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New words:
promulgation, revocation, settle, weighted
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amortize, audited, automated, balloon, basic, casualty, challenged, choose, clearing, commission, conform, cooling, cover, estate, evidence, expectation, expressing, housing, incorporated, interruption, multiple, national, optimism, person, pessimism, proposal, real, reclassified, reference, reliable, rely, rent, rescind, section, Senate, sequence, sequential, single, smaller, succeeding, unsuccessful, verify
Financial report summary
?Risks
- Our substantial indebtedness could adversely affect our ability to meet our debt or other contractual obligations, or to raise additional capital to fund our operations, and could also limit our ability to react to changes in the economy or our industry, and expose us to substantial increased expenses.
- We may be unable to refinance the Ivy Credit Agreement before it matures on April 30, 2021, or the refinancing terms may be materially less favorable than the terms of the current Ivy Credit Agreement. If we are unable to refinance this indebtedness on the same or similar terms and/or otherwise secure additional capital, it is likely to have a material adverse effect on our business, financial condition and results of operations.
- Our Predecessor reported net losses in prior periods, and there can be no assurance that we will generate income in the future, or that we will be able to successfully achieve or maintain our growth strategy.
- Despite our current level of indebtedness, we may still be able to incur substantial additional indebtedness. This could exacerbate the risks associated with our substantial indebtedness.
- The PIK Notes are effectively subordinated to our secured debt and any liabilities of our subsidiaries.
- The PIK Notes are our obligations only and our operations are conducted through, and substantially all of our consolidated assets are held by, our subsidiaries.
- To service our indebtedness, we will require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.
- Covenants in our debt agreements restrict our business in many ways and a default and acceleration under those agreements which are secured could result in the lenders seizing all collateral granted to them as security for the loans.
- The Company’s reliance on specialty or other financing may be a risk if such financing sources become unavailable or their cost materially increases.
- Credit ratings issued by statistical rating organizations could adversely affect our costs of financing.
- Repayment of our debt is dependent on cash flow generated by our subsidiaries.
- A change in the control of the Company could require us to repay certain of our outstanding indebtedness and we may be unable to do so.
- We may enter into transactions that would not constitute a change of control that could affect our ability to satisfy our obligations under indebtedness.
- Qualified Noteholders and Former Qualified Noteholders, as applicable, will have significant approval rights and their interests may conflict with the interests of our other investors.
- Prior to the conversion of Class B Common Units to Class A Common Units, holders of Class A Common Units will have no voting rights.
- We are not required to, and likely will not, satisfy our obligations under the PIK Notes in cash.
- Holders of Class A Common Units will likely experience substantial dilution.
- Our ability to issue equity securities to finance future operations is limited and subject to the rights of certain investors.
- There is no active trading market nor do we expect an active trading market to develop for our securities.
- Holders of PIK Notes will not be entitled to any rights with respect to our Class A Common Units, but they will be subject to all changes made with respect to them to the extent we issue Class A Common Units in redemption of the PIK Notes.
- We are subject to regulation at both the state and federal levels that is susceptible to varying interpretations, and our failure to comply with applicable regulations could result in significant liability to us as well as significant additional costs to bring our business practices into compliance.
- The CFPB has adopted rules applicable to our loans that could have a material adverse effect on our business and results of operations, on our ability to offer short and medium‑term consumer loans, on our ability to obtain ACH payment authorizations, and on our ability to remain in compliance with the SPV Indenture and the Ivy Credit Agreement. The original compliance date for those rules was August 19, 2019. The CFPB has delayed the compliance date until November 19, 2020, except, and although stayed by court order, the CFPB has retained the original August 2019 compliance date for the portion of the rules governing the initiation of electronic debits of consumer accounts. If the CFPB Rule is not substantially modified before becoming fully effective, the continuance of our current business would be materially less profitable, impractical or impossible, and we would most likely be unable to meet our debt obligations. In addition, both the CFPB and state officials are authorized to bring enforcement actions against companies that violate federal consumer financial laws which could result in significant liability to us as well as significant additional costs to bring our business practice into compliance.
- The Dodd‑Frank Act authorizes the CFPB to conduct supervisory examinations and to adopt other rules that could potentially have a serious impact on our ability to offer short‑term consumer loans. The Dodd‑Frank Act also empowers the CFPB and state officials to bring enforcement actions against companies that violate federal consumer financial laws.
- Short‑term consumer lending, including payday lending, is highly controversial and has been criticized as being predatory by certain advocacy groups, legislators, regulators, media organizations and other parties.
- Customer complaints or negative public perception of our business could result in a decline in our customer growth and our business could suffer.
- Some of our (and our competitors’) lending practices in certain states have become or may become the subject of regulatory scrutiny and/or litigation. An unfavorable outcome in ongoing or future litigation or regulatory proceedings could force us to discontinue these business practices and/or make monetary payments. This could have a material adverse effect on our business, financial condition and results of operations.
- Judicial decisions, amendments to the Federal Arbitration Act, or actions by State legislative or regulatory bodies could render the arbitration agreements we use illegal or unenforceable.
- Provisions of Dodd‑Frank limiting interchange fees on debit cards could reduce the appeal of debit cards we distribute and/or limit revenues we receive from our debit card activities.
- Changes in local rules and regulations such as local zoning ordinances could negatively impact our business, results of operations and financial condition or could make the continuance of our current business impractical, unprofitable or impossible.
- Potential litigation and regulatory proceedings could have a material adverse impact on our business, results of operations and financial condition in future periods.
- A significant portion of our assets are held in a limited number of states.
- To the extent that our current and future business growth strategy involves new store acquisitions and our failure to manage our growth or integrate or manage newly acquired stores may adversely affect our business, results of operations and financial condition.
- We may not realize the expected benefits of acquisitions because of integration difficulties and other challenges.
- We may not be successful at entering new businesses or broadening the scope of our existing product and service offerings.
- If we lose key management or are unable to attract and retain the talent required for our business, our operating results and growth could suffer.
- We are dependent on hiring an adequate number of hourly employees to run our business and are subject to government regulations concerning these and our other employees, including minimum wage laws. These laws and regulations together with other factors influencing labor costs could have a material adverse effect on our business.
- Competition in the retail financial services industry is intense and could cause us to lose market share and revenue.
- Our competitors’ use of other business models could put us at a competitive disadvantage and have a material adverse effect on our business.
- A reduction in demand for our products and services and failure by us to adapt to such reduction could adversely affect our business and results of operations.
- Demand for our products and services is sensitive to the level of transactions effected by our customers, and accordingly, our revenues could be affected negatively by a general economic slowdown.
- Our future growth and financial success will be harmed if there is a decline in the use of prepaid debit cards as a payment mechanism or if there are adverse developments with respect to the prepaid debit card services industry in general.
- Disruptions in the credit markets may negatively impact the availability and cost of our short‑term borrowings, which could adversely affect our results of operations, cash flows and financial condition.
- The use of personal data in credit underwriting is highly regulated.
- If the information provided by customers to us is incorrect or fraudulent, we may misjudge a customer’s qualification to receive a loan, and any inability to effectively identify, manage, monitor and mitigate fraud risk on a large scale could cause us to incur substantial losses, and our operating results, brand and reputation could be harmed.
- If we do not effectively price the credit risk of our prospective or existing customers, our results of operations and financial condition could be materially and adversely affected.
- Failure to keep up with the rapid changes in e‑commerce and the uses and regulation of the Internet could harm our business.
- Our revenue and revenue less provision for losses from check cashing services may be materially adversely affected if the number and amount of checks we cash that go uncollected significantly increase.
- Any disruption in the availability or the security of our information systems or our internet lending platform or fraudulent activity could adversely affect our operations or subject us to significant liability or increased regulation.
- Unauthorized disclosure of sensitive or confidential customer data could expose us to protracted and costly litigation and penalties and cause us to lose customers.
- Our ability to collect payment on loans and maintain accurate accounts may be adversely affected by computer viruses, physical or electronic break‑ins, technical errors and similar disruptions.
- Security breaches, cyber‑attacks, or fraudulent activity could result in damage to our operations or lead to reputational damage.
- Our success and future growth depend significantly on our successful marketing efforts, and if such efforts are not successful, our business and financial results may be harmed.
- Any decrease in our access to preapproved marketing lists from consumer reporting agencies (credit bureaus) or other developments impacting our use of direct mail marketing could adversely affect our ability to grow our business.
- Our business may suffer if our trademarks or service marks are infringed.
- Part of our business is seasonal, which causes our revenue to fluctuate and may adversely affect our ability to service our debt.
- Our retail locations currently carry less cash as a result of costs associated with the Restructuring and reduced cash flow.
- Because we maintain a significant supply of cash in our stores, we may be subject to cash shortages due to robbery, employee errors and theft.
- If our insurance coverage limits are inadequate to cover our liabilities, if we are unable to obtain insurance or surety bonds due to our financial condition, if our insurance costs rise, or we suffer losses due to one or more of our insurance carriers defaulting on their obligations, our financial condition and results of operations could be materially adversely affected.
- Our operations could be impacted by any future government shutdowns.
- Our operations could be subject to natural disasters, global pandemics, and other business disruptions, which could adversely impact our future revenue and financial condition and increase our costs and expenses.
- Our financial condition, operations and liquidity may be materially adversely affected in the event of a catastrophic loss for which we are self‑insured.
- Adverse real estate market fluctuations could affect our profits.
Management Discussion
- Total revenue for the year ended December 31, 2019, decreased $11.4 million, or 3.5%, as compared to the same period in the prior year, primarily as the result of the decrease in credit service fees partially offset by the increases in check cashing fees and other income.
- Revenue from short-term consumer loan fees and interest for the year ended December 31, 2019, decreased $2.7 million, or 2.0%, as compared to the same period in the prior year, primarily due to customers moving to a medium-term product in a certain market and tighter underwriting criteria in the Internet segment.
- Revenue from medium-term consumer loans for the year ended December 31, 2019, decreased $0.8 million, or 1.3%, as compared to the same period in the prior year, primarily due to regulatory changes in a certain market. However, Retail segment revenue