - The company has a **$480.0 million** senior revolving credit facility, with **$308.0 million** outstanding as of Dec 31, 2018[152](index=152&type=chunk)[154](index=154&type=chunk) - In December 2018, the credit agreement was amended to permit a maximum commitment of **$600 million** and modify the interest rate to one-month LIBOR plus a margin of 3.0% to 4.0%[153](index=153&type=chunk) - On December 16, 2018, the Board authorized a new share repurchase program of up to **$75.0 million**, with **$73.1 million** remaining available under this authorization as of Dec 31, 2018[161](index=161&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk on variable-rate debt, with foreign currency risk eliminated after the Mexico business sale - The company is exposed to interest rate risk on its **$308.0 million** of outstanding variable-rate debt, where a **1.0%** change in rates would result in a **$3.1 million** annual change in interest expense[175](index=175&type=chunk) - Foreign currency exchange rate risk was eliminated following the sale of the company's Mexico subsidiaries, effective July 1, 2018[176](index=176&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of December 31, 2018, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[178](index=178&type=chunk) - No material changes were made to the internal control over financial reporting during the quarter[177](index=177&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings, including the FCPA investigation, is detailed in Note 11 to the consolidated financial statements - Information regarding legal proceedings is detailed in Note 11 to the unaudited Consolidated Financial Statements[181](index=181&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported during this quarter beyond those disclosed in the prior quarterly report - There were no material changes to risk factors during this quarter, beyond those disclosed in the Q1 FY19 report[182](index=182&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A new $75.0 million share repurchase program was authorized in December 2018, with 38,822 shares repurchased during the quarter Share Repurchases for Quarter Ended Dec 31, 2018 | Month | Total Shares Purchased | Average Price Paid | Value Remaining in Program | | :--- | :--- | :--- | :--- | | October 2018 | 0 | $0.00 | $1,906,179 | | November 2018 | 0 | $0.00 | $1,906,179 | | December 2018 | 38,822 | $96.83 | $73,147,034 | - A new **$75.0 million** share repurchase program was authorized on December 17, 2018, which includes amounts remaining from a prior authorization[183](index=183&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with or incorporated by reference into the Quarterly Report on Form 10-Q, including certifications and XBRL data - The exhibit index lists all documents filed with or incorporated by reference into the 10-Q report[186](index=186&type=chunk)[188](index=188&type=chunk)

Financial Data and Key Metrics Changes - The company has initiated a share buyback program, repurchasing approximately 267,000 shares with $48 million remaining on the authorization [11] - The company maintains a conservative debt-to-equity ratio target of 2:1, indicating a willingness to leverage up to that level [11] - The tax rate is projected to be in the range of 23% to 24% long-term [22][24] Business Line Data and Key Metrics Changes - The company has seen significant growth in new customer acquisition, which has impacted credit loss rates, with a current charge-off rate of 17% [17] - The company has acquired 97 locations and opened 21 new offices, contributing to increased headcount and general and administrative expenses, which rose by 16% year-over-year [20][21] Market Data and Key Metrics Changes - The company has observed a stable performance from returning customers, with credit scores and overall performance remaining consistent with historical data [35] - The growth in the overall portfolio and the influx of new customers have been major drivers of increased provisions for credit losses [35] Company Strategy and Development Direction - The company is focused on expanding its footprint through acquisitions, targeting portfolios of 10 to 15 stores up to 100 stores, including new states [19] - The management is optimistic about the pipeline for future acquisitions, noting an uptick in available opportunities over the past 12 to 18 months [34] Management's Comments on Operating Environment and Future Outlook - Management believes that the growth in new customers is a good investment, despite the associated increase in loss rates [18] - The company intends to return to a 2:1 debt-to-equity ratio as quickly as possible, although external factors may influence the timing [26] Other Important Information - The company has restrictions on buybacks, limited to 50% of consolidated net income, with $50 million remaining under this clause [29] - The company is actively managing its accounts for employee efficiency despite increasing headcount due to acquisitions [21] Q&A Session Summary Question: Share buyback program aggressiveness - The company has repurchased around 267,000 shares and has $48 million left on the authorization, comfortable with a 2:1 debt-to-equity ratio [11] Question: Credit reserves and loss trends - Future credit loss trends will depend on new customer growth; a 17% charge-off rate is currently observed, influenced by new customer acquisition [17][15] Question: Characteristics of acquired portfolios - The company has been acquiring portfolios within its footprint and in new states, with a focus on smaller to medium-sized acquisitions [19] Question: G&A expenses increase - G&A expenses increased by 16% year-over-year, driven by headcount increases from acquisitions and new offices [20] Question: Tax rate for next year - The long-term tax rate is expected to be between 23% and 24% [22] Question: Availability on revolver and buyback timing - The company has commitments on its revolver of approximately $480 million, with restrictions on buybacks based on consolidated net income [28][29] Question: Seasonality of stock-based compensation - Stock-based compensation will decrease annually, with a stable run rate until Q2 of the following year [33] Question: Health of underlying consumer - The health of existing customers remains stable, with the increase in provisions largely attributed to new customer growth [35]