10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ýQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended January 31, 2019

OR

oTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to            

Commission File Number 001-35588

Liberty Tax, Inc.

(Exact name of registrant as specified in its charter)

Delaware	27-3561876
(State of incorporation)	(IRS employer identification no.)

1716 Corporate Landing Parkway

Virginia Beach, Virginia 23454

(Address of principal executive offices)

(757) 493-8855

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.  Yes ý No o

Indicate by check mark whether the registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No ý

 The number of shares outstanding of the registrant’s common stock as of March 4, 2019 was 14,057,941 shares.

LIBERTY TAX, INC.

Form 10-Q for the Quarterly Period Ended January 31, 2019

Table of Contents

		Page
		Number
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of January 31, 2019, April 30, 2018 and January 31, 2018	2
	Condensed Consolidated Statements of Operations for the three and nine months ended January 31, 2019 and 2018	3
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended January 31, 2019 and 2018	4
	Condensed Consolidated Statements of Stockholders' Equity for the nine months ended January 31, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2019 and 2018	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	49
Signatures		50

PART I. FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS (UNAUDITED)

1

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

January 31, 2019, April 30, 2018 and January 31, 2018

(In thousands, except share data)

	January 31, 2019			April 30, 2018			January 31, 2018
Assets	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	4,348		$	18,522		$	4,084
Receivables:
Accounts receivable	62,141			52,517			67,550
Notes receivable - current	69,513			24,295			69,015
Interest receivable, net of uncollectible amounts	3,480			1,526			4,476
Allowance for doubtful accounts - current	(10,878		)	(11,522		)	(7,987		)
Total current receivables, net	124,256			66,816			133,054
Assets held for sale	—			8,941			12,070
Income taxes receivable	16,329			—			14,820
Other current assets	16,782			5,429			19,473
Total current assets	161,715			99,708			183,501
Property, equipment, and software, net	34,648			38,636			40,050
Notes receivable, non-current	11,435			6,554			17,676
Allowance for doubtful accounts, non-current	(946		)	(965		)	(1,006		)
Total non-current notes receivables, net	10,489			5,589			16,670
Goodwill	7,348			8,640			9,210
Intangible assets, net	20,602			22,837			23,068
Deferred income taxes	307			343			174
Other assets	1,975			2,250			2,535
Total assets	$	237,084		$	178,003		$	275,208
Liabilities and Stockholders’ Equity
Current liabilities:
Current installments of long-term obligations	$	13,763		$	18,113		$	5,223
Accounts payable and accrued expenses	17,566			14,521			22,027
Due to Area Developers (ADs)	9,818			17,906			11,742
Income taxes payable	34			4,511			—
Revolving credit facility	107,893			—			—
Deferred revenue - current	4,593			2,021			2,024
Total current liabilities	153,667			57,072			41,016
Long-term obligations, excluding current installments, net	1,946			2,270			16,421
Revolving credit facility	—			—			120,189
Deferred revenue and other - non-current	5,199			4,692			5,193
Deferred income tax liability	1,723			1,397			3,682
Long-term income taxes payable	1,208			1,070			—
Total liabilities	163,743			66,501			186,501
Commitments and contingencies
Stockholders’ equity:
Special voting preferred stock, $0.01 par value per share, 0, 10 and 10 shares authorized, issued and outstanding, respectively	—			—			—
Class A common stock, $0.01 par value per share, 21,200,000 shares authorized, 14,057,941, 12,823,020 and 12,750,057 shares issued and outstanding, respectively	141			128			127
Class B common stock, $0.01 par value per share, 1,000,000 shares authorized, 0, 200,000 and 200,000 shares issued and outstanding, respectively	—			2			2
Exchangeable shares, $0.01 par value per share, 1,000,000 shares authorized, 0, 1,000,000 and 1,000,000 shares issued and outstanding, respectively	—			10			10
Additional paid-in capital	12,374			11,570			10,689
Accumulated other comprehensive loss, net of taxes	(1,698		)	(1,347		)	(990		)
Retained earnings	62,524			101,139			78,869
Total stockholders’ equity	73,341			111,502			88,707
Total liabilities and stockholders’ equity	$	237,084		$	178,003		$	275,208

See accompanying notes to condensed consolidated financial statements.

2

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Three and Nine Months Ended January 31, 2019 (unaudited) and 2018 (unaudited)

(In thousands, except share count and per share data)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2019			2018			2019			2018
Revenue:
Franchise fees	$	596		$	90		$	1,602		$	354
Area Developer fees	1,018			507			2,665			2,209
Royalties and advertising fees	16,060			17,610			19,095			20,598
Financial products	9,882			18,106			10,938			19,324
Interest income	2,049			2,612			5,253			7,009
Assisted tax preparation fees, net of discounts	2,719			5,225			5,620			8,413
Electronic filing fees	428			2,872			486			2,872
Other revenues	132			1,222			1,165			3,423
Total revenues	32,884			48,244			46,824			64,202
Operating expenses:
Employee compensation and benefits	9,795			11,574			29,770			32,277
Selling, general, and administrative expenses	6,294			22,366			27,649			41,120
Area Developer expense	4,384			4,890			5,089			5,658
Advertising expense	6,913			5,623			9,827			9,702
Depreciation, amortization, and impairment charges	3,991			3,995			10,350			8,526
Restructuring expense	—			(9		)	9,345			3,362
Total operating expenses	31,377			48,439			92,030			100,645
Income (loss) from operations	1,507			(195		)	(45,206		)	(36,443		)
Other income (expense):
Foreign currency transaction gain	—			57			—			128
Interest expense	(1,129		)	(829		)	(2,206		)	(1,618		)
Income (loss) before income taxes	378			(967		)	(47,412		)	(37,933		)
Income tax expense (benefit)	688			555			(14,858		)	(13,550		)
Net loss	(310		)	(1,522		)	(32,554		)	(24,383		)
Net loss per share of common stock:
Basic and diluted	(0.02		)	(0.11		)	(2.37		)	(1.89		)
Weighted-average shares outstanding basic and diluted	14,043,218			12,934,941			13,718,401			12,907,039
Dividends declared per share of common stock and common stock equivalents	$	—		$	0.16		$	0.16		$	0.48

See accompanying notes to condensed consolidated financial statements.

3

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

Three and Nine Months Ended January 31, 2019 (unaudited) and 2018 (unaudited)

(In thousands)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2019			2018			2019			2018
Net loss	$	(310	)	$	(1,522	)	$	(32,554	)	$	(24,383	)
Unrealized gain (loss) on interest rate swap agreement, net of taxes of $(17), $11, $(18) and $11, respectively	(42		)	31			(23		)	41
Foreign currency translation adjustment	23			372			(304		)	1,052
Forward contracts related to foreign currency exchange rates	(25		)	—			(25		)	—
Comprehensive loss	$	(354	)	$	(1,119	)	$	(32,906	)	$	(23,290	)

See accompanying notes to condensed consolidated financial statements.

4

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

Nine months endedJanuary 31, 2019 (unaudited)

(In thousands)

	Class A			Class B					Special voting preferred stock
	Common stock			Common stock
	Shares	Amount		Shares		Amount			Shares	Amount
Balance at May 1, 2018	12,823	$	129	200		$	2		—	$	—
Exercise of stock options	14	—		—		—			—	—
Vesting of restricted stock	21	—		—		—			—	—
Converted Class B shares to Class A shares	1,200	12		(200	)	(2		)	—	—
Balance at January 31, 2019	14,058	$	141	—		$	—		—	$	—

	Exchangeable shares					Additional paid-in capital			Accumulated other comprehensive loss			Retained earnings
	Shares		Amount												Total
Balance at May 1, 2018	100		$	10		$	11,571		$	(1,346	)	$	101,139		$	111,505
Non-cash adjustments due to ASC 606	—		—			—			—			(3,794		)	(3,794		)
Exercise of stock options	—		—			153			—			—			153
Repurchase of common stock	—		—			(83		)	—			—			(83		)
Conversion of preferred stock to common stock	(100	)	(10		)	—			—			—			—
Stock-based compensation expense	—		—			733			—			—			733
Net loss	—		—			—			—			(32,554		)	(32,554		)
Cash dividends	—		—			—			—			(2,267		)	(2,267		)
Foreign currency translation adjustment	—		—			—			(304		)	—			(304		)
Forward contracts related to foreign currency exchange rates	—		—			—			(25		)	—			(25		)
Unrealized loss on interest rate swap agreement, net of taxes	—		—			—			(23		)	—			(23		)
Balance at January 31, 2019	—		$	—		$	12,374		$	(1,698	)	$	62,524		$	73,341

See accompanying notes to condensed consolidated financial statements.

5

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

Nine months endedJanuary 31, 2018 (unaudited)

(In thousands)

	Class A			Class B			Special voting preferred stock
	Common stock			Common stock
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at May 1, 2017	12,683	$	127	200	$	2	—	$	—
Exercise of stock options	9	—		—	—		—	—
Vesting of restricted stock	59	—		—	—		—	—
Balance at January 31, 2018	12,751	$	127	200	$	2	—	$	—

	Exchangeable shares			Additional paid-in capital			Accumulated other comprehensive income			Retained earnings
	Shares	Amount											Total
Balance at May 1, 2017	1,000	$	10	$	8,370		$	(2,083	)	$	110,028		$	116,454
Exercise of stock options	—	—		95			—			—			95
Repurchase of common stock	—	—		(299		)	—			—			(299		)
Stock-based compensation expense	—	—		2,523			—			—			2,523
Net loss	—	—		—			—			(24,383		)	(24,383		)
Cash dividends	—	—		—			—			(6,776		)	(6,776		)
Foreign currency translation adjustment	—	—		—			1,052			—			1,052
Unrealized gain on interest rate swap agreement, net of taxes	—	—		—			41			—			41
Balance at January 31, 2018	1,000	$	10	$	10,689		$	(990	)	$	78,869		$	88,707

See accompanying notes to condensed consolidated financial statements.

6

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Nine Months EndedJanuary 31, 2019 (unaudited) and 2018 (unaudited)

(In thousands)

	Nine Months Ended January 31,
	2019			2018
Cash flows from operating activities:
Net loss	$	(32,554	)	$	(24,383	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts	5,798			7,865
Depreciation, amortization, and impairment charges	10,350			8,526
Amortization of deferred financing costs	184			116
Loss on disposal of fixed and intangible assets	5,814			2,370
Stock-based compensation expense	733			2,523
Loss (gain) on bargain purchases and sales of Company-owned offices	743			(1,626		)
Equity in gain (loss) of affiliate	65			(71		)
Deferred tax income	1,757			113
Changes in accrued income taxes	(20,639		)	(21,119		)
Changes in other assets and liabilities	(35,192		)	(36,709		)
Net cash used in operating activities	(62,941		)	(62,395		)
Cash flows from investing activities:
Issuance of operating loans to franchisees and ADs	(52,455		)	(57,839		)
Payments received on operating loans to franchisees	3,477			5,377
Purchases of AD rights, Company-owned offices and acquired customer lists	(230		)	(2,456		)
Proceeds from sale of Company-owned offices and AD rights	1,229			451
Purchases of property, equipment and software	(2,733		)	(3,980		)
Net cash used in investing activities	(50,712		)	(58,447		)
Cash flows from financing activities:
Proceeds from the exercise of stock options	153			95
Dividends paid	(2,244		)	(6,669		)
Repayment of amounts due to former ADs and franchisees	(3,130		)	(2,984		)
Repayment of long-term obligations	(2,995		)	(2,216		)
Borrowings under revolving credit facility	111,585			120,525
Repayments under revolving credit facility	(3,693		)	(336		)
Cash paid for taxes on exercises/vesting of stock-based compensation	(83		)	(299		)
Net cash provided by financing activities	99,593			108,116
Effect of exchange rate changes on cash, net	(114		)	383
Net decrease in cash and cash equivalents	(14,174		)	(12,343		)
Cash and cash equivalents at beginning of period	18,522			16,427
Cash and cash equivalents at end of period	$	4,348		$	4,084

See accompanying notes to condensed consolidated financial statements.

7

LIBERTY TAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Nine Months EndedJanuary 31, 2019 (unaudited) and 2018 (unaudited)

(In thousands)

	Nine Months Ended January 31,
	2019			2018
Supplemental disclosures of cash flow information:
Cash paid for interest, net of capitalized interest of$27 and $425, respectively	$	2,124		$	1,563
Cash paid for taxes, net of refunds	4,031			7,344
During the nine months ended January 31, 2019 and 2018, the Company acquired certain assets from ADs, franchisees, and third parties as follows:
Fair value of assets purchased	$	2,476		$	11,082
Receivables applied, net of amounts written off, due ADs and related deferred revenue	(488		)	(6,668		)
Bargain purchase gains	(224		)	(1,100		)
Long-term obligations and accounts payable issued to seller	(1,534		)	(858		)
Cash paid to ADs, franchisees and third parties	$	230		$	2,456
During the nine months ended January 31, 2019 and 2018, the Company sold certain assets to ADs and franchisees as follows:
Book value of assets sold	$	5,105		$	1,129
Gain on sale - revenue deferred	—			18
Gain (loss) on sale - gain (loss) recognized	(1,013		)	88
Notes received	(2,863		)	(784		)
Cash received from ADs and franchisees	$	1,229		$	451

See accompanying notes to condensed consolidated financial statements.

8

LIBERTY TAX, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Unaudited)

January 31, 2019 and 2018

(1) Organization and Significant Accounting Policies

Description of Business

Liberty Tax, Inc. (the "Company"), a Delaware corporation, is a holding company engaged through its subsidiaries as a franchisor and, to a lesser degree, an operator of a system of income tax preparation offices located in the United States of America (the "U.S.") and Canada. The Company's principal operations are conducted through JTH Tax, Inc. (d/b/a Liberty Tax Service), the Company's largest subsidiary. Through this system of income tax preparation offices, the Company also facilitates refund-based tax settlement financial products, such as refund transfer products in the U.S. and personal income tax refund discounting products in Canada. The Company also offers online tax preparation services. In fiscal 2015, the Company changed its name from JTH Holding, Inc. to Liberty Tax, Inc.

The Company provides a substantial amount of lending to its franchisees and area developers ("ADs"). The Company allows franchisees and ADs to defer a portion of the franchise fee and AD fee, which are paid over time. The Company also offers its franchisees working capital loans to assist in funding their operations between tax seasons.

The Company’s operating revenues are seasonal in nature, with peak revenues occurring in the months of January through April.  Therefore, results for interim periods are not indicative of results to be expected for the full year.

Unless the context requires otherwise, the terms "Liberty Tax," "Liberty Tax Service," "we," the "Company," "us," and "our" refer to Liberty Tax, Inc. and its consolidated subsidiaries.

Basis of Presentation

 The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Assets and liabilities of the Company's Canadian operations have been translated into U.S. dollars using the exchange rate in effect at the end of the period. Revenues and expenses have been translated using the average exchange rates in effect each month of the period. Foreign exchange transaction gains and losses are recognized when incurred. The Company reclassifies to accounts payable checks issued in excess of funds available and reports them as cash flow from operating activities. The Company consolidates any entities in which it has a controlling interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation an entity in which the Company has certain interests where a controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity ("VIE"), is required to be consolidated by its primary beneficiary. The Company does not possess any ownership interests in franchisee entities; however, the Company may provide financial support to franchisee entities. Because the Company's franchise arrangements provide franchisee entities the power to direct the activities that most significantly impact their economic performance, the Company does not consider itself the primary beneficiary of any such entity that might be a VIE. Based on the results of management's analysis of potential VIEs, the Company has not consolidated any franchisee entities. The Company's maximum exposure to loss resulting from involvement with potential VIEs is attributable to accounts and notes receivables and future lease payments due from franchisees. When the Company does not have a controlling interest in an entity but has the ability to exert significant influence over the entity, the Company applies the equity method of accounting. Intercompany balances and transactions have been eliminated in consolidation. Other current assets is comprised of prepaid expenses and bank product fees and discounting, net.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information.  The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required only in annual financial statements.  The consolidated balance sheet data as of April 30, 2018 was derived from the Company’s April 30, 2018 Annual Report on Form 10-K filed on October 5, 2018, as amended by Amendment No. 1 to the Annual Report on Form 10-K filed on October 10, 2018.

In the opinion of management, all adjustments necessary for a fair presentation of such condensed consolidated financial statements in accordance with GAAP have been recorded.  These adjustments consisted only of normal recurring items.  The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s

9

consolidated financial statements and notes thereto included in its April 30, 2018 Annual Report on Form 10-K filed on October 5, 2018, as amended by Amendment No. 1 to the Annual Report on Form 10-K filed on October 10, 2018.

Office Count

The following table shows the U.S. office activity and the number of Canadian and Company-owned offices for the 2019, 2018, and 2017 tax seasons:

	Tax Season
	2019		2018		2017
U.S. Office Locations:
Permanent Office Locations:
Operated during the prior tax season	3,282		3,710		3,960
Offices opened	56		65		172
Offices closed	(547	)	(493	)	(422	)
Operated during the current tax season	2,791		3,282		3,710
Seasonal Office Locations:
Operated during the prior tax season	24		67		211
Offices opened	1		2		37
Offices closed	(9	)	(45	)	(181	)
Operated during the current tax season	16		24		67
Processing Centers	29		37		46
Total U.S. Office Locations	2,836		3,343		3,823
Canada Office Locations	272		267		254
Total Office Locations	3,108		3,610		4,077
Additional Office Information:
Company-owned offices	140		344		362
Franchised offices	2,968		3,266		3,715
Total Office Locations	3,108		3,610		4,077

SiempreTax+ is operating 45 offices during the 2019 tax season compared to 77 during the 2018 tax season and 159 during the 2017 tax season. These offices include second locations opened by current franchisees in existing territories, conversions of existing Liberty Tax offices and offices opened in new territories.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period, to prepare these condensed consolidated financial statements and accompanying notes in conformity with GAAP. Actual results could differ from those estimates.

10

Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." This update will replace existing lease guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The update is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently finalizing its implementation plan and evaluating the impact of the new pronouncement on its consolidated financial statements. The Company expects the adoption of this pronouncement to result in a material increase in the assets and liabilities on its consolidated balance sheets, but does not expect it to have a material impact on its consolidated statements of operations.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)", which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The update is intended to reduce the existing diversity in practice and is effective for the Company beginning with its first quarterly filing in fiscal year 2019. The Company adopted the update for all periods beginning on or after May 1, 2018.

In June 2016, the FASB issued ASU No. 2016-13, "Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which changes how companies will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost (which generally will result in the earlier recognition of allowances for losses) and requires companies to record allowances for available-for-sale debt securities, rather than reduce the carrying amount. In addition, companies will have to disclose significantly more information, including information used to track credit quality by year of origination, for most financing receivables. The ASU should be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the standard is effective. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The ASU is effective for the Company beginning in the first quarter of fiscal year 2021. The Company is currently evaluating the impact of the adoption of this newly issued standard to its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business", which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU is effective for the Company beginning in the first quarter of fiscal year 2019. The Company adopted the update for all periods beginning on or after May 1, 2018, and it did not have a material impact on the Company's current accounting for business combinations.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This new standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard will be effective for the Company in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this newly issued standard to its consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Codification ("ASC") 606, “Revenues from Contracts with Customers” ("ASC 606") which amends the guidance in ASC 605, “Revenue Recognition.” The core principle of this new standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. ASC 606 also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The adoption of this new standard did not materially impact the Company’s recognition of revenues generated from the following:

• Assisted tax preparation fees, net of discounts, which are recorded at the time the return is filed. The related discounts are recorded as reductions to revenues.

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• Financial products, which are recorded at the time the return is filed. As a result of ASC 606, refund transfer products and refund-based loans revenues are now recorded net instead of gross.

• Royalties and advertising fees, which are based on a percentage of the franchisees’ sales are recognized at the time the underlying sales occur. The Company has elected to use the right to invoice practical expedient for recognition of minimum royalties.

• Interest income on notes receivable, which is recognized based on the outstanding principal note balance unless it is put on non-accrual status. Interest income on notes receivable that are placed on a non-accrual basis is recognized when cash is received. Interest income on accounts receivable is recognized based on the outstanding receivable balance over 30 days old, net of an allowance.

• Gains on sales of Company-owned offices, which are recognized when cash is received. Losses on sales of Company-owned offices are recognized immediately.

The details of the significant changes in revenue recognition and quantitative impact of the changes are discussed below.

Initial Franchise Fees

Typically, franchise rights are granted to franchisees for an initial term of five years with an option to renew at no additional cost. In exchange for initial franchise fees, royalties and advertising fees, the Company is obligated by its franchise agreements to provide training, an operations manual, site selection guidance, tax preparation software, operational assistance, tax and technical support, the ability to perform electronic filing, and marketing and advertising. Under the previous revenue recognition guidance, revenues from initial franchise fees were recognized when the obligations of the Company to prepare the franchisee for operation were substantially complete, up to the amount of cash received.

Under the new guidance, the standard requires that the transaction price received from customers be allocated to each separate and distinct performance obligation. The transaction price attributable to each separate and distinct performance obligation is then recognized as the performance obligations are satisfied. The services that the Company provides related to the initial franchise fees the Company receives from franchisees do not contain separate and distinct performance obligations from the franchise right. Accordingly, under the new standard, initial franchise fees, as constrained for amounts the Company does not expect to collect, will be recognized over the initial term of the franchise agreement, which is generally five years.

AD Fees

Historically, the rights to develop a new territory were granted to an AD for an initial term of six or ten years with an option to renew at no additional cost. Under the previous revenue recognition guidance, AD fees were recognized as revenue on a straight-line basis over the initial contract term of each AD agreement with the cumulative amount of revenue recognized not to exceed the amount of cash received. Under the new guidance, the standard requires the Company to recognize AD fees, as constrained for amounts not expected to be collected, over the initial term of the AD agreement.

The Company also sells a developed territory and simultaneously grants the right to operate as the exclusive AD in such developed territory to a new AD for an initial term of six years or ten years. Under the previous revenue recognition guidance, gains on sales of developed territories were recognized as revenues over the initial term, with the cumulative amount of revenues recognized not to exceed the amount of cash received. Losses on sales of developed territories were recognized immediately. Such gains and losses represented the difference between the transaction price and the net book value of the intangible asset recorded upon the Company’s reacquisition of the developed territory as of the date of the sale. Under the new guidance, the transaction price, as constrained for amounts the Company does not expect to collect, is recognized as revenues over the initial term of the AD agreement. The net book value of the intangible asset is charged to operating expenses at the date of the sale.

Electronic Filing Fees

Electronic filing fees are recorded in the period the tax return is electronically filed. Under the previous revenue recognition guidance, the electronic filing fees and the franchisees’ share in such fees were recorded as revenues and expense in the consolidated income statement, respectively. Under the new guidance, the electronic filing fees, net of the franchisees’ share in such fees, will be recorded as revenues in the consolidated statements of operations.

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Transition Method

The Company applied the new guidance on all contracts that were not completed as of May 1, 2018 using the modified retrospective method, whereby the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of retained earnings at May 1, 2018 in the amount of $3.8 million, net of tax, with corresponding increases in deferred revenue and notes receivable. Therefore, the results of operations from the comparative period have not been adjusted and continue to be reported under the previous revenue recognition guidance.

Impacts on the Condensed Consolidated Financial Statements

The following tables summarize the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the nine months endedJanuary 31, 2019:

Condensed Consolidated Balance Sheet	As Reported			ASC 606 Adjustment			Balances Without Adoption of ASC 606
	(In thousands)
Notes receivable, current	$	69,513		$	1,543		$	67,970
Allowance for doubtful accounts - current	(10,878		)	344			(11,222		)
Income taxes receivable	16,329			(914		)	17,243
Notes receivable, non-current	11,435			90			11,345
Intangible assets, net	20,602			(169		)	20,771
Deferred income taxes	307			307			—
Total assets	237,084			1,203			235,881
Deferred revenue, current	4,593			147			4,446
Deferred revenue and other, non-current	5,199			4,528			671
Deferred income tax liability	1,723			(1,260		)	2,983
Total liabilities	163,743			921			162,822
Retained earnings	62,524			282			62,242
Total stockholders' equity	73,341			282			73,059
Total liabilities and stockholders’ equity	$	237,084		$	1,203		$	235,881

Condensed Consolidated Statement of Operations	As Reported			ASC 606 Adjustment			Balances Without Adoption of ASC 606
	(In thousands)
Franchise fees	$	1,602		$	1,129		$	473
Area Developer fees	2,665			1,070			1,595
Financial products	10,938			(2,732		)	13,670
Electronic filing fees	486			(3,280		)	3,766
Other revenues	1,165			132			1,033
Total revenues	46,824			(4,736		)	51,560
Selling, general, and administrative expenses	27,649			(7,069		)	34,718
Total operating expenses	92,030			(5,590		)	97,620
Loss from operations	(45,206		)	854			(46,060		)
Loss before income taxes	(47,412		)	2,332			(49,744		)
Income tax benefit	(14,858		)	749			(15,607		)
Net loss	$	(32,554	)	$	1,583		$	(34,137	)

There have been no other significant changes in the Company's condensed consolidated balance sheets or statements of operations and cash flows as a result of the adoption of ASC 606.

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 Contract Balances

The following table provides information about receivables and contract liabilities (deferred revenue) from contracts with customers:

	January 31, 2019		April 30, 2018
	(In thousands)
Notes receivable (1)	$	80,948	$	30,849
Deferred revenue (2)	9,234		5,667

(1) Notes receivable increased by $1.7 million as of May 1, 2018 due to the change in the Company's revenue recognition policy for initial franchise and AD fees upon adoption of ASC 606.

(2) Deferred revenue increased $6.9 million as of May 1, 2018 due to the cumulative effect of adopting ASC 606.

Significant changes in deferred franchise and AD fees are as follows:

	Nine Months Ended
	January 31, 2019
	(In thousands)
Deferred franchise and AD fees at beginning of period	$	5,667
ASC 606 deferred franchise and AD fees adoption	6,940
Revenue recognized during the period	(4,267		)
New deferrals of franchise and AD fees	894
Deferred franchise and AD fees at end of period	$	9,234

Anticipated Future Recognition of Deferred Franchise and AD Fees

The following table reflects the estimated franchise and AD fees expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:

	Estimate for Fiscal Year
	(In thousands)
2019 (1)	$	938
2020	3,393
2021	2,488
2022	1,475
2023	667
Thereafter	273
Total	$	9,234

(1) Represents franchise and AD fees expected to be recognized for the remainder of fiscal 2019. The amount does not include $4.3 millionof franchise and AD fee revenues recognized for the nine months endedJanuary 31, 2019.

The Company has applied the optional exemption, as provided for under ASC 606, which allows the Company not to disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

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Foreign Operations

Canadian operations contributed $0.7 million and $0.3 million in revenues for the three months ended January 31, 2019 and 2018, respectively, and $1.9 million and $1.7 million in revenues for the nine months endedJanuary 31, 2019 and 2018, respectively.

The Company may have exposure to foreign currency fluctuations due to transactions between its U.S. and Canadian subsidiaries.

(2) Accounts and Notes Receivable

The Company provides select financing to ADs and franchisees for the purchase of franchises, areas, Company-owned offices, and operating loans for working capital and equipment needs. The franchise-related notes generally are payable over five years and the operating loans generally are due within one year. Most notes bear interest at an annual rate of 12%. 

Most of the notes receivable are due from the Company's ADs and franchisees and are collateralized by the underlying franchise and, when the AD or franchise is an entity, are guaranteed by the owners of the respective entity. The debtors' ability to repay the notes is dependent upon both the performance of the tax preparation industry as a whole and the individual franchise or AD areas.

At January 31, 2019, the Company had unfunded lending commitments for working capital loans to franchisees and ADs of $16.9 million through the end of the current fiscal year.

Allowance for Doubtful Accounts

The adequacy of the allowance for doubtful accounts is assessed on a quarterly basis and adjusted as deemed necessary. Management believes the recorded allowance is adequate based upon its consideration of the estimated fair value of the franchises and AD areas collateralizing the receivables. Any adverse change in the tax preparation industry or the individual franchise or AD areas could affect the Company's estimate of the allowance.

Activity in the allowance for doubtful accounts for the three and nine months ended January 31, 2019 and 2018 was as follows: 

	Three Months Ended January 31,						Nine Months Ended January 31,
	2019			2018			2019			2018
	(In thousands)
Balance at beginning of period	$	13,562		$	9,849		$	12,487		$	12,021
Provision for doubtful accounts	1,804			4,410			5,798			7,865
Write-offs	(3,517		)	(5,330		)	(6,398		)	(11,054		)
Foreign currency adjustment	(25		)	64			(63		)	161
Balance at end of period	$	11,824		$	8,993		$	11,824		$	8,993

Management considers specific accounts and notes receivable to be impaired if the net amounts due exceed the fair value of the underlying franchise at the time of the annual valuation performed as of April 30 of each year, and estimates an allowance for doubtful accounts based on that excess. In establishing the fair value of the underlying franchise, management considers a variety of factors, including recent sales between franchisees, sales of Company-owned stores, net fees of open offices earned during the most recently completed tax season, and the number of unopened offices. The Company performs its impairment analysis annually due to the seasonal nature of its operations. At the end of each fiscal quarter, the Company considers the activity during the period for accounts and notes receivable impaired at each prior fiscal year end and adjusts the allowance for doubtful accounts accordingly. While not specifically identifiable as of the balance sheet date, the Company's analysis of its experience also indicates that a portion of other accounts and notes receivable may not be collectible. Net amounts due include contractually obligated accounts and notes receivable plus accrued interest, reduced by unrecognized revenue, the allowance for uncollected interest, amounts due ADs, and amounts owed to the franchisee by the Company.

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The allowance for doubtful accounts at January 31, 2019, April 30, 2018 and January 31, 2018, was allocated as follows:

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Impaired:
Notes and interest receivable, net of unrecognized revenue	$	10,281		$	11,654		$	9,778
Accounts receivable	12,336			13,891			9,189
Less amounts due to ADs and franchisees	(905		)	(1,907		)	(817		)
Amounts receivable less amounts due to ADs and franchisees	$	21,712		$	23,638		$	18,150
Allowance for doubtful accounts for impaired notes and accounts receivable	$	10,341		$	10,322		$	8,013
Non-impaired:
Notes and interest receivable, net of unrecognized revenue	$	74,147		$	20,721		$	81,389
Accounts receivable	49,805			38,626			58,361
Less amounts due to ADs and franchisees	(9,055		)	(11,722		)	(11,213		)
Amounts receivable less amounts due to ADs and franchisees	$	114,897		$	47,625		$	128,537
Allowance for doubtful accounts for non-impaired notes and accounts receivable	$	1,483		$	2,165		$	980
Total:
Notes and interest receivable, net of unrecognized revenue	$	84,428		$	32,375		$	91,167
Accounts receivable	62,141			52,517			67,550
Less amounts due to ADs and franchisees	(9,960		)	(13,629		)	(12,030		)
Amounts receivable less amounts due to ADs and franchisees	$	136,609		$	71,263		$	146,687
Total allowance for doubtful accounts	$	11,824		$	12,487		$	8,993

The Company’s average investment in impaired receivables during the nine months ended January 31, 2019 and 2018 was $22.7 million and $21.2 million, respectively.

Analysis of Past Due Receivables

The breakdown of accounts and notes receivable past due at January 31, 2019 was as follows:

	Past due		Current		Interest receivable, net		Total receivables
	(In thousands)
Accounts receivable	$	33,290	$	28,851	$	—	$	62,141
Notes and interest receivable, net (1)	11,251		69,698		3,479		84,428
Total accounts, notes and interest receivable	$	44,541	$	98,549	$	3,479	$	146,569

(1)    Interest receivable is shown net of an allowance for uncollectible interest of $2.9 million.

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Accounts receivable are considered to be past due if unpaid 30 days after billing, and notes receivable are considered past due if unpaid 90 days after the due date. If it is determined the likelihood of collecting substantially all of the notes and accrued interest is not probable, the notes are put on non-accrual status. The Company’s investment in notes receivable on non-accrual status was $11.3 million, $13.6 million and $9.8 million at January 31, 2019, April 30, 2018, and January 31, 2018, respectively. Payments received on notes in non-accrual status are applied to the principal until the note is current and then to interest income. Non-accrual notes that are paid current and expected to remain current are moved back into accrual status during the next annual review.

(3) Restructuring Expense

In the nine months endedJanuary 31, 2018, the Company began restructuring initiatives involving a review of Company-owned stores and service providers to improve the Company's overall long-term profitability. The Company incurred $9.3 million of expenses in the nine months endedJanuary 31, 2019 related to these initiatives. The expenses incurred are presented in the Restructuring expense line item in the consolidated statements of operations. The composition of the restructuring expenses incurred for the nine months endedJanuary 31, 2019 were as follows:

Expense	Cash		Accrued Expenses		Non-cash		Total Expense
	(In thousands)
Contract termination costs - maintenance	$	37	$	—	$	—	$	37
Property and intangible impairments and exit costs	1,486		2,263		5,559		9,308
Total	$	1,523	$	2,263	$	5,559	$	9,345

The property and intangible impairments and exit costs, which were primarily recorded in assets held for sale, were comprised of expenses related to lease obligations and non-cash charges associated with intangible write-downs. The accrued restructuring expenses of $2.3 million are included in "Accounts payable and accrued expenses" in the accompanying consolidated balance sheets.

A summary of the activity in accrued expenses related to restructuring initiatives for the nine months endedJanuary 31, 2019 is as follows:

	Contract termination costs - maintenance			Property and intangible impairments and exit costs			Total accrued expenses
	(In thousands)
Balance at beginning of period	$	1,359		$	—		$	1,359
Additions accrued against the liability	—			3,749			3,749
Cash payments	(669		)	(1,486		)	(2,155		)
Balance at end of period	$	690		2,263			$	2,953

(4) Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended January 31, 2019 and 2018 were as follows:

	January 31, 2019			January 31, 2018
	(In thousands)
Balance at beginning of period	$	8,640		$	8,576
Acquisitions of assets from franchisees and others	372			1,850
Disposals and foreign currency changes, net	(4,614		)	(184		)
Purchase price reallocation	—			(1,032		)
Transfers	2,950			—
Balance at end of period	$	7,348		$	9,210

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Components of intangible assets were as follows as of January 31, 2019, April 30, 2018 and January 31, 2018:

	January 31, 2019
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	1,373	$	(1,096	)	$	277
Trade names	3 years	216		(119		)	97
Non-compete agreements	2 years	54		(52		)	2
Assets acquired from franchisees:
Customer lists	4 years	2,091		(1,248		)	843
Reacquired rights	2 years	1,711		(1,323		)	388
AD rights	9 years	32,002		(13,007		)	18,995
Total intangible assets		$	37,447	$	(16,845	)	$	20,602

	April 30, 2018
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	3,187	$	(1,555	)	$	1,632
Trade names	3 years	431		(172		)	259
Non-compete agreements	2 years	241		(145		)	96
Assets acquired from franchisees:
Customer lists	4 years	1,842		(1,427		)	415
Reacquired rights	2 years	1,436		(1,393		)	43
AD rights	9 years	30,907		(10,515		)	20,392
Total intangible assets		$	38,044	$	(15,207	)	$	22,837

	January 31, 2018
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	3,187	$	(1,390	)	$	1,797
Trade names	3 years	431		(136		)	295
Non-compete agreements	2 years	241		(115		)	126
Assets acquired from franchisees:
Customer lists	4 years	2,193		(1,642		)	551
Reacquired rights	2 years	1,712		(1,642		)	70
AD rights	9 years	29,932		(9,703		)	20,229
Total intangible assets		$	37,696	$	(14,628	)	$	23,068

The Company acquired $1.3 million and $3.5 million of AD rights during the nine months ended January 31, 2019 and 2018, respectively.

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During the third quarter of fiscal 2019, the Company sold the assets of six unrelated offices of smaller regional or local accounting firms for $2.9 million of which $1.4 million is contingent and recorded a loss on sale of $1.1 million. In addition, the Company charged $0.2 million to impairment during the period, for the sale of the last remaining office subsequent to January 31, 2019. These offices performed year-round accounting services. The following table summarizes the assets that were sold as of January 31, 2019.

	January 31, 2019
	(In thousands)
Accounts Receivable	$	(111	)
Property, equipment and software, net	66
Customer lists	965
Trade names	130
Non-compete agreements	19
Goodwill	2,896
Total asset value	$	3,965

(5) Assets Held For Sale

In the third quarter of fiscal 2019, the Company reclassified all assets associated with its U.S. Company-owned offices from assets held for sale to reacquired rights, customer lists, and goodwill. Amortization expense was recorded on a cumulative basis for reacquired rights and customer lists. Prior to the third quarter of fiscal 2019, assets acquired from U.S. franchisees were classified as assets held for sale. During the nine months ended January 31, 2019, the Company acquired $1.0 million in assets from U.S. franchisees and third parties that were first accounted for as business combinations, with the value allocated to customer lists and reacquired rights of $0.5 million and goodwill of $0.5 millionprior to being recorded as assets held for sale. During the nine months ended January 31, 2018, the Company acquired $7.0 million in assets from U.S. franchisees and third parties that were initially accounted for as business combinations, with the value allocated to customer lists and reacquired rights of $3.5 million and goodwill of $3.5 million prior to being recorded as assets held for sale. The acquired businesses are operated as Company-owned offices until a buyer is located and a new franchise agreement is entered into. During the nine months ended January 31, 2019, the Company sold, terminated, or impaired $4.9 million in assets from U.S. franchisees, of which $3.8 million was included in the Company's restructuring initiative.

Changes in the carrying amount of assets held for sale for the nine months ended January 31, 2019 and 2018 were as follows:

	Nine Months Ended January 31,
	2019			2018
	(In thousands)
Balance at beginning of period	$	8,941		$	11,989
Reacquired and acquired from third parties	945			6,992
Sold or terminated, impairments and other	(4,886		)	(6,911		)
Reclassification to reacquired rights, customer lists, and goodwill	(5,000		)	—
Balance at end of period	$	—		$	12,070

(6) Long-Term Obligations

The Company has a credit facility that consists of a term loan with an original principal amount of $21.2 million and a revolving credit facility that currently allows borrowing of up to $170.0 million with an accordion feature that permits the Company to request an increase in availability of up to an additional $50.0 million. Outstanding borrowings accrue interest, which is paid monthly at a rate of the one-month London Interbank Offered Rate ("LIBOR") plus a margin ranging from 1.50% to 2.25% depending on the Company’s leverage ratio.

The average interest rate paid during the nine months ended January 31, 2019 and 2018 was 3.87% and 2.99%, respectively. The indebtedness is collateralized by substantially all the assets of the Company, and both loans mature on April 30, 2019. 

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The credit facility contains certain financial covenants that the Company must meet, including leverage and fixed-charge coverage ratios as well as minimum net worth requirements. In addition, the Company must reduce the outstanding balance under its revolving credit facility to zero for a period of at least 45 consecutive days each fiscal year. The Company was in compliance with the financial covenants at January 31, 2019. 

In December 2016, the Company obtained a mortgage payable to a bank in monthly installments of principal payments plus interest at the one-month LIBOR plus 1.85% through December 2026 with a balloon payment of $0.8 million due at maturity. The mortgage is collateralized by land and buildings.

Long-term obligations at January 31, 2019, April 30, 2018, and January 31, 2018 consisted of the following:

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Credit Facility:
Revolver	$	107,893		$	—		$	120,189
Term loan, net of debt issuance costs	11,974			14,855			15,376
Total credit facility	119,867			14,855			135,565
Long-Term Obligations
Term loan, net of debt issuance costs	11,974			14,855			15,376
Due former ADs, franchisees and third parties	1,791			3,490			4,198
Mortgages	1,944			2,038			2,070
	15,709			20,383			21,644
Less: current installments	(13,763		)	(18,113		)	(5,223		)
Long-term obligations, excluding current installments, net	$	1,946		$	2,270		$	16,421

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(7) Forward Contracts Related to Foreign Currency Exchange Rates and Cash Flow Hedge

The Company periodically enters into forward contracts to eliminate the exposure related to foreign currency fluctuations in connection with short-term advances made to its Canadian subsidiary. Foreign currency contracts with a fair value of less than$0.1 million are included in accounts payable and accrued expenses for the nine months endedJanuary 31, 2019. The Company did not enter into any foreign currency contracts for the nine months endedJanuary 31, 2018.

In December 2016, in connection with obtaining a mortgage payable to a bank, the Company entered into an interest rate swap agreement that allows it to manage fluctuations in cash flow resulting from changes in the interest rate on the mortgage. This swap effectively changes the variable-rate of the Company's mortgage into a fixed rate of 4.12%. The Company has designated this swap agreement as a cash flow hedge. At January 31, 2019, the fair value of the interest rate swap is less than $0.1 million and is included in other current assets. The interest rate swap expires in December 2026.

(8) Income Taxes

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the U.S. on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. During the quarter ending January 31, 2018, the Company recorded provisional amounts related to the enactment-date effects of the Tax Act that included recording the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed and adjusting deferred tax assets and liabilities.

SAB 118 measurement period

The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Act throughout 2018. As of January 31, 2018, the Company recorded provision amounts for all of the enactment-date income tax effects of the Tax Act under ASC 740, Income Taxes, for the following aspects: remeasurement of deferred tax assets and liabilities, one-time transition tax, and tax on global intangible low-taxed income. As of January 31, 2019, the Company completed its accounting for all of the enactment-date income tax effects of the Tax Act. As further discussed below, during 2018 and the first month of 2019, the Company recognized adjustments to the provisional amounts recorded at January 31, 2018 and included these adjustments as a component of income tax expense from continuing operations.

One-time transition tax

The one-time transition tax is based on the Company’s total post-1986 earnings and profits, the tax on which the Company previously deferred from U.S. income taxes under U.S. law. The Company recorded a provisional amount for its one-time transition tax liability for each of its foreign subsidiaries, resulting in a transition tax liability of $1.2 million at January 31, 2018. Upon further analyses of the Tax Act and Notices and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, the Company finalized its calculations of the transition tax liability during 2018. The Company increased its January 31, 2018 provisional amount by $0.2 million, which is included as a component of income tax expense from continuing operations. The Company elected to pay its transition tax over the eight-year period provided in the Tax Act. As of January 31, 2019, the remaining balance of the Company’s transition tax obligation is $1.2 million, which will be paid over the next seven years.

Deferred tax assets and liabilities

As of January 31, 2018, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional income tax benefit of $1.6 million. Upon further analysis of certain aspects of the Tax Act and refinement of its calculations during the 12 months ended January 31, 2019, the Company adjusted its provisional amount by increasing the income tax benefit by $0.8 million, which is included as a component of income tax expense from continuing operations.

Global intangible low-taxed income (GILTI)

The Tax Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Because the Company evaluated the

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provision of GILTI as of January 31, 2018, the Company recorded no GILTI-related deferred amounts. After further consideration in the current year, the Company elected to account for GILTI in the year the tax is incurred as a period cost.

Similar to prior years, pre-tax book income estimated in the fourth quarter of fiscal 2019 is expected to offset pre-tax book loss for the nine months endedJanuary 31, 2019 due to the established pattern of seasonality in the Company's primary business operations. Management has determined it is at least more-likely-than-not that realization of tax benefits recorded in the Company's financial statements will occur during fiscal 2019. The amount of tax benefit recorded for the nine months endedJanuary 31, 2019 reflects the Company’s estimated annual effective tax rate applied to the year-to-date loss from continuing operations adjusted for the tax impact of discrete items.

The Company's effective tax rate from continuing operations, including discrete income tax items, was 182.0% and 31.3% for the three and nine months endedJanuary 31, 2019, respectively and (57.4)% and 35.7% for the three and nine months endedJanuary 31, 2018, respectively. The reduced effective tax rate results primarily from the decrease in the U.S. federal corporate income tax rate from 35% to 21%, effective after December 31, 2017.

(9) Stockholders’ Equity

Stockholders' Equity Activity

During the nine months ended January 31, 2019 and 2018, activity in stockholders’ equity was as follows:

	Nine Months Ended January 31,
	2019		2018
	(In thousands, except for share amounts)
Class A common stock issued from the exercise of stock options	—		9,000
Class A common stock issued from the vesting of restricted stock and as director compensation	14,069		58,507
Class B common stock converted to Class A common stock	200,000		—
Exchangeable shares exchanged for Class A common stock	1,000,000		—
Proceeds from exercise of stock options	$	153	$	95
Stock-based compensation expense	$	733	$	2,523
Dividends declared	$	2,267	$	6,777

In July 2018, the holder of the Company's Class B common stock entered into a stock purchase agreement to sell all of his outstanding shares of the Company's Class A common stock and Class B common stock owned directly and indirectly by him. In connection with the sale, the shares of the Company’s Class B common stock converted into shares of the Company’s Class A common stock on a one-for-one basis and for no additional consideration. As of January 31, 2019, no shares of the Company’s Class B common stock remained outstanding. In addition, the sole holder of the Company’s exchangeable shares elected to exchange all of the exchangeable shares held by it for shares of the Company’s Class A common stock on a one-for-one basis and for no additional consideration. In connection with such exchange, the Company redeemed all ten of its outstanding shares of special voting preferred stock for a price of $1.00 per share. Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation, as approved by stockholders on December 13, 2018, the Company currently has only one class of common stock. As of January 31, 2019, no shares of the Company’s exchangeable shares or special voting preferred stock remained outstanding or authorized to issue.

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Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss at January 31, 2019, April 30, 2018 and January 31, 2018 were as follows.

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Foreign currency adjustment	$	(1,685	)	$	(1,381	)	$	(1,008	)
Unrealized gain on interest rate swap agreement, net of taxes	12			34			18
Forward contracts related to foreign currency exchange rates	(25		)	—			—
Total accumulated other comprehensive loss	$	(1,698	)	$	(1,347	)	$	(990	)

Net Loss per Share

Net income (loss) per share of Class A and Class B common stock is computed using the two-class method. Basic net income (loss) per share is computed by allocating undistributed earnings to common stock and participating securities (exchangeable shares) and using the weighted-average number of common stock outstanding during the period.  Undistributed losses are not allocated to participating securities because they do not meet the required criteria for such allocation. 

Diluted net income (loss) per share is computed using the weighted-average number of common stock and, if dilutive, the potential common stock outstanding during the period. Potential common stock consists of the incremental common stock issuable upon the exercise of stock options and vesting of restricted stock units. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. Additionally, the computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock and exchangeable shares, if dilutive, while the diluted net loss per share of Class B common stock does not assume conversion of those shares.

The rights, including liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, with the exception of the election of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year had been distributed.  Participating securities have dividend rights that are identical to Class A and Class B common stock.

The computation of basic and diluted net loss per share for the three and nine months ended January 31, 2019 and 2018 is as follows:

	Three Months Ended   January 31, 2019					Three Months Ended   January 31, 2018
	Class A			Class B		Class A			Class B
	Common Stock			Common Stock		Common Stock			Common Stock
	(In thousands, except for share and per share amounts)
Basic and diluted net loss per share:
Numerator
Allocation of undistributed losses	$	(310	)	$	—	$	(1,499	)	$	(23	)
Amounts allocated to participating securities:
Exchangeable shares	—			—		108			2
Net loss attributable to common stockholders	$	(310	)	$	—	$	(1,391	)	$	(21	)
Denominator
Weighted-average common stock outstanding	14,043,218			—		12,734,941			200,000
Basic and diluted net loss per share	$	(0.02	)	$	—	$	(0.11	)	$	(0.11	)

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Diluted net income (loss) per share excludes the impact of shares of potential common stock from the exercise of options to purchase 477,094 and 1,147,386 shares for the three months ended January 31, 2019 and 2018, respectively, because the effect would be anti-dilutive.

	Nine Months Ended   January 31, 2019						Nine Months Ended   January 31, 2018
	Class A			Class B			Class A			Class B
	Common Stock			Common Stock			Common Stock			Common Stock
	(In thousands, except for share and per share amounts)
Basic and diluted net loss per share:
Numerator
Allocation of undistributed losses	$	(32,399	)	$	(155	)	$	(24,005	)	$	(378	)
Denominator
Weighted-average common shares outstanding	13,653,184			65,217			12,707,039			200,000
Basic and diluted net loss per share	$	(2.37	)	$	(2.37	)	$	(1.89	)	$	(1.89	)

As a result of the net losses for the periods shown, diluted net loss per share excludes the impact of shares of potential common stock from the exercise of options to purchase 517,852 and 1,301,175 shares for the nine months endedJanuary 31, 2019 and 2018, respectively, because the effect would be anti-dilutive.

(10) Stock Compensation Plans

Stock Options

The Company has an equity and cash incentive plan, for the issuance of up to 2,500,000 shares of Class A common stock in which employees and outside directors are eligible to receive awards. At January 31, 2019, 1,442,211 shares of Class A common stock remain available for grant.

Stock option activity during the nine months ended January 31, 2019 was as follows:

	Number of options		Weighted average exercise price
Balance at beginning of period	472,503		$	17.41
Granted	704,514		10.20
Exercised	(14,069	)	10.90
Expired or forfeited	(366,704	)	17.99
Balance at end of period	796,244		$	10.88

Intrinsic value is defined as the fair value of the stock less the cost to exercise. The total intrinsic value of options exercised during the nine months ended January 31, 2019was less than $0.1 million. The total intrinsic value of stock options outstanding atJanuary 31, 2019was$1.2 million. Stock options vest from the date of grant to five years after the date of grant and expire from four to seven years after the vesting date.

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Nonvested stock options activity during the nine months endedJanuary 31, 2019 was as follows: 

	Nonvested options		Weighted average exercise price
Balance at beginning of period	267,433		$	14.27
Granted	704,514		10.20
Vested	(92,207	)	9.49
Forfeited	(225,226	)	14.22
Balance at end of period	654,514		$	10.35

At January 31, 2019, unrecognized compensation costs related to nonvested stock options were $1.2 million. These costs are expected to be recognized through fiscal 2022.

The following table summarizes information about stock options outstanding and exercisable at January 31, 2019:

	Options Outstanding				Options Exercisable
Range of exercise prices	Number of shares outstanding	Weighted average exercise price		Weighted average remaining contractual life (in years)	Number of options exercisable	Weighted average exercise price
$0.00 - $10.89	572,569	$	9.78	6.2	50,000	$	8.30
$10.90 - $16.38	196,345	12.00		4.3	64,400	11.96
$16.39 - $26.17	18,858	22.57		1.5	18,858	22.57
$26.18 - $33.38	8,472	33.38		0.6	8,472	33.38
	796,244	$	10.88		141,730	$	13.36

Restricted Stock Units

Restricted stock activity during the nine months endedJanuary 31, 2019 was as follows:

	Number of restricted stock units		Weighted average fair value at grant date
Balance at beginning of period	127,030		$	12.48
Granted	147,991		10.40
Vested	(28,029	)	13.47
Forfeited	(77,770	)	12.31
Balance at end of period	169,222		$	10.56

At January 31, 2019, unrecognized compensation costs related to restricted stock units were $1.5 million. These costs are expected to be recognized through fiscal 2022.

(11) Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities subject to fair value measurements on a recurring basis are classified according to a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Valuation methodologies for the fair value hierarchy are as follows:

• Level 1 — Quoted prices for identical assets and liabilities in active markets.

• Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

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• Level 3 — Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company measures or monitors certain of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for those assets and liabilities for which fair value is the primary basis of accounting. Other assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The following tables present, at January 31, 2019, April 30, 2018 and January 31, 2018, for each of the fair value hierarchy levels, the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis (In thousands):

	January 31, 2019
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Interest rate swap agreement	$	16	$	—	$	16	$	—
Total recurring assets	16		—		16		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	12,276		—		—		12,276
Total nonrecurring assets	12,276		—		—		12,276
Total recurring and nonrecurring assets	$	12,292	$	—	$	16	$	12,276
Liabilities:
Recurring liabilities:
Forward contract related to foreign currency exchange rates	$	43	$	—	$	—	$	43
Contingent consideration included in obligations due to former ADs, franchisees and others	1,243		—		—		1,243
Total recurring liabilities	$	1,286	$	—	$	—	$	1,286

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	April 30, 2018
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Cash equivalents	$	12,056	$	12,056	$	—	$	—
Interest rate swap agreement	57		—		57		—
Total recurring assets	12,113		12,056		57		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	15,223		—		—		15,223
Impaired goodwill	109		—		—		109
Impaired customer lists	4		—		—		4
Assets held for sale	8,941		—		—		8,941
Total nonrecurring assets	24,277		—		—		24,277
Total recurring and nonrecurring assets	$	36,390	$	12,056	$	57	$	24,277
Liabilities:
Recurring liabilities:
Contingent consideration included in obligations due to former ADs, franchisees and others	$	1,545	$	—	$	—	$	1,545
Total recurring liabilities	$	1,545	$	—	$	—	$	1,545

	January 31, 2018
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Interest rate swap agreement	$	29	$	—	$	29	$	—
Total recurring assets	29		—		29		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	$	10,954	$	—	$	—	$	10,954
Total nonrecurring assets	10,954		—		—		10,954
Total recurring and nonrecurring assets	$	10,983	$	—	$	29	$	10,954
Liabilities:							9539
Recurring liabilities:
Contingent consideration included in obligations due to former ADs, franchisees and others	3,219		—		—		3,219
Total recurring liabilities	$	3,219	$	—	$	—	$	3,219

The Company’s policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of level 1 or 2 requiring fair value measurements for each of the nine months ended January 31, 2019 and 2018.

The following methods and assumptions are used to estimate the fair value of our financial instruments.

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Cash equivalents: The carrying amounts approximate fair value because of the short maturity of these instruments. Cash equivalent financial instruments consist of money market accounts.

Impaired accounts and notes receivable, net of unrecognized revenue: Accounts and notes receivable are considered to be impaired if the net amounts due exceed the fair value of the underlying franchise or if management considers it probable that all principal and interest will not be collected when contractually due. In establishing the estimated fair value of the underlying franchise, consideration is given to recent sales between franchisees, sales of Company-owned stores, the net fees of open offices, and the number of unopened offices.

Impaired goodwill, reacquired rights, and customer lists: Goodwill, reacquired rights and customer lists associated with a Company-owned office are considered to be impaired if the net carrying amount exceeds the fair value of the underlying office. In establishing the fair value of the underlying office, consideration is given to the related net fees and third-party transactions of franchises and when appropriate a discounted cash flow model.

Assets held for sale: The Company discontinued its use of assets held for sale in the third quarter of fiscal 2019. Prior to the discontinuation, assets held for sale are recorded at the lower of the carrying value or the sales price, less costs to sell, which approximates fair value. The sales price is calculated as a percentage of prior year net fees and marketplace transactions.

Contingent consideration included in obligations due to former ADs, franchisee and others: Obligations due to former ADs and franchisees related to estimated contingent consideration are carried at fair value. The fair value of these obligations was determined using a discounted cash flow model.

Interest rate swap agreement: Value of interest rate swap on variable rate mortgage debt. The fair value of this instrument was determined based on third-party market research.

Other Fair Value Measurements

Additionally, accounting standards require the disclosure of the estimated fair value of financial instruments that are not recorded at fair value. For the financial instruments that the Company does not record at fair value, estimates of fair value are made at a point in time based on relevant market data and information about the financial instrument. No readily available market exists for a significant portion of the Company's financial instruments. Fair value estimates for these instruments are based on current economic conditions, interest rate risk characteristics, and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. In addition, changes in assumptions could significantly affect these fair value estimates. The following methods and assumptions were used by the Company in estimating fair value of these financial instruments.

Notes receivable: The carrying amount approximates fair value because the interest rate charged by the Company on these notes approximates rates currently offered by local lending institutions for loans of similar terms to individuals/entities with comparable credit risk (Level 3).

Long-term obligations: The carrying amount approximates fair value because the interest rate paid has a variable component (Level 2).

(12) Related Party Transactions

The Company considers directors and their affiliated companies, as well as named executive officers and members of their immediate families, to be related parties.

Nicole Ossenfort’s (Chief Executive Officer) franchise agreement

The Company is or was a participant in the following related party transactions with Ms. Ossenfort since the beginning of fiscal 2019:

Ossenfort Franchise. Ms. Ossenfort, together with her husband, Scott Ossenfort (together, with Ms. Ossenfort, the “Ossenforts”), jointly own a Company franchise through JL Enterprises. JL Enterprises borrows operating funds for working capital to operate the franchises each year. During the nine months endedJanuary 31, 2019, JL Enterprises did not borrow operating funds for working capital to operate the franchise. During the nine months endedJanuary 31, 2019, the Company has

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recorded $60,041 of accounts receivable from the Ossenforts for royalties, advertising and financial product charges, of which a balance of $15,621 remained outstanding and payable to the Company as of January 31, 2019.

Shaun York’s (Chief Operating Officer) franchises and AD agreements

The Company is or was a participant in the following related party transactions with Mr. York since the beginning of fiscal 2019:

York Franchises. Mr. York operates eleven Company franchises through Yorkompany LLC, S&P Holding Group LLC, My Business Group LLC and Core Fitness Partners LLC (the “York Franchise Entities”). The York Franchise Entities borrow operating funds from the Company for working capital to operate the franchises each year. During the nine months endedJanuary 31, 2019, the York Franchise Entities borrowed operating funds in the amount of $225,286, of which $217,377 remained outstanding and payable to the Company as of January 31, 2019. In addition, during the nine months endedJanuary 31, 2019, the Company recorded $58,626 of accounts receivable from the York Franchise Entities for royalties, advertising and financial product charges, of which $60,155 remained outstanding and payable to the Company as of January 31, 2019.

York AD. Mr. York has Area Development arrangements with the Company that are conducted through Yorkompany LLC, S&P Holding Group LLC and TNT Florida Investments LLC (the “York AD Entities”). The York AD Entities were acquired by Mr. York through various transactions with the Company and through third party agreements with AD sellers. In connection with those transactions, the York AD Entities financed a total of $4,059,460 through the Company to acquire the Area Development territories and associated rights. The loans are payable by the York AD Entities in annual installments at 12% interest. As of January 31, 2019, the aggregate outstanding principal balance owed by the York AD Entities on the notes was $1,789,040.

As of January 31, 2019, the Company had accounts receivable from the York AD Entities of $0. The York AD Entities earned $102,000 for their portion of franchise fees, royalties and interest during the nine months endedJanuary 31, 2019.

York Debt Guarantees. Mr. York also has entered into multiple guarantee agreements with the Company whereby Mr. York has guaranteed all or a portion of the indebtedness owed by other franchisees and ADs to the Company as related to certain financial transactions for which Mr. York had an interest. The indebtedness owed by these franchisees and ADs as of January 31, 2019 is approximately $3,606,236.

(13) Commitments and Contingencies

In the ordinary course of operations, the Company may become a party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company's business, financial condition, cash flows, or results of operations except as provided below.

Delaware Derivative Litigation

Asbestos Workers’ Philadelphia Pension Fund, derivatively on behalf of Liberty Tax, Inc., v. John Hewitt, Defendant, and Liberty Tax, Inc., Nominal Defendant, Case No. 2017-0883, filed in the Court of Chancery of the State of Delaware on December 12, 2017. The Plaintiff alleges that the Company's former CEO, John T. Hewitt (“Hewitt”), breached his fiduciary duties as an officer based upon certain allegations of misconduct on his part. The Plaintiff also alleges breach of fiduciary duty against Hewitt in his capacity as a director of the Company. The Complaint seeks compensatory damages and attorney’s fees. No claim or relief is asserted against the Company, which is named solely as a Nominal Defendant.

Erie County Employees Retirement System, derivatively on behalf of Liberty Tax, Inc., v. John T. Hewitt, Defendant, and Liberty Tax, Inc., Nominal Defendant, Case No. 2017-0914, brought a second derivative suit filed in the Court of Chancery of the State of Delaware on December 22, 2017. The Plaintiff also alleges that Hewitt breached his fiduciary duties as an officer based upon certain allegations of misconduct on his part. The Plaintiff also alleges breach of fiduciary duty against Hewitt in his capacity as a director of the Company. The Complaint seeks to enjoin Hewitt from managing our business operations, and seeks compensatory damages and attorney’s fees.

On December 27, 2017, the two above-referenced shareholder matters were consolidated into the case with the caption In Re: Liberty Tax, Inc. Stockholder Litigation, C.A. No. 2017-0883(the "Delaware Action"). On April 17, 2018, the Plaintiffs filed an amended complaint (the "Amended Complaint"). The Amended Complaint added former directors, Gordon D’Angelo, Ellen McDowell, Nicole Ossenfort, and John Seal, with Hewitt as individual defendants (the “Individual Defendants”) and

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asserted class action allegations. The Plaintiffs seek (i) a declaration that the Individual Defendants have breached the Company's Nominating Committee Charter (now the Nominating & Corporate Governance Committee Charter); (ii) a declaration that the Individual Defendants have breached their fiduciary duties; (iii) an award to the Plaintiffs and the Class in the amount of damages sustained as a result of the Individual Defendants' breaches; (iv) certification of the action as a class action; (v) an award to the Company in the amount of damages sustained as a result of the Individual Defendants’ breaches of their fiduciary duties; (vi) a grant of further appropriate equitable relief to remedy the Individual Defendants’ breaches, including injunctive relief; (vii) an award to the Plaintiffs of the costs and disbursements of this action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs and expenses; and (viii) such further relief as the Court deems just and proper. The Company has answered the Amended Complaint and discovery is underway. The Individual Directors have filed a notice of motion to dismiss. No briefing schedule has been set on the motion. A mediation took place on November 12, 2018 but did not result in a resolution. A scheduling order has been entered which currently schedules trial in this matter to begin on March 18, 2019.

RSL Senior Partners LLC, derivatively and on behalf of Liberty Tax, Inc. v. Edward L. Brunot, John T. Hewitt, Kathleen E. Donovan, Gordon D’Angelo, John Garel, Thomas Herskovits, Robert M. Howard, Ross N. Longfield. Steven Ibbotson, Ellen M. McDowell, Nicole Ossenfort, George Robson and John Seal and Liberty Tax. Inc. (Nominal Defendant),Case No. 18 cv 127, filed on March 7, 2018 in the United States District Court for the Eastern District of Virginia (the “Virginia Action”). This purported shareholder derivative action was filed on behalf of the Company seeking to address the alleged wrongs of the Company’s directors and officers. The Complaint, which contains allegations that are substantially similar to the allegations in the Delaware Action, claims that certain conduct created an inappropriate tone at the top, resulting in the loss of key executives, employees, directors and otherwise harmed the Company. The Complaint asserts claims under Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Section 10(b) and Rule 10b-5 and Section 20(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The Complaint seeks the following relief: (a) declaring that the Plaintiff may maintain this action on behalf of the Company, and that the Plaintiff is an adequate representative of the Company; (b) declaring that the Individual Defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company; (c) determining and awarding to the Company the damages sustained by it as a result of the violations set forth above from each of the Individual Defendants, jointly and severally, together with pre-judgment and post-judgment interest thereon;  (d) directing the Company and the Individual Defendants to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect the Company and its shareholders from a repeat of the damaging events (e) awarding the Company restitution from Individual Defendants; and (f) awarding the Plaintiff the costs and disbursements of the action, including reasonable attorneys’ and experts’ fees, costs, and expenses

No claim or relief is asserted against the Company, which is named solely as a Nominal Defendant.

On July 30, 2018, various motions were filed: (i) Defendants Hewitt, McDowell, Ossenfort and Seal collectively moved to dismiss the Complaint; (ii) Defendants Garel, Herskovits, Howard, Ibbotson, Longfield, and Robson collectively moved to dismiss the Complaint; (iii) Defendants Brunot and Donovan collectively moved to dismiss the Complaint; (iv) Company moved to stay the action pending resolution of parallel state (Delaware) and/or federal (New York) proceedings (in which the Individual Defendants joined). Briefing on the motions is complete.

The Delaware and Virginia Actions are in the process of being settled. On January 25, 2019, the Company along with the named Individual Defendants entered into a Memorandum of Understanding (the “MOU”) with the Plaintiffs, regarding settlement of the Delaware Action which will result in certain enhancements to the Company’s code of conduct and training of employees, and disclosure of Nasdaq’s appeal ruling delisting the Company’s Class A common stock from Nasdaq which is furnished as Exhibit 99.1 herein. The Plaintiffs have agreed that the settlement, which is subject to the execution of a definitive settlement agreement and court approval, will include a dismissal of the lawsuits with prejudice and a release of all claims against the Company and the Individual Defendants asserted in the Delaware Action and the Virginia Action. If the parties to the MOU execute a stipulation of settlement, a hearing will be held at which the Delaware Court of Chancery will consider the fairness, reasonableness and adequacy of the settlement. In connection with the settlement, the Company will negotiate in good faith the amount of reasonable legal fees and expenses of the Plaintiffs’ counsel which will ultimately be paid by the Company and/or its insurance carrier. No agreement has been reached on the amount of the fees and expenses, which is subject to court approval.

The parties to the Virginia Action have also agreed that all claims in the Virginia Action have been settled and that the parties will seek to stay the Virginia Action pending the settlement proceedings in Delaware. The parties to the Virginia Action have agreed to dismiss the Virginia Action with prejudice within five business days of the settlement of the Delaware Action becoming final. The Company has agreed that it (and/or its insurance carrier) will pay $295,000 in fees and expenses to

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Plaintiffs' counsel in the Virginia Action in connection with settlement of the Virginia Action. The parties to the Virginia Action provided a joint status update to the Virginia court on February 27, 2019.

Settlement of the Virginia and Delaware Actions are expressly not to be construed as an admission of wrongdoing or liability by any defendant. The defendants have vigorously denied, and continue to vigorously deny, any wrongdoing or liability with respect to the facts and claims asserted, or which could have been asserted, in the Delaware and Virginia Actions , including that they have committed any violations of law or breach of fiduciary duty, aided and abetted any violations of law or breaches of fiduciary duty, acted improperly in any way or have any liability or owe any damages of any kind to the Plaintiffs or to the purported Class.  Nothing in this report shall be deemed an admission of the legal necessity or materiality under the federal securities laws, state fiduciary law or any other law, statute, rule or regulation of any of the disclosures set forth herein.

Eastern District of New York Securities Litigation

Rose Mauro, individually and on behalf of all others similarly situated v. Liberty Tax, Inc., Edward L. Brunot, John T. Hewitt, and Kathleen E. Donovan, filed in the United States District Court for the Eastern District of New York on January 12, 2018, Case No. 18 CV 245. The Plaintiff filed a securities class action asserting violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and a second count for violations of Section 20(a) of the Exchange Act against the individual defendants. According to the complaint, throughout the class period, the Company allegedly issued materially false and misleading statements and/or failed to disclose that: (1) Hewitt created an inappropriate tone at the top; (2) the inappropriate tone at the top led to ineffective entity level controls over the organization; and (3) as a result, defendants’ statements about the operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.

Patrick Beland, individually and on behalf of all others similarly situated vs. Liberty Tax, Inc., Edward L. Brunot, John T. Hewitt, and Kathleen E. Donovan, filed in the United States District Court for the Eastern District of New York on December 15, 2017, case number 17 CV 7327. The Plaintiff filed a securities class action asserting violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and a second count for violations of Section 20(a) of the Exchange Act against the individual defendants. According to the complaint, throughout the class period, the Company allegedly issued materially false and misleading statements and/or failed to disclose that: (1) Hewitt created an inappropriate tone at the top; (2) the inappropriate tone at the top led to ineffective entity level controls over the organization; and (3) as a result, defendants’ statements about the business, operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.

These actions were consolidated with the caption In Re Liberty Tax, Inc. Securities Litigation, Case No. 27 CV 07327 and IBEW Local 98 Pension Fund was appointed the Lead Plaintiff (the "Lead Plaintiff"). On June 12, 2018, the Lead Plaintiff filed its Consolidated Amended Class Action Complaint, which removed Brunot as a defendant, and added additional securities claim based on Section 14(a) of the Exchange Act and Rules 14a-3 and 14a-9. The Consolidated Amended Class Action Complaint, among other things, asserts that the Company’s SEC filings over a multi-year period failed to disclose the alleged misconduct of the individual defendants and that disclosure of the alleged misconduct caused the Company’s stock price to drop and, thereby harm the purported class of shareholders. The Class Period is alleged to be October 1, 2013 through February 23, 2018. The defendants filed a joint motion to dismiss the Consolidated Amended Class Action Complaint on September 17, 2018. The Lead Plaintiff served their opposition on November 1, 2018 and the defendants filed their reply brief on November 27, 2018. A mediation took place on November 12, 2018 but did not result in a resolution. The motion to dismiss is still pending before the Court.

Franchise Litigation

JTH Tax, Inc. and SiempreTax LLC v. Gregory Aime, Aime Consulting, LLC, Aime Consulting, Inc. and Wolf Ventures, Inc. The Company filed suit in the United States District Court for the Eastern District of Virginia against the defendants, former Company franchisees, on June 9, 2016, as amended on June 22, 2016, claiming the defendants breached the purchase and sale agreement (the “PSA”) entered between the parties on January 21, 2016 and that the defendants had failed to comply with the post termination obligations of the franchise agreements (together with the PSA, the “Aime Agreements”). The Company sought damages in an amount equal to three times the defendants’ earnings and profits, as well as injunctive relief to enforce the defendants to comply with the post termination obligations of the Aime Agreements, to be determined by the trier of fact. The Company specifically sought, in part, to enjoin the defendants from continued operation of a tax preparation business using the Company’s protected trademarks, enforcement of the non-compete provision of the Aime Agreements, and an order that the defendants assign all of the leases related to the franchised businesses to the Company. On July 1, 2016, the Magistrate Judge issued a report and recommendation finding a likelihood of success on the merits and recommending entry of the requested temporary restraining order (the “TRO”) in favor of the Company, which was adopted in part on August 3, 2016.

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On September 9, 2016, the defendants filed an answer and counterclaim against the Company, alleging breach of the PSA, breach of the implied covenant of good faith and fair dealing and fraud and seeking approximately $2.4 million in damages, plus future loss profits, punitive damages and other expenses.  After a three-day bench trial, on January 13, 2017, the court vacated the TRO, finding in favor of the defendants.  On February 15, 2017, the court issued its written opinion and order granting the defendants’ breach of contract and breach of the implied covenant of good faith and fair dealing claims, denying the Company’s claims against the defendants and finding certain post termination obligations to be unenforceable. Judgment was entered in favor of the defendants for approximately $2.7 million. The Company accrued $2.7 million as of the fourth quarter of fiscal 2017 in connection with the judgment, which is recorded in "Accounts payable and accrued expense" in the accompanying consolidated balance sheets. The Company has filed an appeal of the judgment with the Fourth Circuit Court of Appeals.

On August 8, 2018, the Fourth Circuit Court of Appeals issued an unpublished opinion affirming in part, vacating in part, and remanding to the District Court with instructions via the opinion. The Court of Appeals affirmed the District Courts finding that the Company breached the PSA first, however, the Court of Appeals concluded the District Court erred as a matter of law when it determined that the defendants were entitled to lost profits based on the purported extension of the PSA buyback deadline. The Court of Appeals held the alleged extension was not supported by independent consideration and thus not enforceable. It remanded the case for the District Court to recalculate damages consistent with said opinion.

On August 22, 2018, the defendants filed a petition for rehearing of the Fourth Circuit's decision. On September 5, 2018 the Fourth Circuit issued an order denying the petition for rehearing. On September 13, 2018 the Fourth Circuit issued a mandate that the judgment of the Fourth Circuit entered August 8, 2018 takes effect as of the same date of said filing. The matter has now officially been sent back to the District Court to recalculate damages consistent with the Fourth Circuit’s decision. The District Court entered an order on October 18, 2018 ordering Aime to provide the Court with a brief on damages within ten days of the entry of the Order and the Company has ten days to respond after the filing of the defendants' brief. The parties have filed their respective briefs and the Court held a hearing on damages on November 28, 2018. On November 29, 2018, the Court issued an order awarding Aime approximately $0.3 million in damages.

Before the District Court on remand, the parties briefed the question of what damages remained in place after the Court of Appeals’ ruling. On November 30, 2018, the District Court ruled that the Company remained liable to Aime for $0.3 million in damages. The court also ordered return of the Company's appeal bond. As a result of this ruling, the Company reduced the liability from $2.7 million to $0.3 million in the third quarter of fiscal 2019.

Aime filed a petition for certiorari in the United States Supreme Court on December 4, 2018. On January 7, 2019 the Supreme Court denied certiorari.

On December 28, 2018 Aime filed a motion for reconsideration of the District Court’s November 30, 2018 Order. On January 11, 2019 the Company filed its opposition to Aime’s motion for reconsideration. On January 17, 2019 Aime filed his reply memorandum in further support of his motion for reconsideration. The motion for reconsideration is fully briefed and pending before the court. The ultimate outcome of this action and the timing of such outcome is uncertain and there can be no assurance that the Company will benefit financially from such litigation.

Class Action Litigation

Rene Labrado v. JTH Tax, Inc. (Case BC 715076). On July 3, 2018, a class action complaint was filed in the Superior Court of California, County of Los Angeles by a former employee for herself and on behalf of all other “similarly situated” persons. The Complaint alleges, among other things, that the Company allegedly violated various provisions of the California Labor Code, including: unpaid overtime, unpaid meal period premiums, unpaid rest premiums, unpaid minimum wages, final wages not timely paid, wages not timely paid, non-compliant wage statements, failure to keep pay records, unreimbursed business expenses and violation of California Business and Profession Code Section 17200. The Complaint seeks actual, consequential and incidental losses and damages, injunctive relief and other damages. The Company highly disputes the allegations set forth in the Complaint and plans on filing a dispositive motion. The Company intends to defend the case vigorously.

Other Matters

From time to time, certain of our franchisees and Company-owned offices are the subject of IRS investigations to review their tax return preparation activities, and in certain cases the Department of Justice has sought injunctions and other remedies with respect to some of our former franchisees or area developers. In addition to those activities, the IRS has been conducting an investigation of our policies, practices and procedures in connection with such tax return preparation activities.

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We are cooperating fully with the government in connection with these matters, including by providing documents and other information. The Company is unable to predict what action, if any, might be taken in the future as a result of these matters or the impact, if any, of the cost of responding to the government or any potential remedies as a result of these matters could have on the Company. It is possible, however, that any such remedies could have a material adverse impact on the Company's consolidated results of operations, financial position, or cash flows.

The Company is also party to claims and lawsuits that are considered to be ordinary, routine litigation incidental to the business, including claims and lawsuits concerning the preparation of customers' income tax returns, the fees charged to customers for various products and services, relationships with franchisees, intellectual property disputes, employment matters, and contract disputes. Although the Company cannot provide assurance that it will ultimately prevail in each instance, it believes the amount, if any, it will be required to pay in the discharge of liabilities or settlements in these claims will not have a material adverse impact on its consolidated results of operations, financial position, or cash flows.

(14) Subsequent Events

None.

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ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements concerning our business, operations, financial performance, and condition, as well as our plans, objectives, and expectations for our business operations and financial performance and condition. Any statements contained herein that are not of historical facts may be deemed to be forward-looking statements. You can identify these statements by words such as “aim,” “anticipate,” “assume,” “believe,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements are based on current expectations, estimates, forecasts, projections about our business and the industry in which we operate, and our management’s beliefs and assumptions. They are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this quarterly report may turn out to be inaccurate or could cause our actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements. Factors that may cause such differences include, but are not limited to, the risks described under “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2018 and other filings with the U.S. Securities and Exchange Commission ("SEC"), including:

• our inability to grow on a sustainable basis;

• the seasonality of our business;

• departures of key executives or directors;

• our ability to attract additional talent to our senior management team;

• our delisting determination by Nasdaq and our ability to regain listing;

• our ability to maintain an active trading market for our common stock on the Over-The-Counter Market;

• the review and consideration of any unsolicited proposal received by the Company, the review and evaluation of strategic alternatives, and the outcome of such review and evaluation;

• our inability to secure reliable sources of the tax settlement products we make available to our customers;

• government regulation and oversight, including the regulation of tax preparers or settlement products such as refund transfers and loan settlement products;

• government initiatives that simplify tax return preparation, improve the timing and efficiency of processing tax returns, limit payments to tax preparers, or decrease the number of tax returns filed or the size of the refunds;

• government initiatives to pre-populate income tax returns;

• the effect of regulation of the products and services that we offer, including changes in laws and regulations;

• the possible characterization of refund transfers as a form of loan or extension of credit;

• changes in the tax settlement products offered to our customers that make our services less attractive to customers or more costly to us;

• our ability to maintain relationships with our tax settlement product service providers;

• any potential non-compliance, fraud or other misconduct by our franchisees or employees;

• our ability and the ability of our franchisees to comply with legal and regulatory requirements;

• failures by our franchisees and their employees to comply with their contractual obligations to us and with laws and regulations, to the extent these failures affect our reputation or subject us to legal risk;

• the ability of our franchisees to open new territories and operate them successfully;

• the ability of our franchisees to generate sufficient revenue to repay their indebtedness to us;

• our ability to manage Company-owned offices;

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• our exposure to litigation;

• our ability and our franchisees' ability to protect customers' personal information, including from a cyber-security incident;

• the impact of identity-theft concerns on customer attitudes toward our services;

• our ability to access the credit markets and satisfy our covenants to lenders;

• challenges in deploying accurate tax software in a timely way each tax season;

• the impact of the Tax Cuts and Job Act (the “Tax Act”), including, but not limited to, the effect of the lower corporate tax rate, including on the valuation of our tax assets and liabilities;

• any future refinements to our preliminary analysis of the impact of the Tax Act;

• changes in the effect of the Tax Act due to issuance of interpretive regulatory guidance or enactment of corrective or supplement legislation;

• delays in the commencement of the tax season attributable to Congressional action affecting tax matters and the resulting inability of federal and state tax agencies to accept tax returns on a timely basis, or other changes that have the effect of delaying the tax refund cycle;

• competition in the tax preparation market;

• the effect of federal and state legislation that affects the demand for paid tax preparation, such as the Affordable Care Act and potential immigration reform;

• our reliance on technology systems and electronic communications;

• our ability to effectively deploy software in a timely manner and with all the features our customers require;

• the impact of any acquisitions or dispositions, including our ability to integrate acquisitions and capitalize on their anticipated synergies; and

• other factors, including the risk factors discussed in our latest annual report filed with the SEC.

Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. These forward-looking statements speak only as of the date of this quarterly report. Unless required by law, we do not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. A potential investor or other vendor should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this quarterly report.

Overview

We are one of the largest providers of tax preparation services in the U.S. and Canada, and during the current tax season, we operated 3,108 tax offices. Our tax preparation services and related tax settlement products are offered primarily through franchised locations, although we operate a limited number of Company-owned offices each tax season. See Note 1 "Description of Business and Summary of Significant Accounting Policies" in the notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2018, for details of the U.S. office activity and the number of Canadian and Company-owned offices for the years ended April 30, 2018, 2017 and 2016.

Our revenue primarily consists of the following components:

• Franchise Fees: Our standard franchise fee per territory is $40,000, and we offer our franchisees flexible structures and financing options for franchise fees. Franchise fee revenue is recognized when our obligations to prepare the franchisee for operation are substantially complete.

• Area Developer ("AD") Fees: Our fees for AD areas vary based on our assessment of the revenue potential of each AD area and also depend on the performance of any existing franchisees within the AD area being sold. Our ADs generally receive 50% of franchise fees, royalties, and a portion of the interest income derived from territories located

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in their area. AD fees received are recognized as revenue on a straight-line basis over the initial contract term of each AD agreement.

• Royalties: Our franchise agreements require franchisees to pay us a base royalty typically equal to 14% of the franchisees' tax preparation revenue, generally subject to certain specified minimums.

• Advertising Fees: Our franchise agreements require all franchisees to pay us an advertising fee of 5% of the franchisees' tax preparation revenue, which we use primarily to fund collective advertising efforts.

• Financial Products: We offer two types of tax settlement financial products: refund transfer products, which involve providing a means by which a customer may receive his or her refund more quickly and conveniently, and refund-based loans. We earn fees from the arranging of the sale of these financial products.

• Interest Income: We earn interest income from our franchisees and ADs related to both indebtedness for the unpaid portions of their franchise and AD fees, and for other loans we extend to our franchisees related to the operation of their territories. We also earn interest on our accounts receivable.

• Assisted Tax Preparation Fees: We earn tax preparation fees, net of discounts, directly from the operation of Company-owned offices in the U.S. and Canada.

• Electronic Filing Fees: We earn fees for the electronic filing of federal returns prepared in U.S. franchisee owned offices. Each location determines if they want to charge an electronic filing fee.

We operate Company-owned offices, all of which are included in the accompanying condensed consolidated financial statements. If these offices remain unsold at the start of a tax season we will operate them for the tax season with the intent of selling them to qualified franchisees the next year, and, as a result, the number of Company-owned offices will vary from year to year. Going forward, the number of Company-owned offices may increase if the Company reacquires more offices from existing franchisees and does not find a suitable buyer to take over the office. During the nine months ended January 31, 2019, the Company closed Company-owned offices as part of its restructuring initiatives. The Company incurred approximately $9.3 million of expenses related to restructuring initiatives during the nine months ended January 31, 2019.

For purposes of this section and throughout this quarterly report, all references to “fiscal 2019” and “fiscal 2018” refer to our fiscal years ending April 30, 2019 and ended April 30, 2018, respectively, and corresponding references to fiscal quarters are references to quarters within those fiscal years. For purposes of this section and throughout this quarterly report, all references to “year” or “years” are the respective fiscal year or years ended April 30 unless otherwise noted in this quarterly report, and all references to “tax season” refer to the period between January 1 and April 30 of the referenced year.

Results of Operations

The table below shows results of operations for the three and nine months ended January 31, 2019 and 2018.

	Three Months Ended January 31,											Nine Months Ended January 31,
							Change											Change
	2019			2018			$			%		2019			2018			$			%
(dollars in thousands)
Total revenues	$	32,884		$	48,244		$	(15,360	)	(32	)%	$	46,824		$	64,202		$	(17,378	)	(27	)%
Loss from operations	1,507			(195		)	1,702			(873	)%	(45,206		)	(36,443		)	(8,763		)	24	%
Net loss	(310		)	(1,522		)	1,212			(80	)%	(32,554		)	(24,383		)	(8,171		)	34	%

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Revenues. The table below sets forth the components and changes in our revenues for the three and nine months ended January 31, 2019 and 2018.

	Three Months Ended January 31,									Nine Months Ended January 31,
					Change									Change
	2019		2018		$			%		2019		2018		$			%
(dollars in thousands)
Franchise fees	$	596	$	90	$	506		562	%	$	1,602	$	354	$	1,248		353	%
Area Developer fees	1,018		507		511			101	%	2,665		2,209		456			21	%
Royalties and advertising fees	16,060		17,610		(1,550		)	(9	)%	19,095		20,598		(1,503		)	(7	)%
Financial products	9,882		18,106		(8,224		)	(45	)%	10,938		19,324		(8,386		)	(43	)%
Interest income	2,049		2,612		(563		)	(22	)%	5,253		7,009		(1,756		)	(25	)%
Assisted tax preparation fees, net of discounts	2,719		5,225		(2,506		)	(48	)%	5,620		8,413		(2,793		)	(33	)%
Electronic filing fees	428		2,872		(2,444		)	(85	)%	486		2,872		(2,386		)	(83	)%
Other revenues	132		1,222		(1,090		)	(89	)%	1,165		3,423		(2,258		)	(66	)%
Total revenues	$	32,884	$	48,244	$	(15,360	)	(32	)%	$	46,824	$	64,202	$	(17,378	)	(27	)%

For the three months ended January 31, 2019, total revenues decreased $15.4 million, or 32%, to $32.9 million compared to $48.2 million in the same period last year. This decrease was primarily due to the following:

• a decrease of $8.2 million in financial products related to bank fees reported as a reduction of income in fiscal 2019 and as operating expenses in fiscal 2018 due to contractual changes and the implementation of ASC 606 and a reduction in the number of tax returns filed by our franchisees;

• a $2.5 million decrease in assisted tax preparation fees due to a decrease in the number of U.S. Company-owned stores and the divestiture of our year-round accounting offices;

• a $2.4 million reduction in electronic filing fees primarily due to the recording of franchisee rebates as a deduction of revenue instead of expense due to the implementation of ASC 606;

• a reduction of $1.6 million in royalties and advertising fees due to a reduction in the number of tax returns filed by our franchisees;

• a $1.1 million decrease in other revenues primarily due to the divestiture of our year-round accounting offices; and

• an increase of $1.0 million in franchise and AD fees primarily due to the implementation of ASC 606.

For the nine months endedJanuary 31, 2019, total revenues decreased $17.4 million, or 27%, to $46.8 million compared to $64.2 million in the same period last year. This decrease was primarily due to the following:

• a decrease of $8.4 million in financial products related to bank fees reported as a reduction of income in fiscal 2019 and as operating expenses in fiscal 2018 due to contractual changes and the implementation of ASC 606 and a reduction in the number of tax returns filed by our franchisees;

• a $2.8 million decrease in assisted tax preparation fees due to a decrease in the number of U.S. Company-owned stores and the divestiture of our year-round accounting offices;

• a $2.4 million reduction in electronic filing fees primarily due to the recording of franchisee rebates as a deduction of revenue instead of expense due to the implementation of ASC 606;

• a decrease of $2.3 million in other revenues due to the divestiture of our year-round accounting offices and related to gains recorded in fiscal 2018 on AD and franchisee acquisitions where the consideration was less than the value of the acquired asset;

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• a decrease of $1.8 million in interest income related to a reduction in working capital loans to franchisees as well as a decrease in the loans due from reacquired ADs and franchisees;

• a reduction of $1.5 million in royalties and advertising fees due to a reduction in the number of tax returns filed by our franchisees; and

• an increase of $1.7 million in franchise and AD fees primarily due to the implementation of ASC 606.

Operating expenses.    The table below details the amounts and changes in our operating expenses for the three and nine months ended January 31, 2019 and 2018.

	Three Months Ended January 31,										Nine Months Ended January 31,
						Change									Change
	2019		2018			$			%		2019		2018		$			%
(dollars in thousands)
Employee compensation and benefits	$	9,795	$	11,574		$	(1,779	)	(15	)%	$	29,770	$	32,277	$	(2,507	)	(8	)%
Selling, general, and administrative expenses	6,294		22,366			(16,072		)	(72	)%	27,649		41,120		(13,471		)	(33	)%
Area Developer expense	4,384		4,890			(506		)	(10	)%	5,089		5,658		(569		)	(10	)%
Advertising expense	6,913		5,623			1,290			23	%	9,827		9,702		125			1	%
Depreciation, amortization, and impairment charges	3,991		3,995			(4		)	—	%	10,350		8,526		1,824			21	%
Restructuring expense	—		(9		)	9			(100	)%	9,345		3,362		5,983			178	%
Total operating expenses	$	31,377	$	48,439		$	(17,062	)	(35	)%	$	92,030	$	100,645	$	(8,615	)	(9	)%

For the three months ended January 31, 2019, total operating expenses were $31.4 million compared to $48.4 million in the same period last year, representing a decrease of $17.1 million, or 35%. The decrease was primarily driven by the net of the following:

• a $1.3 million increase in advertising expenses mainly due to the timing and categorizing of spending;

• a $1.8 million decrease in employee compensation and benefits primarily due to lower severance costs compared to fiscal 2018 and a decrease in the number of U.S. Company-owned stores and the divestiture of our year-round accounting offices; and

• a $16.1 million decrease in selling, general and administrative expenses primarily related to bank fee and rebate expenses reported as a reduction of income in fiscal 2019 and as operating expenses in fiscal 2018 due to contractual changes and the implementation of ASC 606, cost reductions related to the decrease in the number of U.S. Company-owned stores and the divestiture of our year-round accounting offices and reduced bad debt expense resulting from fewer franchisee terminations, partially offset by increased expenses due to audit and legal costs related to fiscal 2018 and fiscal 2019 SEC filings.

For the nine months endedJanuary 31, 2019, total operating expenses were $92.0 million compared to $100.6 million in the same period last year, representing a decrease of $8.6 million, or 9%. The decrease was primarily driven by the net of the following:

• a $6.0 million increase in restructuring expenses related to Company-store exit costs partially offset by a contract termination recorded in fiscal 2018;

• a $1.8 million increase in depreciation, amortization, and impairment expense mainly due to assets put into service;

• a $2.5 million decrease in employee compensation and benefits primarily due to lower severance costs compared to fiscal 2018 and a decrease in the number of U.S. Company-owned stores and the divestiture of our year-round accounting offices; and

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• a $13.5 million decrease in selling, general and administrative expenses primarily related to bank fee and rebate expenses reported as a reduction of income in fiscal 2019 and as operating expenses in fiscal 2018 due to contractual changes and the implementation of ASC 606, cost reductions related to the decrease in the number of U.S. Company-owned stores and the divestiture of our year-round accounting offices and reduced bad debt expense resulting from fewer franchisee terminations, partially offset by increased expenses due to audit and legal costs related to fiscal 2018 and fiscal 2019 SEC filings.

Income tax benefit. We recorded income tax benefits (expense) with effective rates of 182.0% and 31.3% during the three and nine months ended January 31, 2019, respectively and (57.4%) and 35.7% for the three and nine months endedJanuary 31, 2018, respectively. Due to the seasonal nature of our business, we expect any losses that we incur through the first eight months of each fiscal year will be more than offset by the results of the last four months of the fiscal year.

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Liquidity and Capital Resources

Overview of factors affecting our liquidity

Seasonality of cash flow. Our tax return preparation business is seasonal, and most of our revenues and cash flow are generated during the period from late January through April 30. Following each tax season, from May 1 through late January of the following year, we rely significantly on excess operating cash flow from the previous season, from cash payments made by franchisees and ADs who purchase new territories and areas prior to the next tax season, and on the use of our credit facility to fund our operating expenses and invest in the future growth of our business. Our business has historically generated a strong cash flow from operations on an annual basis. We devote a significant portion of our cash resources during the off season to finance the working capital needs of our franchisees, and expenditures for property, equipment and software.

Credit facility. Our amended credit facility consists of a $21.2 million term loan and a revolving credit facility that currently allows borrowing of up to $170.0 million with an accordion feature that permits the Company to request an increase in availability of up to an additional $50.0 million.

Under our credit facility, we are subject to a number of covenants that could potentially restrict how we carry out our business, or that require us to meet certain periodic tests in the form of financial covenants. The restrictions we consider to be material to our ongoing business include the following:

• We must satisfy a "leverage ratio" test that is based on our outstanding indebtedness at the end of each fiscal quarter.

• We must satisfy a "fixed charge coverage ratio" test at the end of each fiscal quarter.

• We must reduce the outstanding balance under our revolving loan to zero for a period of at least 45 consecutive days each fiscal year.

• We must also maintain a minimum net worth requirement, measured at April 30 of each year.

Our credit facility also contains customary affirmative and negative covenants, including limitations on indebtedness, limitations on liens and negative pledges, limitations on investments, loans and acquisitions, limitations on mergers, consolidations, liquidations and dissolutions, limitations on sales of assets, limitations on certain restricted payments and limitations on transactions with affiliates, among others.

We were in compliance with our financial covenants as of January 31, 2019.

Franchisee lending and potential exposure to credit loss.  A substantial portion of our cash flow during the year is utilized to provide funding to our franchisees. At January 31, 2019, our total balance of loans to franchisees and ADs for working capital and equipment loans, representing cash amounts we had advanced to the franchisees and ADs, was $56.1 million. In addition, at that date, our franchisees and ADs together owed us an additional $90.5 million, net of unrecognized revenue of $8.1 million, for amounts representing the unpaid purchase price for franchise territories or areas comprising clusters of territories and other amounts owed to us for royalties and other amounts for which our franchisees and ADs had outstanding payment obligations. The following table provides a breakdown of our potential exposure to credit loss:

(In millions)	At January 31, 2019
Loans to franchisees and ADs for working capital and equipment loans			$	56.1
Unpaid purchase price of franchise territories, royalties and other amounts, gross	98.6
Unrecognized revenue	(8.1	)
Unpaid purchase price of franchise territories, royalties and other amounts, net			90.5
Book balance of amounts due			146.6
AD share of royalties and franchise fees			(9.8		)
Exposure to potential credit loss			$	136.8

Our franchisees make electronic return filings for their customers utilizing our systems. Our franchise agreements allow us to obtain repayment of amounts due to us from our franchisees through an electronic fee intercept program before our franchisees receive the net proceeds from tax preparation and other fees they have charged to their customers on tax returns associated with tax settlement products. Therefore, we are able to minimize the nonpayment risk associated with amounts

40

outstanding from franchisees by obtaining direct electronic payment in the ordinary course throughout the tax season. Our credit risk associated with amounts outstanding to ADs is also mitigated by our electronic fee intercept program, which enables us to retain repayments of amounts that would otherwise flow through to ADs as their share of franchise fee and royalty payments, to the extent of an AD's indebtedness to us.

 The unpaid amounts owed to us from our ADs and franchisees are collateralized by the underlying franchise or area and, when the franchise or area owner is an entity, are generally guaranteed by the related owners of the respective entity. Accordingly, to the extent a franchisee or AD does not satisfy its payment obligations to us, we may repossess the underlying franchise or area in order to resell it in the future. At January 31, 2019, we had an investment in impaired accounts and notes receivable and related interest receivable of approximately $21.7 million. We consider accounts and notes receivable to be impaired if the amounts due exceed the fair value of the underlying franchise and estimate an allowance for doubtful accounts based on that excess. Amounts due include the recorded value of the accounts and notes receivable reduced by the allowance for uncollected interest, amounts due to ADs for their portion of franchisee receivables, any related unrecognized revenue and amounts owed to the franchisee or AD by us. In establishing the fair value of the underlying franchise, we consider net fees of open territories and the number of unopened territories. At January 31, 2019, we have recorded an allowance for doubtful accounts for impaired accounts and notes receivable of $10.3 million. There were no significant concentrations of credit risk with any individual franchisee or AD as of January 31, 2019. We believe our allowance for doubtful accounts as of January 31, 2019 is adequate for our existing loss exposure. We closely monitor the performance of our franchisees and ADs and will adjust our allowances as appropriate if we determine the existing allowances are inadequate to cover estimated losses.

Dividends. Beginning in April 2015 through July 2018, we announced a $0.16 per share quarterly cash dividend. We have not declared a dividend since July 2018 and may not continue to pay cash dividends in the future. The payment of dividends will be at the discretion of our Board of Directors and will depend, among other things, on our earnings, capital requirements, and financial condition. Our ability to pay dividends will also be subject to compliance with financial covenants that are contained in our credit facility and may be restricted by any future indebtedness that we incur or issuances of preferred stock. In addition, applicable law requires our Board of Directors to determine that we have adequate surplus prior to the declaration of dividends. We cannot provide an assurance that we will pay dividends at any specific level or at all.

Sources and uses of cash

Operating activities. In the nine months endedJanuary 31, 2019, we used $0.5 million more cash in our operating activities compared to the same period in fiscal 2018. The cash used in operating activities is relatively flat due to a larger net loss partially offset by higher non-cash expenses.

Investing activities. In the nine months endedJanuary 31, 2019, we utilized $7.7 million less cash for investing activities compared to the same period in fiscal 2018. This decrease is largely due to a $3.5 million reduction in net cash used for the issuance of operating loans to franchisees and ADs, net of repayments, $2.2 million less in the purchases of AD rights, Company-owned offices and acquired customer lists, and $1.2 million less in the purchases of property, equipment and software.

Financing activities. In the nine months endedJanuary 31, 2019, cash provided by financing activities decreased $8.5 million compared to the same period in fiscal 2018. This decrease was driven by a reduction of $12.3 million in net borrowings under our revolving credit facility partially offset by a $4.4 million decrease in dividends paid compared to the same period in fiscal 2018.

Future cash needs and capital requirements

Operating cash flow needs. We believe our credit facility entered into on April 30, 2012, as amended, will be sufficient to support our cash flow needs for the current fiscal year. At January 31, 2019, using the leverage ratio applicable under our loan covenants at the end of the quarter, our maximum unused borrowing capacity was $46.4 million. We are currently in negotiations on a new credit facility to replace our existing credit facility which matures on April 30, 2019.

Our credit facility also contains a requirement that we reduce the balance of our revolving loan to zero for a period of at least 45 consecutive days each fiscal year; however, because our term loan will remain outstanding during that 45 day period, and given our historic cash flow experience at the end of and beginning of each fiscal year, we do not anticipate that the unavailability of our revolving loan during that 45 day period each fiscal year will adversely affect our cash flow. As of June 14, 2018, we had maintained a zero balance on our revolver for the required 45 days and thus have already met the requirement for fiscal 2019.

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Several factors could affect our cash flow in future periods, including the following:

• the delay by the IRS to issue refunds to taxpayers who claim the Earned Income Tax Credit or the Child Tax Credit;

• the extent to which we extend operating financing to our franchisees and ADs and the extent that our franchisees and ADs repay their notes to us;

• the extent and timing of capital expenditures;

• the cash flow effect of stock option exercises and the extent to which we engage in stock repurchases;

• our ability to generate fees and other income related to tax settlement products in light of regulatory pressures on us and our business partners;

• the extent to which we repurchase AD areas, which will involve the use of cash in the short-term, but improve cash receipts in future periods from what would have been the AD's share of royalties and franchise fees;

• the extent to which we repurchase certain assets from franchisees and third parties and our ability to operate these assets profitably;

• the extent, if any, to which our Board of Directors elects to continue to declare cash dividends on our common stock;

• the extent and timing of payments related to litigation settlements; and

• our ability to enter into a new credit facility prior to the maturity of our current facility on April 30, 2019.

Effect of our credit facility covenants on our future performance. Our credit facility, which matures on April 30, 2019, imposes several restrictive covenants, including a covenant that requires us to maintain a leverage ratio of not more than 5.5:1 at the end of each fiscal quarter ending January 31 and a leverage ratio of not more than 3.0:1 at the end of each other fiscal quarter. The higher permitted leverage ratio at the end of the January 31 quarter reflects the fact that as of that date, we have typically extended significant credit to our franchisees for working capital and other needs that is not reflected in repayments received from our franchisees until the period beginning in February each year. At January 31, 2019, our leverage ratio was 3.9:1.

We continue to be obligated under our credit facility to satisfy a fixed charge coverage ratio test, which requires that ratio to be not less than 1.50:1 at the end of every fiscal quarter. At January 31, 2019, our fixed charge coverage ratio was 2.0:1.

We were in compliance with the ratio tests described in this section as of January 31, 2019. We expect to be able to manage our cash flow and our operating activities in such a manner that we will continue to be able to satisfy our obligations under the credit facility for the remainder of the term of that facility.

Non-GAAP Financial Information. We report our consolidated financial results in accordance with GAAP; however, we believe that earnings before interest, taxes, depreciation, amortization and impairment ("EBITDA") and other non-GAAP results should be evaluated, in addition to, and not as an alternative for, net loss, as determined in accordance with GAAP. We consider our non-GAAP consolidated financial results to be a useful metric for management and investors to evaluate and compare current year results with prior periods. Because not all companies use the same calculations, our definition of EBITDA may not be comparable to similarly titled figures from other companies. In addition, when evaluating non-GAAP results, we exclude certain items that are not considered to be part of future operating results. Descriptions of the items which are excluded are as follows:

• Executive severance and related costs, including stock-based compensation: We exclude from our non-GAAP financial measures cash and non-cash stock-based compensation, related third-party expenses and perquisites associated with the separation of employment with executives of the Company.

• Compliance Task Force and related costs: We exclude from our non-GAAP financial measures third-party expenses we incur related to our Compliance Task Force. These expenses include professional and legal fees.

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• Restructuring expense: We exclude from our non-GAAP financial measures cash and non-cash expenses of restructuring activities. These expenses include property and intangible impairments and exit costs.

• Executive recruitment costs: We exclude from our non-GAAP financial measures one-time costs incurred to recruit and hire new executives.

• Shareholder litigation costs: We exclude from our non-GAAP financial measures one-time costs incurred related to shareholder litigation.

The following is a reconciliation of GAAP Net Loss to EBITDA:

	Three Months Ended January 31,						Nine Months Ended January 31,
	2019			2018			2019			2018
	(In thousands)						(In thousands)
Net loss - as reported	$	(310	)	$	(1,522	)	$	(32,554	)	$	(24,383	)
Add back:
Interest expense	1,129			829			2,206			1,618
Income tax expense (benefit)	688			555			(14,858		)	(13,550		)
Depreciation, amortization, and impairment charges:
As reported	3,991			3,995			10,350			8,526
Total Adjustments	5,808			5,379			(2,302		)	(3,406		)
EBITDA	$	5,498		$	3,857		$	(34,856	)	$	(27,789	)

Included in restructuring expense on the condensed consolidated statement of operations for the nine months ended January 31, 2019 and 2018 is $5.6 million and $0.8 million, respectively, of depreciation, amortization, and impairment charges. EBITDA is $29.2 million and $26.9 million in the nine months ended January 31, 2019 and 2018, respectively, with these expenses included.

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The following is a reconciliation of our reported net loss to our non-GAAP financial measures. Amounts may not add or recalculate due to rounding.

Three Months Ended January 31, 2019
(In thousands except per share data)
	Revenues		Operating Expenses			Loss from Operations			EBITDA			Pre-tax Loss			Net Loss			Basic and Diluted EPS
As Reported	$	32,884	$	31,377		$	1,507		$	5,498		$	378		$	(310	)	$	(0.02	)
Adjustments: (1)
Shareholder litigation costs	—		(313		)	313			313			313			215			0.02
Accrued judgment	—		2,400			(2,400		)	(2,400		)	(2,400		)	(1,647		)	(0.12		)
Corporate governance costs	—		(25		)	25			25			25			17			—
Divestiture of year-round accounting offices	1,079		(145		)	1,224			1,224			1,224			840			0.06
Total adjustments	1,079		1,917			(838		)	(838		)	(838		)	(575		)	(0.04		)
Non-GAAP	$	33,963	$	33,294		$	669		$	4,660		$	(460	)	$	(885	)	$	(0.06	)
Three Months Ended January 31, 2018
(In thousands except per share data)
	Revenues		Operating Expenses			Loss from Operations			EBITDA			Pre-tax Loss			Net Loss			Basic and Diluted EPS
As Reported	$	48,244	$	48,439		$	(195	)	$	3,857		$	(967	)	$	(1,522	)	$	(0.11	)
Adjustments: (1)
Executive severance including stock-based compensation	—		(325		)	325			325			325			203			0.02
Compliance Task Force and related costs	—		(61		)	61			61			61			38			—
Shareholder litigation costs	—		(529		)	529			529			529			330			0.03
Restructuring expense	—		9			(9		)	(9		)	(9		)	(5		)	—
Tax reform on reported earnings	—		—			—			—			—			919			0.07
Total adjustments	—		(906		)	906			906			906			1,485			0.12
Non-GAAP	$	48,244	$	47,533		$	711		$	4,763		$	(61	)	$	(37	)	$	0.01

(1) The net loss impact of the adjustments is calculated using the effective tax rate for the period.

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Nine Months Ended January 31, 2019
(In thousands except per share data)
	Revenues		Operating Expenses			Loss from Operations			EBITDA			Pre-tax Loss			Net Loss			Basic and Diluted EPS
As Reported	$	46,824	92,030			$	(45,206	)	$	(34,856	)	$	(47,412	)	$	(32,554	)	$	(2.37	)
Adjustments: (1)
Executive severance including stock-based compensation	—		(933		)	933			933			933			640			0.05
Executive recruitment costs	—		(725		)	725			725			725			497			0.04
Shareholder litigation costs (2)	—		(472		)	472			472			472			324			0.02
Accrued judgment	—		2,400			(2,400		)	(2,400		)	(2,400		)	(1,647		)	(0.12		)
Corporate governance costs (2)	—		(303		)	303			303			303			208			0.02
Divestiture of year-round accounting offices	1,079		(145		)	1,224			1,224			1,224			840			0.06
Restructuring expense	—		(9,345		)	9,345			9,345			9,345			6,411			0.47
Total adjustments	1,079		(9,523		)	10,602			10,602			10,602			7,273			0.54
Non-GAAP	$	47,903	$	82,507		$	(34,604	)	$	(24,254	)	$	(36,810	)	$	(25,281	)	$	(1.83	)
Nine Months Ended January 31, 2018
(In thousands except per share data)
	Revenues		Operating Expenses			Loss from Operations			EBITDA			Pre-tax Loss			Net Loss			Basic and Diluted EPS
As Reported	$	64,202	$	100,645		$	(36,443	)	$	(27,789	)	$	(37,933	)	$	(24,383	)	$	(1.89	)
Adjustments: (1)
CEO Separation and related costs	—		(2,417		)	2,417			2,417			2,417			1,554			0.12
Executive severance including stock-based compensation	—		(325		)	325			325			325			209			0.02
Executive recruitment costs	—		(325		)	325			325			325			209			0.02
Compliance Task Force and related costs	—		(386		)	386			386			386			248			0.02
Shareholder litigation costs			(529		)	529			529			529			340			0.03
Restructuring expense	—		(3,362		)	3,362			3,362			3,362			2,161			0.17
Total adjustments	—		(7,344		)	7,344			7,344			7,344			4,721			0.38
Non-GAAP	$	64,202	$	93,301		$	(29,099	)	$	(20,445	)	$	(30,589	)	$	(19,662	)	$	(1.51	)

(1) The net loss impact of the adjustments is calculated using the effective tax rate for the period.

(2) Adjustment included for prior period amounts.

Seasonality of Operations

Given the seasonal nature of the tax return preparation business, we have historically generated and expect to continue to generate most of our consolidated revenues during the period from January 1 through April 30 of each year. For example, in fiscal 2018 we earned 28% of our annual consolidated revenues during our fiscal third quarter ended January 31 and 91% of our annual revenues during the combined fiscal third and fourth quarters of 2018. We historically operate at a loss through the first eight months of each fiscal year, during which we incur costs associated with preparing for the upcoming tax season.

Off Balance Sheet Arrangements

We are a party to an interest rate swap agreement that allows us to manage fluctuations in cash flow resulting from changes in the interest rate on our variable rate mortgage. This swap effectively changes the variable-rate of our mortgage into a fixed rate of 4.12%. At January 31, 2019, the fair value of our interest rate swap was an asset of less than $0.1 million and was included in other current assets. The interest rate swap expires in December 2026.

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ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2018.

ITEM 4

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of January 31, 2019. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2019, the Company’s disclosure controls and procedures were not effective due to a material weakness in the Company's internal control over financial reporting as described below.

The Company concluded that, notwithstanding the material weakness in the Company's internal control over financial reporting, the consolidated financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Changes in Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of our internal control over financial reporting described above, management has identified the following deficiencies that constituted individually, or in the aggregate, a material weakness in our internal control over financial reporting as of January 31, 2019.

The control environment, risk assessment, control activities, information and communication, and monitoring controls were not effective. “Tone at the top” issues contributed to an ineffective control environment. The deficiencies aggregating to this material weakness are set forth below.

Control Environment - control deficiencies contributing to the material weakness relating to: (i) commitment to integrity and ethical values, (ii) the ability of the board of directors to effectively exercise oversight of the development and performance of internal control, as a result of failure to communicate relevant information within the organization and, in some cases, withholding information, (iii) appropriate organizational structure, reporting lines, and authority and responsibilities in pursuit of objectives, (iv) commitment to attract, develop, and retain competent individuals, and (v) holding individuals accountable for their internal control related responsibilities.

Risk Assessment - control deficiencies contributing to the material weakness relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, (iii) contemplating fraud risks, and (iv) identifying and assessing changes in the business that could impact the system of internal controls.

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Control Activities - control deficiencies contributing to the material weakness relating to: (i) selecting and developing control activities and information technology that contribute to the mitigation of risks and support achievement of objectives and (ii) deploying control activities through policies that establish what is expected and procedures that put policies into action.

Information and Communication - control deficiencies contributing to the material weakness relating to: (i) obtaining, generating, and using relevant quality information to support the function of internal control, and (ii) communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.

Monitoring - control deficiencies contributing to the material weakness relating to: (i) selecting, developing, and performing ongoing evaluation to ascertain whether the components of internal controls are present and functioning, and (ii) evaluating and communicating internal control deficiencies in a timely manner to those parties responsible for taking corrective action.

Because of this material weakness, management has concluded that we did not maintain effective internal control over financial reporting as of January 31, 2019.

Remediation Efforts to Address Material Weakness

The Company's management has worked, and continues to work, to strengthen the internal control over financial reporting. The Company is committed to ensuring that such controls are designed and operating effectively. Since identifying the material weakness in the internal controls over financial reporting relating to the Company's former CEO and Chairman of the Board and his control of the Board of Directors through his ownership of Class B common stock, the Company has developed and implemented remediation plans to address these control failures. The Company's Board of Directors and management take internal controls over financial reporting and the integrity of the Company’s financial statements seriously and believe that the remediation steps described below, including with respect to personnel changes, were and are essential steps to maintaining strong and effective internal controls over financial reporting and a strong internal control environment.

The Company has taken significant steps to address the material weakness set forth above. The Company believes that making the following changes are critical steps toward addressing the “tone at the top” concerns that contributed to the material weakness it has identified. The following steps are among the measures that have been implemented or will be implemented as soon as practicable after the date of this filing:     

• On July 24, 2018, the Company's former President and Chief Executive Officer and Chairman of the Board of Directors entered into a stock purchase agreement to sell all of the shares of the Company’s Class A common stock and Class B common stock owned directly and indirectly by him. As a result of this transaction, Mr. Hewitt resigned as Chairman of the Board.

• In addition to the resignation of Mr. Hewitt as Chairman of the Board, all remaining Class B directors previously appointed by our former Chairman tendered their resignations to the Board.

• In February 2018, the Board of Directors appointed Nicole Ossenfort as the Company's new President and Chief Executive Officer. Ms. Ossenfort has brought expertise and leadership to the Company and has helped establish open lines of communication with her internal business unit leaders and the finance and accounting team.

• In June 2018, the Company hired a new Chief Financial Officer, Michael S. Piper, who has brought expertise and leadership to the Company and our finance and accounting team.

• In August 2018, the Company elected five new Class A directors through written consent executed by stockholders representing a majority of the outstanding shares of the Company’s Class A common stock that are “independent” for purposes of the Nasdaq Listing Rules.

• The Board of Directors has elected Andrew M. Laurence as the independent Chairman of our Board of Directors.

• The Company hired Ernst & Young to conduct a review of its corporate governance practices.

The Company is committed to maintaining a strong internal control environment, and believes that these remediation actions represent significant improvements in its controls. Additional remediation measures continue to be considered and will be implemented as appropriate. The Company will continue to assess the effectiveness of its remediation efforts in connection with its evaluations of internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1

LEGAL PROCEEDINGS

For information regarding legal proceedings, please see "Note 12. Commitments and Contingencies" in Financial Statements, which information is incorporated herein by reference.

ITEM 1A

RISK FACTORS

There have been no material changes to our risk factors previously disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended April 30, 2018 and in Part II, Item 1A in our Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2018.

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no issuances of unregistered securities during the nine months ended January 31, 2019.

SHARE REPURCHASES

Our Board of Directors has authorized up to $10.0 million for share repurchases. This authorization has no specific expiration date and cash proceeds from stock option exercises increase the amount of the authorization. In addition, the Board of Directors authorized an AD repurchase program, which reduces the amount of the share repurchase authorization on a dollar-for-dollar basis. Shares repurchased from option exercises and RSUs vesting that are net-share settled by us and shares repurchased in privately negotiated transactions are not considered share repurchases under this authorization. The Company had no share repurchases and no purchases as part of its AD repurchase program during the quarter ended January 31, 2019.

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ITEM 3

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4

MINE SAFETY DISCLOSURES

None.

ITEM 5

OTHER INFORMATION

None.

ITEM 6

EXHIBITS

We have filed the following exhibits as part of this report:

Exhibit Number	Exhibit Description	Filed Herewith	Incorporated by Reference
3.1	Second Amended and Restated Certificate of Incorporation of Liberty Tax, Inc.	X
31.1	Certification of Chief Executive Officer	X
31.2	Certification of Chief Financial Officer	X
32.1(1)	Section 1350 Certification (Chief Executive Officer)	X
32.2(1)	Section 1350 Certification (Chief Financial Officer)	X
99.1	Nasdaq Listing and Hearing Review Council Decision on Liberty Tax, Inc. dated October 18, 2018.	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X

(1) This exhibit is furnished and shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Liberty Tax, Inc. (Registrant)
March 7, 2019	By:		/s/ Nicole Ossenfort
			Nicole Ossenfort Chief Executive Officer (Principal Executive Officer)
March 7, 2019	By:		/s/ Michael S. Piper
			Michael S. Piper Chief Financial Officer (Principal Financial Officer)

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EX-3.1

Exhibit 3.1

SECOND AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

LIBERTY TAX, INC.

(Under Sections 242 and 245 of the
Delaware General Corporation Law)

It is hereby certified that:

1. The Certificate of Incorporation of the Corporation was originally filed with the Secretary of State of the State of Delaware on September 23, 2010, under the name of JTH Holding, Inc. The Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on July 14, 2011.

2. This Second Amended and Restated Certificate of Incorporation of the Corporation has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware and by the written consent of its stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware.

3. The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows:

ARTICLE I

NAME

The name of the corporation is Liberty Tax, Inc. (the “Corporation”).

ARTICLE II

ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, in the County of New Castle. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as amended (the “DGCL”).

ARTICLE IV

CAPITAL STOCK

Section 1. Authorized Shares. The total number of shares of stock which the Corporation is authorized to issue is 25,000,000 shares, of which 22,000,000 shares shall be shares of Common Stock, par value $0.01 per share (the “Common Stock”), and 3,000,000 shares shall be shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”).

Section 2. Common Stock. The Common Stock shall have the following powers, designations, preferences and rights and qualifications, limitations and restrictions:

(a) Voting Rights. Except as otherwise provided herein or by applicable law, each holder of Common Stock shall be entitled to one vote for each share of Common Stock held of record by such holder as of the applicable record date on any matter that is submitted to a vote of the stockholders of the Corporation.

Notwithstanding the foregoing, except as otherwise required by applicable law, holders of Common Stock, assuch, shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate of Incorporation (including any certificate filed with the Secretary of State establishing the terms of a series of Preferred Stock in accordance with Section 3 of this Article IV) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of the affected series of Preferred Stock are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to applicable law or this Second Amended and Restated Certificate of Incorporation (including any certificate filed with the Secretary of State establishing the terms of a series of Preferred Stock in accordance with Section 3 of this Article IV).

(b) Dividends and Distributions. Except as may be provided in a resolution or resolutions of the Board of Directors providing for any series of Preferred Stock outstanding at any time, the holders of Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Corporation as may be declared by the Board of Directors from time to time with respect to the Common Stock out of assets or funds of the Corporation legally available therefor.

(c) Liquidation, etc. Except as may be provided in a resolution or resolutions of the Board of Directors providing for any series of Preferred Stock outstanding at any time, in the event of a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, the holders of Common Stock shall be entitled to share equally, on a per share basis, in all assets of the Corporation of whatever kind available for distribution to the holders of Common Stock.

Section 3. Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by law, to provide by resolution or resolutions for the issuance of a share or shares of Preferred Stock in one or more series of Preferred Stock and, by filing a certificate of designation pursuant to the DGCL setting forth a copy of such resolution or resolutions, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and the qualifications, limitations, and restrictions thereof. The authority of the Board of Directors with respect to any additional series of Preferred Stock shall include, but not be limited to, determination of the following:

(a) the number of shares constituting any series and the distinctive designation of that series;

(b) the dividend rate on the shares of any series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(c) whether any series shall have voting rights, in addition to the voting rights provided by applicable law, and, if so, the number of votes per share and the terms and conditions of such voting rights;

(d) whether any series shall have conversion privileges and, if so, the terms and conditions of conversion, including provision for adjustment of the conversion rate upon such events as the Board of Directors shall determine;

(e) whether the shares of any series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(f) whether any series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(g) the rights of the shares of any series in the event of voluntary or involuntary dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and

(h) any other powers, preferences, rights, qualifications, limitations, and restrictions of any series.

Notwithstanding the provisions of Section 242(b)(2) of the DGCL, the number of authorized shares of Preferred Stock and Common Stock may, without a class or series vote, be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by the affirmative vote of the holders of at least a majority of the voting power of the Corporation’s then outstanding capital stock, voting together as a single class.

ARTICLE V

BOARD OF DIRECTORS

Section 1. Powers of the Board. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by applicable law or by this Second Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

Section 2. Number of Directors. Except as may be provided in a resolution or resolutions of the Board of Directors providing for any series of Preferred Stock with respect to any directors elected (or to be elected) by the holders of such series, the total number of directors constituting the entire Board of Directors shall consist of not less than five nor more than fifteen members, with the precise number of directors to be determined from time to time exclusively by a vote of a majority of the entire Board of Directors.

Section 3. Bylaws. The Board of Directors shall have the power to adopt, amend, alter, change or repeal any and all Bylaws of the Corporation.

Section 4. Elections of Directors. Elections of directors need not be by ballot unless the Bylaws of the Corporation shall so provide.

Section 5. Officers. Except as otherwise expressly delegated by resolution of the Board of Directors, the Board of Directors shall have the exclusive power and authority to appoint and remove officers of the Corporation.

ARTICLE VI

DIRECTOR LIABILITY

A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as it presently exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director existing hereunder with respect to any act or omission occurring prior to such amendment, modification or repeal.

ARTICLE VII

INDEMNIFICATION

Section 1. Right of Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, manager, employee or agent of another corporation or of a partnership, limited liability company, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence or Section 2 of this Article VII, except as otherwise provided in Section 3 of this Article VII, the Corporation shall be required to indemnify, or advance expenses to, a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board of Directors.

Section 2. Prepayment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article VII or otherwise.

Section 3. Claims. If a claim for indemnification (following the final disposition of the Proceeding with respect to which indemnification is sought, including any settlement of such Proceeding) or advancement of expenses under this Article VII is not paid in full within thirty days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by applicable law. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under this Article VII and applicable law.

Section 4. Non-Exclusivity of Rights. The rights conferred on any Covered Person by this Article VII shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, any other provision of this Second Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation, or any agreement, vote of stockholders or disinterested directors or otherwise.

Section 5. Amendment or Repeal. Any right to indemnification or to advancement of expenses of any Covered Person arising hereunder shall not be eliminated or impaired by an amendment to or repeal of this Article VII after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought.

Section 6. Other Indemnification and Advancement of Expenses. This Article VII shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.

ARTICLE VIII

SECTION 203

The Corporation elects not to be governed by Section 203 of the DGCL.

ARTICLE IX

FORUM SELECTION

    Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or the Corporation’s certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this ARTICLE IX.

ARTICLE X

AMENDMENT

The Corporation hereby reserves the right to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate of Incorporation in any manner permitted by the DGCL and all rights and powers conferred upon stockholders and/or directors herein are granted subject to this reservation.

IN WITNESS WHEREOF, Liberty Tax, Inc. has caused this Second Amended and Restated Certificate of Incorporation to be executed by its duly authorized officer this 18th day of December, 2018.

LIBERTY TAX, INC.
By: /s/ Nicole Ossenfort
Name:	Nicole Ossenfort
Title:	President and Chief Executive Officer

1

36640671v4

EX-31.1

Exhibit 31.1

I, Nicole Ossenfort, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LIBERTY TAX, INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 7, 2019	By:	/s/ Nicole Ossenfort
		Nicole Ossenfort
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, Michael S. Piper, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LIBERTY TAX, INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 7, 2019	By:	/s/ Michael S. Piper
		Michael S. Piper
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Liberty Tax, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended January 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nicole Ossenfort, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 7, 2019	By:	/s/ Nicole Ossenfort
		Nicole Ossenfort
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Liberty Tax, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended January 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael S. Piper, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 7, 2019	By:	/s/ Michael S. Piper
		Michael S. Piper
		Chief Financial Officer
		(Principal Financial Officer)

EX-99.1

Exhibit 99.1

BEFORE THE NASDAQ LISTING AND HEARING REVIEW COUNCIL

THE NASDAQ STOCK MARKET LLC

In the Matter of	DECISION
Liberty Tax, Inc.
(Symbol: TAXA)
c/o Mr. David Donohoe	Docket No. NQ 6281N-18
Donohoe Advisory Associates LLC
9901 Belward Campus Drive	Date: October 18, 2018
Suite 175
Rockville, MD 20850
Concerning the Operations of
The Nasdaq Stock Market

This matter appears before the Nasdaq Listing and Hearing Review Council (the “Listing Council”) pursuant to an appeal by Liberty Tax, Inc. (the “Company”). On July 31, 2018, the Nasdaq Hearings Panel (the “Panel”) issued a decision to delist the Company’s securities from The Nasdaq Stock Market, LLC (the “Stock Market” or the “Exchange”) and suspend trading of the Company’s shares, effective at the opening of business on August 2, 2018. The Company appealed the Panel’s decision to the Listing Council. After considering the written record in this matter, the Listing Council affirms the decision of the Panel.

Procedural History

On December 13, 2017, the Exchange’s Listings Qualifications Staff (“Staff”) notified the Company that it was delinquent in filing its Quarterly Report on Form 10-Q for the fiscal year ended October 31, 2017. On February 12, 2018, the Company submitted a plan to Staff to regain compliance and it requested an exception through June 11, 2018 to do so. Staff granted this exception.

In a March 15, 2018, letter, the Staff notified the Company of an additional filing delinquency based on the Company’s failure to file its January 10-Q. In that same letter, Staff granted the Company’s request for an exception, allowing it until June 11, 2018, to file the delinquent reports.

When the Company failed to file the delinquent reports by the June 11 deadline, the Staff issued a notice of de-listing on June 12, 2018.

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On June 19, 2018 the Company appealed the de-listing determination to a Hearings Panel (the “Panel”).

On July 18, 2018, the Staff notified the Company of an additional filing delinquency based on the Company’s failure to file its Form 10-K for the fiscal year ended April 30, 2018.

On June 19, 2018, the Panel held a hearing on the matter. Staff and the Company submitted post-hearing memoranda on July 23 and July 26, respectively.

On July 31, 2018, the Panel issued a decision to de-list the Company’s securities and to suspend trading in those securities, effective August 2, 2018. In reaching its decision, the Panel stated that it did not have confidence that the Company was in a position to both address its corporate governance issues and to meet its filing requirements in the near term. The Panel noted that even if the Company could complete an audit and file its delinquent reports within the targeted time frame, it did not believe that the continued listing of the Company was in the best interests of the investing public. The Panel observed that the Company had experienced a protracted battle for control, the ouster or resignation of its Chief Executive Officer, Chief Financial Officer, numerous Board Directors, independent audit firms, and law firms. It also noted that the process of recovering from those events, and in making needed corporate governance reforms, had just begun, and that the new management team lacked deep experience in steering a public company through a crisis of this nature. The Panel concluded as follows:

The Company has taken the first necessary steps toward remediation and compliance; retained an audit firm; and will shortly be out from under control by [the CEO, Board Chairman, and controlling shareholder] Mr. Hewitt. However, in the Panel’s experience, the road toward compliance and remediation after a protracted battle and eventual ouster of a founder/CEO/Board Chair is one in which a Company is advised to move cautiously and deliberately, so as to ensure a level of integrity that has apparently been missing. This process, in the Panel’s view, is best undertaken while the Company is not listed. A continued listing at this juncture would signal to the market a confidence in the continued compliance with all Nasdaq rules that the record does not yet support. Given the almost complete changeover in Board and management and governance policies for the Company, investors will be better served if this virtually new Company undergoes the review all new companies undergo upon initial listing, once it has regained compliance with the filing requirements and put its house in order.

On August 15, 2018, the Company appealed the Panel decision to the Listing Council. On September 5, 2018, the Company provided its appellate brief to the Listing Council. On September 19, 2018, Staff provided its opposition brief to the Listing Council. On September 26, 2018, the Company filed its reply brief.

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On September 11, 2018, it filed a Form 12b-25 in which it indicated that it would be late in filing its Form 10-Q for the quarter ended July 31, 2018. The Company stated in the form that it intends to file this report by October 31, 2018.

On October 5, 2018, the Company informed the Listing Council that it had filed its delinquent reports on Form 10-Q for the quarters ended October 31, 2017 and January 31, 2018 and its Form 10-K for the year ended April 30, 2018.

Listing Standard at Issue

The Company fails to comply with Nasdaq Listing Rule 5250(c), which requires listed companies to timely file all periodic reports that the Commission requires them to file. As of the date of this decision, the Company has not filed its Form 10-Q for the quarter ended July 31, 2018.

Findings of Fact

The Listing Council considered the entire record, which is incorporated by reference into this decision. Relevant documents include submissions by the Company and Staff, the decisions of the Panel, the hearing transcript, the Company’s public filings, and relevant correspondence.

Arguments on Appeal

In its September 5, 2018 brief in support of its appeal, the Company did not dispute the Panel’s decision. Instead, the Company said that its delay in filing the delinquent reports was precipitated by significant changes to the Company’s Board of Directors, executive management team, and independent audit firm. The Company asserted that a new leadership team — including a new President and Chief Executive Officer and a new Chief Financial Officer – is now in place and that its new audit firm, which the Company engaged in June 2018, is proceeding with “all due haste” to complete its work so that the Company can file the delinquent reports. The Company represented that it expected to become current in its filings by October 31, 2018.

Additionally, the Company described its progress in addressing other concerns that the Panel raised in its decision. The Company described certain corporate governance reforms that it had taken or planned to undertake, including the adoption of a revised Code of Conduct, adoption of a new Conflicts of Interest Policy, the adoption of a new Complaints Policy, the establishment of a revised Ethics Hotline, the proposed adoption of revised Board of Directors and Board Committee Charters, proposed updates to the Company’s franchise and area developer agreements, and proposed updates to the Company’s hiring policies. It noted that it

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had consummated the sale of the Company to a private equity company. It discussed its engagement of a firm to assist with the implementation of ASC 606.

In light of the foregoing, the Company requested that the Listing Council continue the Company’s listing on Nasdaq through at least October 31, 2018.

Staff argued, in its September 19, 2018 opposition brief, that the Company’s appeal presents no new arguments. Staff argued that the Company “has not complied with this rule since filing its Quarterly Report on Form 10-Q for the period ended July 31, 2017, on September 11, 2017 – more than one year ago.” Staff cited several reasons why it believed that the Listing Council should not exercise its discretion to grant the Company additional time to file its delinquent reports. First, Staff argued that the turnover in those responsible for the Company’s financial statements casts doubt on the Company’s ability to regain compliance. Second, Staff noted that the Company had experienced almost a complete turnover in its senior management and Board of Directors, and thus had no track record on its ability to meet its proposed deadline for filing the delinquent reports. Third, Staff argued that the Company still had substantial work to do to correct its corporate culture, and that such work requires its undivided attention.

Although Staff acknowledged that the Company had made incremental progress since the Panel issued its decision, including by disclosing, on September 7, 2018, unaudited financial information for fiscal year 2018, Staff noted that the Company still had not publicly disclosed any financial or operational information for the interim quarterly periods in fiscal 2018 or for its most recently completed quarter. Moreover, Staff argued that a single public disclosure of limited unaudited financial information should not be deemed by the Listing Council to evidence the fact that Company had fully overcome its prior difficulties.

Staff ended by echoing the Panel’s observation that the Company’s success in overcoming its recent upheavals and in redeeming its integrity, requires it to proceed cautiously and deliberatively, rather than hastily, and that this process is not appropriate for the Company to undertake while it is listed on Nasdaq.

In its September 26, 2018 reply brief, the Company countered Staff’s intimation that the Listing Council lacked discretion under the Listing Rules to grant the Company a further exception during which to file its delinquent reports. The Company noted that the Listing Council may grant an exception period of up to 360 days from the date of the first such delinquency, which it said in this instance was December 6, 2018.

The Company also disagreed with Staff’s diminution of the significance of the Company’s September 7, 2018 press release that disclosed interim financial results for the fiscal year ended April 30, 2018. The Company asserted that the fact that the Company made this disclosure evidenced its substantial progress in regaining its footing and demonstrated the

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credibility of its assertion that it would be in a position to regain compliance with the Listing Rules by October 31.

Furthermore, the Company highlighted the experience of its new management team in working for public companies and in providing accounting services to public companies as a means of refuting Staff’s suggestion that the new management team was not credible in its assessment of the time it required to file the delinquent reports. The Company also noted that the management team had the benefit of guidance from the new Board of Directors, which it described as mostly having extensive public company experience. The Company added that the management team had delivered on the commitments it made to the Panel, has spared no expense in doing so, and is “more than capable of taking the necessary steps to ensure good corporate citizenship and compliance with the quantitative and qualitative requirements required of a Nasdaq-listed company.

As to the corporate governance reforms that Staff had observed were not completely implemented by the Company, the Company provided updates in which it asserted that mandatory employee training on the new Code of Conduct had now occurred, new hiring processes have been implemented, the new Conflicts of Interest and Ethics Hotline Policies had been distributed to and affirmatively acknowledged by employees, employees had been asked to identify and disclose conflicts of interest pursuant to the new Policy, and that the new Board and Board Committee Charters had been drafted and were awaiting final review by outside counsel.

Analysis and Conclusions

After a review of the record in this matter, the Listing Council affirms the Panel’s decision.

The Listing Council agrees with Staff that the Company has made no persuasive arguments that the Panel’s delisting determination was made in error. At the time of the Panel’s decision, the Company was indisputably delinquent in filing several of its periodic financial reports. Moreover, the Panel had sound reasons to doubt, not only whether the Company was likely to regain compliance with the periodic filing requirement, but also whether the Company’s new Board and management had done enough to reform the Company and to re-establish it as a responsible public company.

Although the Company has, since the time of the Panel’s decision, fulfilled certain of its pledges to file its delinquent reports, one such report – its Form 10-Q for the period ended July 31, 2018 – remains delinquent.

Even if the Company had already regained full compliance with Listing Rule 5250(c), the Listing Council would still conclude, consistent with its discretion under Rule 5101, that the

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continued listing of its securities on Nasdaq is inadvisable. While the Company has made significant strides to date to reform its corporate culture, these strides are insufficient to overcome the Listing Council’s concerns about whether the Company – which was almost entirely re-constituted only a few months ago – has regained its proper footing. For example, while the Company asserts that it has changed the “tone at the top,” the Listing Council observes that it appointed a new President and CEO who has no prior experience in such positions and whom the ousted former Chairman and CEO had previously hired and appointed to the Board.

Similarly, the Company has appointed a new CFO with no experience working in that capacity for a public company. Moreover, the Company still has not completed all of its planned reforms, including the adoption of new Board and Board Committee Charters. The Listing Council concedes that these each of concerns may prove unwarranted over time, but not enough time has passed yet for the Listing Council to feel comfortable dismissing them.

The Listing Council agrees with both the Panel and the Staff that the Company’s process of recovering from its extensive upheaval is one that the Company cannot and should not rush. It also is not a process that is appropriate for a company to undergo while it is listed on a national securities exchange. Although the Listing Council appreciates all of the hard work that the Company has done and continues to do to regain compliance with the Listing Rules, the Listing Council believes that the Company will benefit from taking time to catch its breath, to heal from its wounds, and to establish a new track record for stability and good corporate citizenship. When it does so, it may then apply to rejoin the ranks of Nasdaq.

Based on the foregoing, the Listing Council affirms the decision of the Panel in this matter.

The Nasdaq Board, in its sole discretion, may call this decision for review pursuant to Nasdaq Listing Rule 5825.

On Behalf of the Nasdaq Listing and Hearing Review Council,

Brett M. Kitt, Counsel

XML

Document and Entity Information - shares	9 Months Ended
	Jan. 31, 2019	Mar. 04, 2019
Entity Information [Line Items]
Entity Registrant Name	Liberty Tax, Inc.
Entity Central Index Key	0001528930
Document Type	10-Q
Document Period End Date	Jan. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--04-30
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Common Class A [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		14,057,941
Common Class B [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		0

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018
Current assets:
Cash and cash equivalents	$ 4,348	$ 18,522	$ 4,084
Receivables:
Accounts receivable	62,141	52,517	67,550
Notes receivable - current	69,513	24,295	69,015
interest receivable, current, net	3,480	1,526	4,476
Allowance for doubtful accounts - current	(10,878)	(11,522)	(7,987)
Total current receivables, net	124,256	66,816	133,054
Assets Held for Sale	0	8,941	12,070
Income taxes receivable	16,329	0	14,820
Other current assets	16,782	5,429	19,473
Total current assets	161,715	99,708	183,501
Property, equipment, and software, net	34,648	38,636	40,050
Notes, Loans and Financing Receivable, Gross, Noncurrent	11,435	6,554	17,676
Allowance for Doubtful Accounts Receivable, Noncurrent	(946)	(965)	(1,006)
Notes, Loans and Financing Receivable, Net, Noncurrent	10,489	5,589	16,670
Goodwill	7,348	8,640	9,210
Intangible assets, net	20,602	22,837	23,068
Deferred Income Taxes and Other Assets, Noncurrent	307	343	174
Other assets	1,975	2,250	2,535
Total assets	237,084	178,003	275,208
Current liabilities:
Current installments of long-term obligations	13,763	18,113	5,223
Accounts payable and accrued expenses	17,566	14,521	22,027
Due to Area Developers (ADs)	9,818	17,906	11,742
Income taxes payable	34	4,511	0
Line of Credit, Current	107,893	0	0
Deferred revenue - current	4,593	2,021	2,024
Total current liabilities	153,667	57,072	41,016
Long-term obligations, excluding current installments, net	1,946	2,270	16,421
Revolving credit facility	0	0	120,189
Deferred revenue and other - non-current	5,199	4,692	5,193
Deferred income tax liability	1,723	1,397	3,682
Accrued Income Taxes, Noncurrent	1,208	1,070	0
Total liabilities	163,743	66,501	186,501
Stockholders’ equity:
Additional paid-in capital	12,374	11,570	10,689
Accumulated other comprehensive loss, net of taxes	(1,698)	(1,347)	(990)
Retained earnings	62,524	101,139	78,869
Total stockholders’ equity	73,341	111,502	88,707
Total liabilities and stockholders’ equity	237,084	178,003	275,208
Special voting preferred stock
Stockholders’ equity:
Preferred stock	0	0	0
Class A common stock
Stockholders’ equity:
Common stock	141	128	127
Class B common stock
Stockholders’ equity:
Common stock	0	2	2
Exchangeable shares
Stockholders’ equity:
Common stock	$ 0	$ 10	$ 10

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 28,096	$ 25,972	$ 24,746
Finite-Lived Intangible Assets, Accumulated Amortization	$ 16,845	$ 15,207	$ 14,628
Special voting preferred stock
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares authorized	10	10	10
Preferred stock, shares issued	10	10	10
Preferred stock, shares outstanding	10	10	10
Class A common stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized	21,200,000	21,200,000	21,200,000
Common stock, shares issued	12,725,472	12,682,550	12,594,756
Common stock, shares outstanding	12,725,472	12,682,550	12,594,756
Class B common stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized	1,000,000	1,000,000	1,000,000
Common stock, shares issued	200,000	900,000	900,000
Common stock, shares outstanding	200,000	900,000	900,000
Exchangeable shares
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares issued	1,000,000	1,000,000	1,000,000
Common stock, shares outstanding	1,000,000	1,000,000	1,000,000
Reclassification of Debt Issuance Costs [Member]
unamortized debt issuance costs	$ 0	$ 0	$ 0

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Jan. 31, 2019	Jan. 31, 2018
Revenues:
Franchise fees	$ 596	$ 90	$ 1,602	$ 354
Area Developer fees	1,018	507	2,665	2,209
Royalties and advertising fees	16,060	17,610	19,095	20,598
Financial products	9,882	18,106	10,938	19,324
Interest income	2,049	2,612	5,253	7,009
Assisted tax preparation fees, net of discounts	2,719	5,225	5,620	8,413
Electronic Filing Fee Revenue	428	2,872	486	2,872
Other revenues	132	1,222	1,165	3,423
Total revenues	32,884	48,244	46,824	64,202
Operating expenses:
Employee compensation and benefits	9,795	11,574	29,770	32,277
Selling, general, and administrative expenses	6,294	22,366	27,649	41,120
Area Developer expense	4,384	4,890	5,089	5,658
Advertising expense	6,913	5,623	9,827	9,702
Depreciation, amortization, and impairment charges	3,991	3,995	10,350	8,526
Restructuring Costs	0	(9)	9,345	3,362
Total operating expenses	31,377	48,439	92,030	100,645
Income (loss) from operations	1,507	(195)	(45,206)	(36,443)
Other income (expense):
Foreign currency transaction gain	0	57	0	128
Interest expense	(1,129)	(829)	(2,206)	(1,618)
Income (loss) before income taxes	378	(967)		(37,933)
Income tax expense (benefit)	688	555		(13,550)
Net loss	$ (310)	$ (1,522)	$ (32,554)	$ (24,383)
Net loss per share of common stock:
Earnings Per Share, Basic and Diluted	$ (0.02)	$ (0.11)	$ (2.37)	$ (1.89)
Weighted Average Number of Shares Outstanding, Basic and Diluted	14,043,218	12,934,941	13,718,401	12,907,039
Dividends declared per share of common stock and common stock equivalents	$ 0.00	$ 0.16	$ 0.16	$ 0.48
Common Class B [Member]
Net loss per share of common stock:
Earnings Per Share, Basic and Diluted	$ 0.00	$ (0.11)	$ (2.37)	$ (1.89)
Weighted Average Number of Shares Outstanding, Basic and Diluted	0	200,000	65,217	200,000
Common Class A [Member]
Net loss per share of common stock:
Earnings Per Share, Basic and Diluted	$ (0.02)	$ (0.11)	$ (2.37)	$ (1.89)
Weighted Average Number of Shares Outstanding, Basic and Diluted	14,043,218	12,734,941	13,653,184	12,707,039
Balance as Reported [Member]
Other income (expense):
Income (loss) before income taxes			$ (47,412)
Income tax expense (benefit)			(14,858)
Net loss			$ (32,554)

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Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Jan. 31, 2019	Jan. 31, 2018	Apr. 30, 2018	Apr. 30, 2017
Net loss	$ (310)	$ (1,522)	$ (32,554)	$ (24,383)
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax, Portion Attributable to Parent	(42)	31	(23)	41
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax	23	372	(304)	1,052
Other Comprehensive Income Loss From Forward Contracts Net of Tax	(25)	0	(25)	0
Comprehensive loss	(354)	(1,119)	(32,906)	(23,290)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	$ 73,341	$ 88,707	73,341	88,707	$ 111,505	$ 116,454
Non-Cash Adjustments due to ASC 606, value			(3,794)
Stock Issued During Period, Value, Stock Options Exercised			$ 153	$ 95
Stock Repurchased During Period, Shares			(1,000,000,000)	0
Stock Repurchased During Period, Value			$ (83)	$ (299)
conversion of preferred stock to common stock_value			0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			733	2,523
Dividends			(2,267)	(6,776)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent			(304)	1,052
Unrealized Loss on Interest Rate Swap, Value			$ (23)	$ 41
Exchange [Member]
Shares, Outstanding	0	1,000,000	0	1,000,000	100,000	1,000,000
Net loss			$ 0	$ 0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	$ 0	$ 10	$ 0	$ 10	$ 10	$ 10
Non-Cash Adjustments due to ASC 606, shares			0
Non-Cash Adjustments due to ASC 606, value			$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			0	0
Stock Issued During Period, Value, Stock Options Exercised			$ 0	$ 0
Stock Repurchased During Period, Shares			0	0
Stock Repurchased During Period, Value			$ 0	$ 0
Conversion of Stock, Shares Converted			(100,000)
conversion of preferred stock to common stock_value			$ (10)
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures			0	0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			$ 0	$ 0
Net income (in shares)			0	0
Payment of Dividends, Shares			0	0
Dividends			$ 0	$ 0
Foreign currency translation (in shares)			0	0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent			$ 0	$ 0
Unrealized Loss on Interest Rate Swap, Shares			0	0
Unrealized Loss on Interest Rate Swap, Value			$ 0	$ 0
Common Class B [Member]
Shares, Outstanding	0	200,000	0	200,000	200,000	200,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	$ 0	$ 2	$ 0	$ 2	$ 2	$ 2
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			0	0
Stock Issued During Period, Value, Stock Options Exercised			$ 0	$ 0
Stock Issued During Period, Shares, Vesting			0	0
Stock Issued During Period, Value, Vesting			$ 0	$ 0
Stock Issued During Period, Shares, Conversion of Convertible Securities			(200,000)
Stock Issued During Period, Value, Conversion of Convertible Securities			$ (2)
Special Voting, Preferred Stock [Member]
Shares, Outstanding	0	0	0	0	0	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			0	0
Stock Issued During Period, Value, Stock Options Exercised			$ 0	$ 0
Stock Issued During Period, Shares, Vesting			0	0
Stock Issued During Period, Value, Vesting			$ 0	$ 0
Stock Issued During Period, Shares, Conversion of Convertible Securities			0
Stock Issued During Period, Value, Conversion of Convertible Securities			$ 0
Common Class A [Member]
Shares, Outstanding	14,058,000	12,751,000	14,058,000	12,751,000	12,823,000	12,683,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	$ 141	$ 127	$ 141	$ 127	$ 129	$ 127
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			14,000	9,000
Stock Issued During Period, Value, Stock Options Exercised			$ 0	$ 0
Stock Issued During Period, Shares, Vesting			21,000	59,000
Stock Issued During Period, Value, Vesting			$ 0	$ 0
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures			0	9,000
Stock Issued During Period, Shares, Conversion of Convertible Securities			1,200,000
Stock Issued During Period, Value, Conversion of Convertible Securities			$ 12
Additional Paid-in Capital [Member]
Net loss			0	$ 0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	12,374	10,689	12,374	10,689	11,571	8,370
Non-Cash Adjustments due to ASC 606, value			0
Stock Issued During Period, Value, Stock Options Exercised			153	95
Stock Repurchased During Period, Value			(83)	(299)
conversion of preferred stock to common stock_value			0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			733	2,523
Dividends			0	0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent			0	0
Unrealized Loss on Interest Rate Swap, Value			0	0
AOCI Attributable to Parent [Member]
Net loss			0	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	(1,698)	(990)	(1,698)	(990)	(1,346)	(2,083)
Non-Cash Adjustments due to ASC 606, value			0
Stock Issued During Period, Value, Stock Options Exercised			0	0
Stock Repurchased During Period, Value			0	0
conversion of preferred stock to common stock_value			0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			0	0
Dividends			0	0
Retained Earnings [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	$ 62,524	$ 78,869	62,524	78,869	$ 101,139	$ 110,028
Non-Cash Adjustments due to ASC 606, value			(3,794)
Stock Issued During Period, Value, Stock Options Exercised			0	0
Stock Repurchased During Period, Value			0	0
conversion of preferred stock to common stock_value			0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			0	0
Dividends			(2,267)	(6,776)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent			0	0
Unrealized Loss on Interest Rate Swap, Value			$ 0	$ 0

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Condensed Consolidated Statements of Comprehensive Loss parentheticals - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Jan. 31, 2019	Jan. 31, 2018
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax	$ 0	$ 0	$ 0	$ 0
Other Comprehensive Income (Loss), Available-for-sale Securities, before Reclassification Adjustments, Tax	$ 0	$ 0	$ 0	$ 0

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended	9 Months Ended
	Oct. 31, 2017	Jan. 31, 2019	Jan. 31, 2018
Cash flows from operating activities:
Net loss		$ (32,554)	$ (24,383)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts		5,798	7,865
Depreciation, amortization, and impairment charges		10,350	8,526
Amortization of Debt Issuance Costs		184	116
Gain (Loss) on Disposition of Other Assets		5,814	2,370
Stock-based compensation expense		733	2,523
Loss (gain) on bargain purchases and sales of Company-owned offices		(743)	1,626
Income (Loss) from Equity Method Investments		65	(71)
Deferred tax income		1,757	113
Increase (Decrease) in Income Taxes Payable		(20,639)	(21,119)
Changes in other assets and liabilities		(35,192)	(36,709)
Net cash used in operating activities		(62,941)	(62,395)
Cash flows from investing activities:
Issuance of operating loans to franchisees and ADs		(52,455)	(57,839)
Payments received on operating loans to franchisees		3,477	5,377
Purchases of AD rights, Company-owned offices and acquired customer lists		(230)	(2,456)
Proceeds from sale of Company-owned offices and AD rights		1,229	451
Purchases of property, equipment and software		(2,733)	(3,980)
Net cash used in investing activities		(50,712)	(58,447)
Cash flows from financing activities:
Proceeds from Stock Options Exercised		153	95
Payments of Ordinary Dividends		(2,244)	(6,669)
Repayments of Amounts Due to Former ADs		(3,130)	(2,984)
Repayment of long-term obligations		(2,995)	(2,216)
Borrowings under revolving credit facility		111,585	120,525
Repayments under revolving credit facility		(3,693)	(336)
Payments Related to Tax Withholding for Share-based Compensation		83	299
Net cash provided by financing activities		99,593	108,116
Effect of exchange rate changes on cash, net		(114)	383
Net decrease in cash and cash equivalents		(14,174)	(12,343)
Cash and cash equivalents at beginning of period	$ 16,427	18,522	16,427
Cash and cash equivalents at end of period		4,348	$ 4,084
Supplemental disclosures of cash flow information:
Cash paid for interest, net of capitalized interest of $27 and $425, respectively	1,563	2,124
Cash paid for taxes, net of refunds	7,344	4,031
During the nine months ended January 31, 2019 and 2018, the Company acquired certain assets from ADs, franchisees, and third parties as follows:
Fair value of assets purchased	11,082	2,476
Receivables applied, net of amounts written off, due ADs and related deferred revenue	(6,668)	(488)
Business Combination, Bargain Purchase, Gain Recognized, Amount	(1,100)	(224)
Long-term obligations and accounts payable issued to seller	(858)	(1,534)
Cash paid to ADs, franchisees and third parties	2,456	230
During the nine months ended January 31, 2019 and 2018, the Company sold certain assets to ADs and franchisees as follows:
Book value of assets sold	1,129	5,105
Gain on sale - revenue deferred	88	(1,013)
Gain (loss) on sale - gain (loss) recognized	18	0
Notes received	(784)	(2,863)
Cash received from ADs and franchisees	$ 451	$ 1,229

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Organization and Significant Accounting Policies

9 Months Ended

Jan. 31, 2019

Accounting Policies [Abstract]

Organization and Significant Accounting Policies

Organization and Significant Accounting Policies

Description of Business

Liberty Tax, Inc. (the "Company"), a Delaware corporation, is a holding company engaged through its subsidiaries as a franchisor and, to a lesser degree, an operator of a system of income tax preparation offices located in the United States of America (the "U.S.") and Canada. The Company's principal operations are conducted through JTH Tax, Inc. (d/b/a Liberty Tax Service), the Company's largest subsidiary. Through this system of income tax preparation offices, the Company also facilitates refund-based tax settlement financial products, such as refund transfer products in the U.S. and personal income tax refund discounting products in Canada. The Company also offers online tax preparation services. In fiscal 2015, the Company changed its name from JTH Holding, Inc. to Liberty Tax, Inc.

The Company provides a substantial amount of lending to its franchisees and area developers ("ADs"). The Company allows franchisees and ADs to defer a portion of the franchise fee and AD fee, which are paid over time. The Company also offers its franchisees working capital loans to assist in funding their operations between tax seasons.

The Company’s operating revenues are seasonal in nature, with peak revenues occurring in the months of January through April.  Therefore, results for interim periods are not indicative of results to be expected for the full year.

Unless the context requires otherwise, the terms "Liberty Tax," "Liberty Tax Service," "we," the "Company," "us," and "our" refer to Liberty Tax, Inc. and its consolidated subsidiaries.

Basis of Presentation

 The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Assets and liabilities of the Company's Canadian operations have been translated into U.S. dollars using the exchange rate in effect at the end of the period. Revenues and expenses have been translated using the average exchange rates in effect each month of the period. Foreign exchange transaction gains and losses are recognized when incurred. The Company reclassifies to accounts payable checks issued in excess of funds available and reports them as cash flow from operating activities. The Company consolidates any entities in which it has a controlling interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation an entity in which the Company has certain interests where a controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity ("VIE"), is required to be consolidated by its primary beneficiary. The Company does not possess any ownership interests in franchisee entities; however, the Company may provide financial support to franchisee entities. Because the Company's franchise arrangements provide franchisee entities the power to direct the activities that most significantly impact their economic performance, the Company does not consider itself the primary beneficiary of any such entity that might be a VIE. Based on the results of management's analysis of potential VIEs, the Company has not consolidated any franchisee entities. The Company's maximum exposure to loss resulting from involvement with potential VIEs is attributable to accounts and notes receivables and future lease payments due from franchisees. When the Company does not have a controlling interest in an entity but has the ability to exert significant influence over the entity, the Company applies the equity method of accounting. Intercompany balances and transactions have been eliminated in consolidation. Other current assets is comprised of prepaid expenses and bank product fees and discounting, net.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information.  The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required only in annual financial statements.  The consolidated balance sheet data as of April 30, 2018 was derived from the Company’s April 30, 2018 Annual Report on Form 10-K filed on October 5, 2018, as amended by Amendment No. 1 to the Annual Report on Form 10-K filed on October 10, 2018.

In the opinion of management, all adjustments necessary for a fair presentation of such condensed consolidated financial statements in accordance with GAAP have been recorded.  These adjustments consisted only of normal recurring items.  The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its April 30, 2018 Annual Report on Form 10-K filed on October 5, 2018, as amended by Amendment No. 1 to the Annual Report on Form 10-K filed on October 10, 2018.

Office Count

The following table shows the U.S. office activity and the number of Canadian and Company-owned offices for the 2019, 2018, and 2017 tax seasons:

	Tax Season
	2019		2018		2017
U.S. Office Locations:
Permanent Office Locations:
Operated during the prior tax season	3,282		3,710		3,960
Offices opened	56		65		172
Offices closed	(547	)	(493	)	(422	)
Operated during the current tax season	2,791		3,282		3,710
Seasonal Office Locations:
Operated during the prior tax season	24		67		211
Offices opened	1		2		37
Offices closed	(9	)	(45	)	(181	)
Operated during the current tax season	16		24		67
Processing Centers	29		37		46
Total U.S. Office Locations	2,836		3,343		3,823
Canada Office Locations	272		267		254
Total Office Locations	3,108		3,610		4,077
Additional Office Information:
Company-owned offices	140		344		362
Franchised offices	2,968		3,266		3,715
Total Office Locations	3,108		3,610		4,077

SiempreTax+ is operating 45 offices during the 2019 tax season compared to 77 during the 2018 tax season and 159 during the 2017 tax season. These offices include second locations opened by current franchisees in existing territories, conversions of existing Liberty Tax offices and offices opened in new territories.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period, to prepare these condensed consolidated financial statements and accompanying notes in conformity with GAAP. Actual results could differ from those estimates.

Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." This update will replace existing lease guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The update is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently finalizing its implementation plan and evaluating the impact of the new pronouncement on its consolidated financial statements. The Company expects the adoption of this pronouncement to result in a material increase in the assets and liabilities on its consolidated balance sheets, but does not expect it to have a material impact on its consolidated statements of operations.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)", which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The update is intended to reduce the existing diversity in practice and is effective for the Company beginning with its first quarterly filing in fiscal year 2019. The Company adopted the update for all periods beginning on or after May 1, 2018.

In June 2016, the FASB issued ASU No. 2016-13, "Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which changes how companies will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost (which generally will result in the earlier recognition of allowances for losses) and requires companies to record allowances for available-for-sale debt securities, rather than reduce the carrying amount. In addition, companies will have to disclose significantly more information, including information used to track credit quality by year of origination, for most financing receivables. The ASU should be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the standard is effective. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The ASU is effective for the Company beginning in the first quarter of fiscal year 2021. The Company is currently evaluating the impact of the adoption of this newly issued standard to its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business", which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU is effective for the Company beginning in the first quarter of fiscal year 2019. The Company adopted the update for all periods beginning on or after May 1, 2018, and it did not have a material impact on the Company's current accounting for business combinations.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This new standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard will be effective for the Company in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this newly issued standard to its consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Codification ("ASC") 606, “Revenues from Contracts with Customers” ("ASC 606") which amends the guidance in ASC 605, “Revenue Recognition.” The core principle of this new standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. ASC 606 also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The adoption of this new standard did not materially impact the Company’s recognition of revenues generated from the following:

• Assisted tax preparation fees, net of discounts, which are recorded at the time the return is filed. The related discounts are recorded as reductions to revenues.

• Financial products, which are recorded at the time the return is filed. As a result of ASC 606, refund transfer products and refund-based loans revenues are now recorded net instead of gross.

• Royalties and advertising fees, which are based on a percentage of the franchisees’ sales are recognized at the time the underlying sales occur. The Company has elected to use the right to invoice practical expedient for recognition of minimum royalties.

• Interest income on notes receivable, which is recognized based on the outstanding principal note balance unless it is put on non-accrual status. Interest income on notes receivable that are placed on a non-accrual basis is recognized when cash is received. Interest income on accounts receivable is recognized based on the outstanding receivable balance over 30 days old, net of an allowance.

• Gains on sales of Company-owned offices, which are recognized when cash is received. Losses on sales of Company-owned offices are recognized immediately.

The details of the significant changes in revenue recognition and quantitative impact of the changes are discussed below.

Initial Franchise Fees

Typically, franchise rights are granted to franchisees for an initial term of five years with an option to renew at no additional cost. In exchange for initial franchise fees, royalties and advertising fees, the Company is obligated by its franchise agreements to provide training, an operations manual, site selection guidance, tax preparation software, operational assistance, tax and technical support, the ability to perform electronic filing, and marketing and advertising. Under the previous revenue recognition guidance, revenues from initial franchise fees were recognized when the obligations of the Company to prepare the franchisee for operation were substantially complete, up to the amount of cash received.

Under the new guidance, the standard requires that the transaction price received from customers be allocated to each separate and distinct performance obligation. The transaction price attributable to each separate and distinct performance obligation is then recognized as the performance obligations are satisfied. The services that the Company provides related to the initial franchise fees the Company receives from franchisees do not contain separate and distinct performance obligations from the franchise right. Accordingly, under the new standard, initial franchise fees, as constrained for amounts the Company does not expect to collect, will be recognized over the initial term of the franchise agreement, which is generally five years.

AD Fees

Historically, the rights to develop a new territory were granted to an AD for an initial term of six or ten years with an option to renew at no additional cost. Under the previous revenue recognition guidance, AD fees were recognized as revenue on a straight-line basis over the initial contract term of each AD agreement with the cumulative amount of revenue recognized not to exceed the amount of cash received. Under the new guidance, the standard requires the Company to recognize AD fees, as constrained for amounts not expected to be collected, over the initial term of the AD agreement.

The Company also sells a developed territory and simultaneously grants the right to operate as the exclusive AD in such developed territory to a new AD for an initial term of six years or ten years. Under the previous revenue recognition guidance, gains on sales of developed territories were recognized as revenues over the initial term, with the cumulative amount of revenues recognized not to exceed the amount of cash received. Losses on sales of developed territories were recognized immediately. Such gains and losses represented the difference between the transaction price and the net book value of the intangible asset recorded upon the Company’s reacquisition of the developed territory as of the date of the sale. Under the new guidance, the transaction price, as constrained for amounts the Company does not expect to collect, is recognized as revenues over the initial term of the AD agreement. The net book value of the intangible asset is charged to operating expenses at the date of the sale.

Electronic Filing Fees

Electronic filing fees are recorded in the period the tax return is electronically filed. Under the previous revenue recognition guidance, the electronic filing fees and the franchisees’ share in such fees were recorded as revenues and expense in the consolidated income statement, respectively. Under the new guidance, the electronic filing fees, net of the franchisees’ share in such fees, will be recorded as revenues in the consolidated statements of operations.

Transition Method

The Company applied the new guidance on all contracts that were not completed as of May 1, 2018 using the modified retrospective method, whereby the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of retained earnings at May 1, 2018 in the amount of $3.8 million, net of tax, with corresponding increases in deferred revenue and notes receivable. Therefore, the results of operations from the comparative period have not been adjusted and continue to be reported under the previous revenue recognition guidance.

Impacts on the Condensed Consolidated Financial Statements

The following tables summarize the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the nine months endedJanuary 31, 2019:

Condensed Consolidated Balance Sheet	As Reported			ASC 606 Adjustment			Balances Without Adoption of ASC 606
	(In thousands)
Notes receivable, current	$	69,513		$	1,543		$	67,970
Allowance for doubtful accounts - current	(10,878		)	344			(11,222		)
Income taxes receivable	16,329			(914		)	17,243
Notes receivable, non-current	11,435			90			11,345
Intangible assets, net	20,602			(169		)	20,771
Deferred income taxes	307			307			—
Total assets	237,084			1,203			235,881
Deferred revenue, current	4,593			147			4,446
Deferred revenue and other, non-current	5,199			4,528			671
Deferred income tax liability	1,723			(1,260		)	2,983
Total liabilities	163,743			921			162,822
Retained earnings	62,524			282			62,242
Total stockholders' equity	73,341			282			73,059
Total liabilities and stockholders’ equity	$	237,084		$	1,203		$	235,881

Condensed Consolidated Statement of Operations	As Reported			ASC 606 Adjustment			Balances Without Adoption of ASC 606
	(In thousands)
Franchise fees	$	1,602		$	1,129		$	473
Area Developer fees	2,665			1,070			1,595
Financial products	10,938			(2,732		)	13,670
Electronic filing fees	486			(3,280		)	3,766
Other revenues	1,165			132			1,033
Total revenues	46,824			(4,736		)	51,560
Selling, general, and administrative expenses	27,649			(7,069		)	34,718
Total operating expenses	92,030			(5,590		)	97,620
Loss from operations	(45,206		)	854			(46,060		)
Loss before income taxes	(47,412		)	2,332			(49,744		)
Income tax benefit	(14,858		)	749			(15,607		)
Net loss	$	(32,554	)	$	1,583		$	(34,137	)

There have been no other significant changes in the Company's condensed consolidated balance sheets or statements of operations and cash flows as a result of the adoption of ASC 606.

 Contract Balances

The following table provides information about receivables and contract liabilities (deferred revenue) from contracts with customers:

	January 31, 2019		April 30, 2018
	(In thousands)
Notes receivable (1)	$	80,948	$	30,849
Deferred revenue (2)	9,234		5,667

(1) Notes receivable increased by $1.7 million as of May 1, 2018 due to the change in the Company's revenue recognition policy for initial franchise and AD fees upon adoption of ASC 606.

(2) Deferred revenue increased $6.9 million as of May 1, 2018 due to the cumulative effect of adopting ASC 606.

Significant changes in deferred franchise and AD fees are as follows:

	Nine Months Ended
	January 31, 2019
	(In thousands)
Deferred franchise and AD fees at beginning of period	$	5,667
ASC 606 deferred franchise and AD fees adoption	6,940
Revenue recognized during the period	(4,267		)
New deferrals of franchise and AD fees	894
Deferred franchise and AD fees at end of period	$	9,234

Anticipated Future Recognition of Deferred Franchise and AD Fees

The following table reflects the estimated franchise and AD fees expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:

	Estimate for Fiscal Year
	(In thousands)
2019 (1)	$	938
2020	3,393
2021	2,488
2022	1,475
2023	667
Thereafter	273
Total	$	9,234

(1) Represents franchise and AD fees expected to be recognized for the remainder of fiscal 2019. The amount does not include $4.3 millionof franchise and AD fee revenues recognized for the nine months endedJanuary 31, 2019.

The Company has applied the optional exemption, as provided for under ASC 606, which allows the Company not to disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

Foreign Operations

Canadian operations contributed $0.7 million and $0.3 million in revenues for the three months ended January 31, 2019 and 2018, respectively, and $1.9 million and $1.7 million in revenues for the nine months endedJanuary 31, 2019 and 2018, respectively.

The Company may have exposure to foreign currency fluctuations due to transactions between its U.S. and Canadian subsidiaries.

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Restructuring Expense

9 Months Ended

Jan. 31, 2019

Restructuring and Related Activities [Abstract]

Restructuring Expense

Restructuring Expense

In the nine months endedJanuary 31, 2018, the Company began restructuring initiatives involving a review of Company-owned stores and service providers to improve the Company's overall long-term profitability. The Company incurred $9.3 million of expenses in the nine months endedJanuary 31, 2019 related to these initiatives. The expenses incurred are presented in the Restructuring expense line item in the consolidated statements of operations. The composition of the restructuring expenses incurred for the nine months endedJanuary 31, 2019 were as follows:

Expense	Cash		Accrued Expenses		Non-cash		Total Expense
	(In thousands)
Contract termination costs - maintenance	$	37	$	—	$	—	$	37
Property and intangible impairments and exit costs	1,486		2,263		5,559		9,308
Total	$	1,523	$	2,263	$	5,559	$	9,345

The property and intangible impairments and exit costs, which were primarily recorded in assets held for sale, were comprised of expenses related to lease obligations and non-cash charges associated with intangible write-downs. The accrued restructuring expenses of $2.3 million are included in "Accounts payable and accrued expenses" in the accompanying consolidated balance sheets.

A summary of the activity in accrued expenses related to restructuring initiatives for the nine months endedJanuary 31, 2019 is as follows:

	Contract termination costs - maintenance			Property and intangible impairments and exit costs			Total accrued expenses
	(In thousands)
Balance at beginning of period	$	1,359		$	—		$	1,359
Additions accrued against the liability	—			3,749			3,749
Cash payments	(669		)	(1,486		)	(2,155		)
Balance at end of period	$	690		2,263			$	2,953

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Notes and Accounts Receivable

9 Months Ended

Jan. 31, 2019

Receivables [Abstract]

Notes and Accounts Receivable

Accounts and Notes Receivable

The Company provides select financing to ADs and franchisees for the purchase of franchises, areas, Company-owned offices, and operating loans for working capital and equipment needs. The franchise-related notes generally are payable over five years and the operating loans generally are due within one year. Most notes bear interest at an annual rate of 12%. 

Most of the notes receivable are due from the Company's ADs and franchisees and are collateralized by the underlying franchise and, when the AD or franchise is an entity, are guaranteed by the owners of the respective entity. The debtors' ability to repay the notes is dependent upon both the performance of the tax preparation industry as a whole and the individual franchise or AD areas.

At January 31, 2019, the Company had unfunded lending commitments for working capital loans to franchisees and ADs of $16.9 million through the end of the current fiscal year.

Allowance for Doubtful Accounts

The adequacy of the allowance for doubtful accounts is assessed on a quarterly basis and adjusted as deemed necessary. Management believes the recorded allowance is adequate based upon its consideration of the estimated fair value of the franchises and AD areas collateralizing the receivables. Any adverse change in the tax preparation industry or the individual franchise or AD areas could affect the Company's estimate of the allowance.

Activity in the allowance for doubtful accounts for the three and nine months ended January 31, 2019 and 2018 was as follows: 

	Three Months Ended January 31,						Nine Months Ended January 31,
	2019			2018			2019			2018
	(In thousands)
Balance at beginning of period	$	13,562		$	9,849		$	12,487		$	12,021
Provision for doubtful accounts	1,804			4,410			5,798			7,865
Write-offs	(3,517		)	(5,330		)	(6,398		)	(11,054		)
Foreign currency adjustment	(25		)	64			(63		)	161
Balance at end of period	$	11,824		$	8,993		$	11,824		$	8,993

Management considers specific accounts and notes receivable to be impaired if the net amounts due exceed the fair value of the underlying franchise at the time of the annual valuation performed as of April 30 of each year, and estimates an allowance for doubtful accounts based on that excess. In establishing the fair value of the underlying franchise, management considers a variety of factors, including recent sales between franchisees, sales of Company-owned stores, net fees of open offices earned during the most recently completed tax season, and the number of unopened offices. The Company performs its impairment analysis annually due to the seasonal nature of its operations. At the end of each fiscal quarter, the Company considers the activity during the period for accounts and notes receivable impaired at each prior fiscal year end and adjusts the allowance for doubtful accounts accordingly. While not specifically identifiable as of the balance sheet date, the Company's analysis of its experience also indicates that a portion of other accounts and notes receivable may not be collectible. Net amounts due include contractually obligated accounts and notes receivable plus accrued interest, reduced by unrecognized revenue, the allowance for uncollected interest, amounts due ADs, and amounts owed to the franchisee by the Company.

The allowance for doubtful accounts at January 31, 2019, April 30, 2018 and January 31, 2018, was allocated as follows:

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Impaired:
Notes and interest receivable, net of unrecognized revenue	$	10,281		$	11,654		$	9,778
Accounts receivable	12,336			13,891			9,189
Less amounts due to ADs and franchisees	(905		)	(1,907		)	(817		)
Amounts receivable less amounts due to ADs and franchisees	$	21,712		$	23,638		$	18,150
Allowance for doubtful accounts for impaired notes and accounts receivable	$	10,341		$	10,322		$	8,013
Non-impaired:
Notes and interest receivable, net of unrecognized revenue	$	74,147		$	20,721		$	81,389
Accounts receivable	49,805			38,626			58,361
Less amounts due to ADs and franchisees	(9,055		)	(11,722		)	(11,213		)
Amounts receivable less amounts due to ADs and franchisees	$	114,897		$	47,625		$	128,537
Allowance for doubtful accounts for non-impaired notes and accounts receivable	$	1,483		$	2,165		$	980
Total:
Notes and interest receivable, net of unrecognized revenue	$	84,428		$	32,375		$	91,167
Accounts receivable	62,141			52,517			67,550
Less amounts due to ADs and franchisees	(9,960		)	(13,629		)	(12,030		)
Amounts receivable less amounts due to ADs and franchisees	$	136,609		$	71,263		$	146,687
Total allowance for doubtful accounts	$	11,824		$	12,487		$	8,993

The Company’s average investment in impaired receivables during the nine months ended January 31, 2019 and 2018 was $22.7 million and $21.2 million, respectively.

Analysis of Past Due Receivables

The breakdown of accounts and notes receivable past due at January 31, 2019 was as follows:

	Past due		Current		Interest receivable, net		Total receivables
	(In thousands)
Accounts receivable	$	33,290	$	28,851	$	—	$	62,141
Notes and interest receivable, net (1)	11,251		69,698		3,479		84,428
Total accounts, notes and interest receivable	$	44,541	$	98,549	$	3,479	$	146,569

(1)    Interest receivable is shown net of an allowance for uncollectible interest of $2.9 million.

Accounts receivable are considered to be past due if unpaid 30 days after billing, and notes receivable are considered past due if unpaid 90 days after the due date. If it is determined the likelihood of collecting substantially all of the notes and accrued interest is not probable, the notes are put on non-accrual status. The Company’s investment in notes receivable on non-accrual status was $11.3 million, $13.6 million and $9.8 million at January 31, 2019, April 30, 2018, and January 31, 2018, respectively. Payments received on notes in non-accrual status are applied to the principal until the note is current and then to interest income. Non-accrual notes that are paid current and expected to remain current are moved back into accrual status during the next annual review.

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Goodwill and Intangible Assets

9 Months Ended

Jan. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended January 31, 2019 and 2018 were as follows:

	January 31, 2019			January 31, 2018
	(In thousands)
Balance at beginning of period	$	8,640		$	8,576
Acquisitions of assets from franchisees and others	372			1,850
Disposals and foreign currency changes, net	(4,614		)	(184		)
Purchase price reallocation	—			(1,032		)
Transfers	2,950			—
Balance at end of period	$	7,348		$	9,210

Components of intangible assets were as follows as of January 31, 2019, April 30, 2018 and January 31, 2018:

	January 31, 2019
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	1,373	$	(1,096	)	$	277
Trade names	3 years	216		(119		)	97
Non-compete agreements	2 years	54		(52		)	2
Assets acquired from franchisees:
Customer lists	4 years	2,091		(1,248		)	843
Reacquired rights	2 years	1,711		(1,323		)	388
AD rights	9 years	32,002		(13,007		)	18,995
Total intangible assets		$	37,447	$	(16,845	)	$	20,602

	April 30, 2018
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	3,187	$	(1,555	)	$	1,632
Trade names	3 years	431		(172		)	259
Non-compete agreements	2 years	241		(145		)	96
Assets acquired from franchisees:
Customer lists	4 years	1,842		(1,427		)	415
Reacquired rights	2 years	1,436		(1,393		)	43
AD rights	9 years	30,907		(10,515		)	20,392
Total intangible assets		$	38,044	$	(15,207	)	$	22,837

	January 31, 2018
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	3,187	$	(1,390	)	$	1,797
Trade names	3 years	431		(136		)	295
Non-compete agreements	2 years	241		(115		)	126
Assets acquired from franchisees:
Customer lists	4 years	2,193		(1,642		)	551
Reacquired rights	2 years	1,712		(1,642		)	70
AD rights	9 years	29,932		(9,703		)	20,229
Total intangible assets		$	37,696	$	(14,628	)	$	23,068

The Company acquired $1.3 million and $3.5 million of AD rights during the nine months ended January 31, 2019 and 2018, respectively.

During the third quarter of fiscal 2019, the Company sold the assets of six unrelated offices of smaller regional or local accounting firms for $2.9 million of which $1.4 million is contingent and recorded a loss on sale of $1.1 million. In addition, the Company charged $0.2 million to impairment during the period, for the sale of the last remaining office subsequent to January 31, 2019. These offices performed year-round accounting services. The following table summarizes the assets that were sold as of January 31, 2019.

	January 31, 2019
	(In thousands)
Accounts Receivable	$	(111	)
Property, equipment and software, net	66
Customer lists	965
Trade names	130
Non-compete agreements	19
Goodwill	2,896
Total asset value	$	3,965

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Assets Held For Sale (Notes)

9 Months Ended

Jan. 31, 2019

Assets Held For Sale Disclosure [Abstract]

Assets Held for Sale

Assets Held For Sale

In the third quarter of fiscal 2019, the Company reclassified all assets associated with its U.S. Company-owned offices from assets held for sale to reacquired rights, customer lists, and goodwill. Amortization expense was recorded on a cumulative basis for reacquired rights and customer lists. Prior to the third quarter of fiscal 2019, assets acquired from U.S. franchisees were classified as assets held for sale. During the nine months ended January 31, 2019, the Company acquired $1.0 million in assets from U.S. franchisees and third parties that were first accounted for as business combinations, with the value allocated to customer lists and reacquired rights of $0.5 million and goodwill of $0.5 millionprior to being recorded as assets held for sale. During the nine months ended January 31, 2018, the Company acquired $7.0 million in assets from U.S. franchisees and third parties that were initially accounted for as business combinations, with the value allocated to customer lists and reacquired rights of $3.5 million and goodwill of $3.5 million prior to being recorded as assets held for sale. The acquired businesses are operated as Company-owned offices until a buyer is located and a new franchise agreement is entered into. During the nine months ended January 31, 2019, the Company sold, terminated, or impaired $4.9 million in assets from U.S. franchisees, of which $3.8 million was included in the Company's restructuring initiative.

Changes in the carrying amount of assets held for sale for the nine months ended January 31, 2019 and 2018 were as follows:

	Nine Months Ended January 31,
	2019			2018
	(In thousands)
Balance at beginning of period	$	8,941		$	11,989
Reacquired and acquired from third parties	945			6,992
Sold or terminated, impairments and other	(4,886		)	(6,911		)
Reclassification to reacquired rights, customer lists, and goodwill	(5,000		)	—
Balance at end of period	$	—		$	12,070

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Debt

9 Months Ended

Jan. 31, 2019

Debt Disclosure [Abstract]

Debt

Long-Term Obligations

The Company has a credit facility that consists of a term loan with an original principal amount of $21.2 million and a revolving credit facility that currently allows borrowing of up to $170.0 million with an accordion feature that permits the Company to request an increase in availability of up to an additional $50.0 million. Outstanding borrowings accrue interest, which is paid monthly at a rate of the one-month London Interbank Offered Rate ("LIBOR") plus a margin ranging from 1.50% to 2.25% depending on the Company’s leverage ratio.

The average interest rate paid during the nine months ended January 31, 2019 and 2018 was 3.87% and 2.99%, respectively. The indebtedness is collateralized by substantially all the assets of the Company, and both loans mature on April 30, 2019. 

The credit facility contains certain financial covenants that the Company must meet, including leverage and fixed-charge coverage ratios as well as minimum net worth requirements. In addition, the Company must reduce the outstanding balance under its revolving credit facility to zero for a period of at least 45 consecutive days each fiscal year. The Company was in compliance with the financial covenants at January 31, 2019. 

In December 2016, the Company obtained a mortgage payable to a bank in monthly installments of principal payments plus interest at the one-month LIBOR plus 1.85% through December 2026 with a balloon payment of $0.8 million due at maturity. The mortgage is collateralized by land and buildings.

Long-term obligations at January 31, 2019, April 30, 2018, and January 31, 2018 consisted of the following:

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Credit Facility:
Revolver	$	107,893		$	—		$	120,189
Term loan, net of debt issuance costs	11,974			14,855			15,376
Total credit facility	119,867			14,855			135,565
Long-Term Obligations
Term loan, net of debt issuance costs	11,974			14,855			15,376
Due former ADs, franchisees and third parties	1,791			3,490			4,198
Mortgages	1,944			2,038			2,070
	15,709			20,383			21,644
Less: current installments	(13,763		)	(18,113		)	(5,223		)
Long-term obligations, excluding current installments, net	$	1,946		$	2,270		$	16,421

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Income Taxes

9 Months Ended

Jan. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the U.S. on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. During the quarter ending January 31, 2018, the Company recorded provisional amounts related to the enactment-date effects of the Tax Act that included recording the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed and adjusting deferred tax assets and liabilities.

SAB 118 measurement period

The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Act throughout 2018. As of January 31, 2018, the Company recorded provision amounts for all of the enactment-date income tax effects of the Tax Act under ASC 740, Income Taxes, for the following aspects: remeasurement of deferred tax assets and liabilities, one-time transition tax, and tax on global intangible low-taxed income. As of January 31, 2019, the Company completed its accounting for all of the enactment-date income tax effects of the Tax Act. As further discussed below, during 2018 and the first month of 2019, the Company recognized adjustments to the provisional amounts recorded at January 31, 2018 and included these adjustments as a component of income tax expense from continuing operations.

One-time transition tax

The one-time transition tax is based on the Company’s total post-1986 earnings and profits, the tax on which the Company previously deferred from U.S. income taxes under U.S. law. The Company recorded a provisional amount for its one-time transition tax liability for each of its foreign subsidiaries, resulting in a transition tax liability of $1.2 million at January 31, 2018. Upon further analyses of the Tax Act and Notices and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, the Company finalized its calculations of the transition tax liability during 2018. The Company increased its January 31, 2018 provisional amount by $0.2 million, which is included as a component of income tax expense from continuing operations. The Company elected to pay its transition tax over the eight-year period provided in the Tax Act. As of January 31, 2019, the remaining balance of the Company’s transition tax obligation is $1.2 million, which will be paid over the next seven years.

Deferred tax assets and liabilities

As of January 31, 2018, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional income tax benefit of $1.6 million. Upon further analysis of certain aspects of the Tax Act and refinement of its calculations during the 12 months ended January 31, 2019, the Company adjusted its provisional amount by increasing the income tax benefit by $0.8 million, which is included as a component of income tax expense from continuing operations.

Global intangible low-taxed income (GILTI)

The Tax Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Because the Company evaluated the provision of GILTI as of January 31, 2018, the Company recorded no GILTI-related deferred amounts. After further consideration in the current year, the Company elected to account for GILTI in the year the tax is incurred as a period cost.

Similar to prior years, pre-tax book income estimated in the fourth quarter of fiscal 2019 is expected to offset pre-tax book loss for the nine months endedJanuary 31, 2019 due to the established pattern of seasonality in the Company's primary business operations. Management has determined it is at least more-likely-than-not that realization of tax benefits recorded in the Company's financial statements will occur during fiscal 2019. The amount of tax benefit recorded for the nine months endedJanuary 31, 2019 reflects the Company’s estimated annual effective tax rate applied to the year-to-date loss from continuing operations adjusted for the tax impact of discrete items.

The Company's effective tax rate from continuing operations, including discrete income tax items, was 182.0% and 31.3% for the three and nine months endedJanuary 31, 2019, respectively and (57.4)% and 35.7% for the three and nine months endedJanuary 31, 2018, respectively. The reduced effective tax rate results primarily from the decrease in the U.S. federal corporate income tax rate from 35% to 21%, effective after December 31, 2017.

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Stockholders' Equity

9 Months Ended

Jan. 31, 2019

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Stockholders' Equity Activity

During the nine months ended January 31, 2019 and 2018, activity in stockholders’ equity was as follows:

	Nine Months Ended January 31,
	2019		2018
	(In thousands, except for share amounts)
Class A common stock issued from the exercise of stock options	—		9,000
Class A common stock issued from the vesting of restricted stock and as director compensation	14,069		58,507
Class B common stock converted to Class A common stock	200,000		—
Exchangeable shares exchanged for Class A common stock	1,000,000		—
Proceeds from exercise of stock options	$	153	$	95
Stock-based compensation expense	$	733	$	2,523
Dividends declared	$	2,267	$	6,777

In July 2018, the holder of the Company's Class B common stock entered into a stock purchase agreement to sell all of his outstanding shares of the Company's Class A common stock and Class B common stock owned directly and indirectly by him. In connection with the sale, the shares of the Company’s Class B common stock converted into shares of the Company’s Class A common stock on a one-for-one basis and for no additional consideration. As of January 31, 2019, no shares of the Company’s Class B common stock remained outstanding. In addition, the sole holder of the Company’s exchangeable shares elected to exchange all of the exchangeable shares held by it for shares of the Company’s Class A common stock on a one-for-one basis and for no additional consideration. In connection with such exchange, the Company redeemed all ten of its outstanding shares of special voting preferred stock for a price of $1.00 per share. Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation, as approved by stockholders on December 13, 2018, the Company currently has only one class of common stock. As of January 31, 2019, no shares of the Company’s exchangeable shares or special voting preferred stock remained outstanding or authorized to issue.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss at January 31, 2019, April 30, 2018 and January 31, 2018 were as follows.

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Foreign currency adjustment	$	(1,685	)	$	(1,381	)	$	(1,008	)
Unrealized gain on interest rate swap agreement, net of taxes	12			34			18
Forward contracts related to foreign currency exchange rates	(25		)	—			—
Total accumulated other comprehensive loss	$	(1,698	)	$	(1,347	)	$	(990	)

Net Loss per Share

Net income (loss) per share of Class A and Class B common stock is computed using the two-class method. Basic net income (loss) per share is computed by allocating undistributed earnings to common stock and participating securities (exchangeable shares) and using the weighted-average number of common stock outstanding during the period.  Undistributed losses are not allocated to participating securities because they do not meet the required criteria for such allocation. 

Diluted net income (loss) per share is computed using the weighted-average number of common stock and, if dilutive, the potential common stock outstanding during the period. Potential common stock consists of the incremental common stock issuable upon the exercise of stock options and vesting of restricted stock units. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. Additionally, the computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock and exchangeable shares, if dilutive, while the diluted net loss per share of Class B common stock does not assume conversion of those shares.

The rights, including liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, with the exception of the election of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year had been distributed.  Participating securities have dividend rights that are identical to Class A and Class B common stock.

The computation of basic and diluted net loss per share for the three and nine months ended January 31, 2019 and 2018 is as follows:

	Three Months Ended   January 31, 2019					Three Months Ended   January 31, 2018
	Class A			Class B		Class A			Class B
	Common Stock			Common Stock		Common Stock			Common Stock
	(In thousands, except for share and per share amounts)
Basic and diluted net loss per share:
Numerator
Allocation of undistributed losses	$	(310	)	$	—	$	(1,499	)	$	(23	)
Amounts allocated to participating securities:
Exchangeable shares	—			—		108			2
Net loss attributable to common stockholders	$	(310	)	$	—	$	(1,391	)	$	(21	)
Denominator
Weighted-average common stock outstanding	14,043,218			—		12,734,941			200,000
Basic and diluted net loss per share	$	(0.02	)	$	—	$	(0.11	)	$	(0.11	)

Diluted net income (loss) per share excludes the impact of shares of potential common stock from the exercise of options to purchase 477,094 and 1,147,386 shares for the three months ended January 31, 2019 and 2018, respectively, because the effect would be anti-dilutive.

	Nine Months Ended   January 31, 2019						Nine Months Ended   January 31, 2018
	Class A			Class B			Class A			Class B
	Common Stock			Common Stock			Common Stock			Common Stock
	(In thousands, except for share and per share amounts)
Basic and diluted net loss per share:
Numerator
Allocation of undistributed losses	$	(32,399	)	$	(155	)	$	(24,005	)	$	(378	)
Denominator
Weighted-average common shares outstanding	13,653,184			65,217			12,707,039			200,000
Basic and diluted net loss per share	$	(2.37	)	$	(2.37	)	$	(1.89	)	$	(1.89	)

As a result of the net losses for the periods shown, diluted net loss per share excludes the impact of shares of potential common stock from the exercise of options to purchase 517,852 and 1,301,175 shares for the nine months endedJanuary 31, 2019 and 2018, respectively, because the effect would be anti-dilutive.

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Stock Compensation Plans

9 Months Ended

Jan. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Compensation Plans

Stock Compensation Plans

Stock Options

The Company has an equity and cash incentive plan, for the issuance of up to 2,500,000 shares of Class A common stock in which employees and outside directors are eligible to receive awards. At January 31, 2019, 1,442,211 shares of Class A common stock remain available for grant.

Stock option activity during the nine months ended January 31, 2019 was as follows:

	Number of options		Weighted average exercise price
Balance at beginning of period	472,503		$	17.41
Granted	704,514		10.20
Exercised	(14,069	)	10.90
Expired or forfeited	(366,704	)	17.99
Balance at end of period	796,244		$	10.88

Intrinsic value is defined as the fair value of the stock less the cost to exercise. The total intrinsic value of options exercised during the nine months ended January 31, 2019was less than $0.1 million. The total intrinsic value of stock options outstanding atJanuary 31, 2019was$1.2 million. Stock options vest from the date of grant to five years after the date of grant and expire from four to seven years after the vesting date.

Nonvested stock options activity during the nine months endedJanuary 31, 2019 was as follows: 

	Nonvested options		Weighted average exercise price
Balance at beginning of period	267,433		$	14.27
Granted	704,514		10.20
Vested	(92,207	)	9.49
Forfeited	(225,226	)	14.22
Balance at end of period	654,514		$	10.35

At January 31, 2019, unrecognized compensation costs related to nonvested stock options were $1.2 million. These costs are expected to be recognized through fiscal 2022.

The following table summarizes information about stock options outstanding and exercisable at January 31, 2019:

	Options Outstanding				Options Exercisable
Range of exercise prices	Number of shares outstanding	Weighted average exercise price		Weighted average remaining contractual life (in years)	Number of options exercisable	Weighted average exercise price
$0.00 - $10.89	572,569	$	9.78	6.2	50,000	$	8.30
$10.90 - $16.38	196,345	12.00		4.3	64,400	11.96
$16.39 - $26.17	18,858	22.57		1.5	18,858	22.57
$26.18 - $33.38	8,472	33.38		0.6	8,472	33.38
	796,244	$	10.88		141,730	$	13.36

Restricted Stock Units

Restricted stock activity during the nine months endedJanuary 31, 2019 was as follows:

	Number of restricted stock units		Weighted average fair value at grant date
Balance at beginning of period	127,030		$	12.48
Granted	147,991		10.40
Vested	(28,029	)	13.47
Forfeited	(77,770	)	12.31
Balance at end of period	169,222		$	10.56

At January 31, 2019, unrecognized compensation costs related to restricted stock units were $1.5 million. These costs are expected to be recognized through fiscal 2022.

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Fair Value of Financial Instruments

9 Months Ended

Jan. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities subject to fair value measurements on a recurring basis are classified according to a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Valuation methodologies for the fair value hierarchy are as follows:

• Level 1 — Quoted prices for identical assets and liabilities in active markets.

• Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

• Level 3 — Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company measures or monitors certain of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for those assets and liabilities for which fair value is the primary basis of accounting. Other assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The following tables present, at January 31, 2019, April 30, 2018 and January 31, 2018, for each of the fair value hierarchy levels, the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis (In thousands):

	January 31, 2019
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Interest rate swap agreement	$	16	$	—	$	16	$	—
Total recurring assets	16		—		16		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	12,276		—		—		12,276
Total nonrecurring assets	12,276		—		—		12,276
Total recurring and nonrecurring assets	$	12,292	$	—	$	16	$	12,276
Liabilities:
Recurring liabilities:
Forward contract related to foreign currency exchange rates	$	43	$	—	$	—	$	43
Contingent consideration included in obligations due to former ADs, franchisees and others	1,243		—		—		1,243
Total recurring liabilities	$	1,286	$	—	$	—	$	1,286

	April 30, 2018
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Cash equivalents	$	12,056	$	12,056	$	—	$	—
Interest rate swap agreement	57		—		57		—
Total recurring assets	12,113		12,056		57		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	15,223		—		—		15,223
Impaired goodwill	109		—		—		109
Impaired customer lists	4		—		—		4
Assets held for sale	8,941		—		—		8,941
Total nonrecurring assets	24,277		—		—		24,277
Total recurring and nonrecurring assets	$	36,390	$	12,056	$	57	$	24,277
Liabilities:
Recurring liabilities:
Contingent consideration included in obligations due to former ADs, franchisees and others	$	1,545	$	—	$	—	$	1,545
Total recurring liabilities	$	1,545	$	—	$	—	$	1,545

	January 31, 2018
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Interest rate swap agreement	$	29	$	—	$	29	$	—
Total recurring assets	29		—		29		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	$	10,954	$	—	$	—	$	10,954
Total nonrecurring assets	10,954		—		—		10,954
Total recurring and nonrecurring assets	$	10,983	$	—	$	29	$	10,954
Liabilities:							9539
Recurring liabilities:
Contingent consideration included in obligations due to former ADs, franchisees and others	3,219		—		—		3,219
Total recurring liabilities	$	3,219	$	—	$	—	$	3,219

The Company’s policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of level 1 or 2 requiring fair value measurements for each of the nine months ended January 31, 2019 and 2018.

The following methods and assumptions are used to estimate the fair value of our financial instruments.

Cash equivalents: The carrying amounts approximate fair value because of the short maturity of these instruments. Cash equivalent financial instruments consist of money market accounts.

Impaired accounts and notes receivable, net of unrecognized revenue: Accounts and notes receivable are considered to be impaired if the net amounts due exceed the fair value of the underlying franchise or if management considers it probable that all principal and interest will not be collected when contractually due. In establishing the estimated fair value of the underlying franchise, consideration is given to recent sales between franchisees, sales of Company-owned stores, the net fees of open offices, and the number of unopened offices.

Impaired goodwill, reacquired rights, and customer lists: Goodwill, reacquired rights and customer lists associated with a Company-owned office are considered to be impaired if the net carrying amount exceeds the fair value of the underlying office. In establishing the fair value of the underlying office, consideration is given to the related net fees and third-party transactions of franchises and when appropriate a discounted cash flow model.

Assets held for sale: The Company discontinued its use of assets held for sale in the third quarter of fiscal 2019. Prior to the discontinuation, assets held for sale are recorded at the lower of the carrying value or the sales price, less costs to sell, which approximates fair value. The sales price is calculated as a percentage of prior year net fees and marketplace transactions.

Contingent consideration included in obligations due to former ADs, franchisee and others: Obligations due to former ADs and franchisees related to estimated contingent consideration are carried at fair value. The fair value of these obligations was determined using a discounted cash flow model.

Interest rate swap agreement: Value of interest rate swap on variable rate mortgage debt. The fair value of this instrument was determined based on third-party market research.

Other Fair Value Measurements

Additionally, accounting standards require the disclosure of the estimated fair value of financial instruments that are not recorded at fair value. For the financial instruments that the Company does not record at fair value, estimates of fair value are made at a point in time based on relevant market data and information about the financial instrument. No readily available market exists for a significant portion of the Company's financial instruments. Fair value estimates for these instruments are based on current economic conditions, interest rate risk characteristics, and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. In addition, changes in assumptions could significantly affect these fair value estimates. The following methods and assumptions were used by the Company in estimating fair value of these financial instruments.

Notes receivable: The carrying amount approximates fair value because the interest rate charged by the Company on these notes approximates rates currently offered by local lending institutions for loans of similar terms to individuals/entities with comparable credit risk (Level 3).

Long-term obligations: The carrying amount approximates fair value because the interest rate paid has a variable component (Level 2).

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Related Party Transactions

9 Months Ended

Jan. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The Company considers directors and their affiliated companies, as well as named executive officers and members of their immediate families, to be related parties.

Nicole Ossenfort’s (Chief Executive Officer) franchise agreement

The Company is or was a participant in the following related party transactions with Ms. Ossenfort since the beginning of fiscal 2019:

Ossenfort Franchise. Ms. Ossenfort, together with her husband, Scott Ossenfort (together, with Ms. Ossenfort, the “Ossenforts”), jointly own a Company franchise through JL Enterprises. JL Enterprises borrows operating funds for working capital to operate the franchises each year. During the nine months endedJanuary 31, 2019, JL Enterprises did not borrow operating funds for working capital to operate the franchise. During the nine months endedJanuary 31, 2019, the Company has recorded $60,041 of accounts receivable from the Ossenforts for royalties, advertising and financial product charges, of which a balance of $15,621 remained outstanding and payable to the Company as of January 31, 2019.

Shaun York’s (Chief Operating Officer) franchises and AD agreements

The Company is or was a participant in the following related party transactions with Mr. York since the beginning of fiscal 2019:

York Franchises. Mr. York operates eleven Company franchises through Yorkompany LLC, S&P Holding Group LLC, My Business Group LLC and Core Fitness Partners LLC (the “York Franchise Entities”). The York Franchise Entities borrow operating funds from the Company for working capital to operate the franchises each year. During the nine months endedJanuary 31, 2019, the York Franchise Entities borrowed operating funds in the amount of $225,286, of which $217,377 remained outstanding and payable to the Company as of January 31, 2019. In addition, during the nine months endedJanuary 31, 2019, the Company recorded $58,626 of accounts receivable from the York Franchise Entities for royalties, advertising and financial product charges, of which $60,155 remained outstanding and payable to the Company as of January 31, 2019.

York AD. Mr. York has Area Development arrangements with the Company that are conducted through Yorkompany LLC, S&P Holding Group LLC and TNT Florida Investments LLC (the “York AD Entities”). The York AD Entities were acquired by Mr. York through various transactions with the Company and through third party agreements with AD sellers. In connection with those transactions, the York AD Entities financed a total of $4,059,460 through the Company to acquire the Area Development territories and associated rights. The loans are payable by the York AD Entities in annual installments at 12% interest. As of January 31, 2019, the aggregate outstanding principal balance owed by the York AD Entities on the notes was $1,789,040.

As of January 31, 2019, the Company had accounts receivable from the York AD Entities of $0. The York AD Entities earned $102,000 for their portion of franchise fees, royalties and interest during the nine months endedJanuary 31, 2019.

York Debt Guarantees. Mr. York also has entered into multiple guarantee agreements with the Company whereby Mr. York has guaranteed all or a portion of the indebtedness owed by other franchisees and ADs to the Company as related to certain financial transactions for which Mr. York had an interest. The indebtedness owed by these franchisees and ADs as of January 31, 2019 is approximately $3,606,236.

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Commitments and Contingencies

9 Months Ended

Jan. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In the ordinary course of operations, the Company may become a party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company's business, financial condition, cash flows, or results of operations except as provided below.

Delaware Derivative Litigation

Asbestos Workers’ Philadelphia Pension Fund, derivatively on behalf of Liberty Tax, Inc., v. John Hewitt, Defendant, and Liberty Tax, Inc., Nominal Defendant, Case No. 2017-0883, filed in the Court of Chancery of the State of Delaware on December 12, 2017. The Plaintiff alleges that the Company's former CEO, John T. Hewitt (“Hewitt”), breached his fiduciary duties as an officer based upon certain allegations of misconduct on his part. The Plaintiff also alleges breach of fiduciary duty against Hewitt in his capacity as a director of the Company. The Complaint seeks compensatory damages and attorney’s fees. No claim or relief is asserted against the Company, which is named solely as a Nominal Defendant.

Erie County Employees Retirement System, derivatively on behalf of Liberty Tax, Inc., v. John T. Hewitt, Defendant, and Liberty Tax, Inc., Nominal Defendant, Case No. 2017-0914, brought a second derivative suit filed in the Court of Chancery of the State of Delaware on December 22, 2017. The Plaintiff also alleges that Hewitt breached his fiduciary duties as an officer based upon certain allegations of misconduct on his part. The Plaintiff also alleges breach of fiduciary duty against Hewitt in his capacity as a director of the Company. The Complaint seeks to enjoin Hewitt from managing our business operations, and seeks compensatory damages and attorney’s fees.

On December 27, 2017, the two above-referenced shareholder matters were consolidated into the case with the caption In Re: Liberty Tax, Inc. Stockholder Litigation, C.A. No. 2017-0883(the "Delaware Action"). On April 17, 2018, the Plaintiffs filed an amended complaint (the "Amended Complaint"). The Amended Complaint added former directors, Gordon D’Angelo, Ellen McDowell, Nicole Ossenfort, and John Seal, with Hewitt as individual defendants (the “Individual Defendants”) and asserted class action allegations. The Plaintiffs seek (i) a declaration that the Individual Defendants have breached the Company's Nominating Committee Charter (now the Nominating & Corporate Governance Committee Charter); (ii) a declaration that the Individual Defendants have breached their fiduciary duties; (iii) an award to the Plaintiffs and the Class in the amount of damages sustained as a result of the Individual Defendants' breaches; (iv) certification of the action as a class action; (v) an award to the Company in the amount of damages sustained as a result of the Individual Defendants’ breaches of their fiduciary duties; (vi) a grant of further appropriate equitable relief to remedy the Individual Defendants’ breaches, including injunctive relief; (vii) an award to the Plaintiffs of the costs and disbursements of this action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs and expenses; and (viii) such further relief as the Court deems just and proper. The Company has answered the Amended Complaint and discovery is underway. The Individual Directors have filed a notice of motion to dismiss. No briefing schedule has been set on the motion. A mediation took place on November 12, 2018 but did not result in a resolution. A scheduling order has been entered which currently schedules trial in this matter to begin on March 18, 2019.

RSL Senior Partners LLC, derivatively and on behalf of Liberty Tax, Inc. v. Edward L. Brunot, John T. Hewitt, Kathleen E. Donovan, Gordon D’Angelo, John Garel, Thomas Herskovits, Robert M. Howard, Ross N. Longfield. Steven Ibbotson, Ellen M. McDowell, Nicole Ossenfort, George Robson and John Seal and Liberty Tax. Inc. (Nominal Defendant),Case No. 18 cv 127, filed on March 7, 2018 in the United States District Court for the Eastern District of Virginia (the “Virginia Action”). This purported shareholder derivative action was filed on behalf of the Company seeking to address the alleged wrongs of the Company’s directors and officers. The Complaint, which contains allegations that are substantially similar to the allegations in the Delaware Action, claims that certain conduct created an inappropriate tone at the top, resulting in the loss of key executives, employees, directors and otherwise harmed the Company. The Complaint asserts claims under Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Section 10(b) and Rule 10b-5 and Section 20(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The Complaint seeks the following relief: (a) declaring that the Plaintiff may maintain this action on behalf of the Company, and that the Plaintiff is an adequate representative of the Company; (b) declaring that the Individual Defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company; (c) determining and awarding to the Company the damages sustained by it as a result of the violations set forth above from each of the Individual Defendants, jointly and severally, together with pre-judgment and post-judgment interest thereon;  (d) directing the Company and the Individual Defendants to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect the Company and its shareholders from a repeat of the damaging events (e) awarding the Company restitution from Individual Defendants; and (f) awarding the Plaintiff the costs and disbursements of the action, including reasonable attorneys’ and experts’ fees, costs, and expenses

No claim or relief is asserted against the Company, which is named solely as a Nominal Defendant.

On July 30, 2018, various motions were filed: (i) Defendants Hewitt, McDowell, Ossenfort and Seal collectively moved to dismiss the Complaint; (ii) Defendants Garel, Herskovits, Howard, Ibbotson, Longfield, and Robson collectively moved to dismiss the Complaint; (iii) Defendants Brunot and Donovan collectively moved to dismiss the Complaint; (iv) Company moved to stay the action pending resolution of parallel state (Delaware) and/or federal (New York) proceedings (in which the Individual Defendants joined). Briefing on the motions is complete.

The Delaware and Virginia Actions are in the process of being settled. On January 25, 2019, the Company along with the named Individual Defendants entered into a Memorandum of Understanding (the “MOU”) with the Plaintiffs, regarding settlement of the Delaware Action which will result in certain enhancements to the Company’s code of conduct and training of employees, and disclosure of Nasdaq’s appeal ruling delisting the Company’s Class A common stock from Nasdaq which is furnished as Exhibit 99.1 herein. The Plaintiffs have agreed that the settlement, which is subject to the execution of a definitive settlement agreement and court approval, will include a dismissal of the lawsuits with prejudice and a release of all claims against the Company and the Individual Defendants asserted in the Delaware Action and the Virginia Action. If the parties to the MOU execute a stipulation of settlement, a hearing will be held at which the Delaware Court of Chancery will consider the fairness, reasonableness and adequacy of the settlement. In connection with the settlement, the Company will negotiate in good faith the amount of reasonable legal fees and expenses of the Plaintiffs’ counsel which will ultimately be paid by the Company and/or its insurance carrier. No agreement has been reached on the amount of the fees and expenses, which is subject to court approval.

The parties to the Virginia Action have also agreed that all claims in the Virginia Action have been settled and that the parties will seek to stay the Virginia Action pending the settlement proceedings in Delaware. The parties to the Virginia Action have agreed to dismiss the Virginia Action with prejudice within five business days of the settlement of the Delaware Action becoming final. The Company has agreed that it (and/or its insurance carrier) will pay $295,000 in fees and expenses to Plaintiffs' counsel in the Virginia Action in connection with settlement of the Virginia Action. The parties to the Virginia Action provided a joint status update to the Virginia court on February 27, 2019.

Settlement of the Virginia and Delaware Actions are expressly not to be construed as an admission of wrongdoing or liability by any defendant. The defendants have vigorously denied, and continue to vigorously deny, any wrongdoing or liability with respect to the facts and claims asserted, or which could have been asserted, in the Delaware and Virginia Actions , including that they have committed any violations of law or breach of fiduciary duty, aided and abetted any violations of law or breaches of fiduciary duty, acted improperly in any way or have any liability or owe any damages of any kind to the Plaintiffs or to the purported Class.  Nothing in this report shall be deemed an admission of the legal necessity or materiality under the federal securities laws, state fiduciary law or any other law, statute, rule or regulation of any of the disclosures set forth herein.

Eastern District of New York Securities Litigation

Rose Mauro, individually and on behalf of all others similarly situated v. Liberty Tax, Inc., Edward L. Brunot, John T. Hewitt, and Kathleen E. Donovan, filed in the United States District Court for the Eastern District of New York on January 12, 2018, Case No. 18 CV 245. The Plaintiff filed a securities class action asserting violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and a second count for violations of Section 20(a) of the Exchange Act against the individual defendants. According to the complaint, throughout the class period, the Company allegedly issued materially false and misleading statements and/or failed to disclose that: (1) Hewitt created an inappropriate tone at the top; (2) the inappropriate tone at the top led to ineffective entity level controls over the organization; and (3) as a result, defendants’ statements about the operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.

Patrick Beland, individually and on behalf of all others similarly situated vs. Liberty Tax, Inc., Edward L. Brunot, John T. Hewitt, and Kathleen E. Donovan, filed in the United States District Court for the Eastern District of New York on December 15, 2017, case number 17 CV 7327. The Plaintiff filed a securities class action asserting violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and a second count for violations of Section 20(a) of the Exchange Act against the individual defendants. According to the complaint, throughout the class period, the Company allegedly issued materially false and misleading statements and/or failed to disclose that: (1) Hewitt created an inappropriate tone at the top; (2) the inappropriate tone at the top led to ineffective entity level controls over the organization; and (3) as a result, defendants’ statements about the business, operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.

These actions were consolidated with the caption In Re Liberty Tax, Inc. Securities Litigation, Case No. 27 CV 07327 and IBEW Local 98 Pension Fund was appointed the Lead Plaintiff (the "Lead Plaintiff"). On June 12, 2018, the Lead Plaintiff filed its Consolidated Amended Class Action Complaint, which removed Brunot as a defendant, and added additional securities claim based on Section 14(a) of the Exchange Act and Rules 14a-3 and 14a-9. The Consolidated Amended Class Action Complaint, among other things, asserts that the Company’s SEC filings over a multi-year period failed to disclose the alleged misconduct of the individual defendants and that disclosure of the alleged misconduct caused the Company’s stock price to drop and, thereby harm the purported class of shareholders. The Class Period is alleged to be October 1, 2013 through February 23, 2018. The defendants filed a joint motion to dismiss the Consolidated Amended Class Action Complaint on September 17, 2018. The Lead Plaintiff served their opposition on November 1, 2018 and the defendants filed their reply brief on November 27, 2018. A mediation took place on November 12, 2018 but did not result in a resolution. The motion to dismiss is still pending before the Court.

Franchise Litigation

JTH Tax, Inc. and SiempreTax LLC v. Gregory Aime, Aime Consulting, LLC, Aime Consulting, Inc. and Wolf Ventures, Inc. The Company filed suit in the United States District Court for the Eastern District of Virginia against the defendants, former Company franchisees, on June 9, 2016, as amended on June 22, 2016, claiming the defendants breached the purchase and sale agreement (the “PSA”) entered between the parties on January 21, 2016 and that the defendants had failed to comply with the post termination obligations of the franchise agreements (together with the PSA, the “Aime Agreements”). The Company sought damages in an amount equal to three times the defendants’ earnings and profits, as well as injunctive relief to enforce the defendants to comply with the post termination obligations of the Aime Agreements, to be determined by the trier of fact. The Company specifically sought, in part, to enjoin the defendants from continued operation of a tax preparation business using the Company’s protected trademarks, enforcement of the non-compete provision of the Aime Agreements, and an order that the defendants assign all of the leases related to the franchised businesses to the Company. On July 1, 2016, the Magistrate Judge issued a report and recommendation finding a likelihood of success on the merits and recommending entry of the requested temporary restraining order (the “TRO”) in favor of the Company, which was adopted in part on August 3, 2016. On September 9, 2016, the defendants filed an answer and counterclaim against the Company, alleging breach of the PSA, breach of the implied covenant of good faith and fair dealing and fraud and seeking approximately $2.4 million in damages, plus future loss profits, punitive damages and other expenses.  After a three-day bench trial, on January 13, 2017, the court vacated the TRO, finding in favor of the defendants.  On February 15, 2017, the court issued its written opinion and order granting the defendants’ breach of contract and breach of the implied covenant of good faith and fair dealing claims, denying the Company’s claims against the defendants and finding certain post termination obligations to be unenforceable. Judgment was entered in favor of the defendants for approximately $2.7 million. The Company accrued $2.7 million as of the fourth quarter of fiscal 2017 in connection with the judgment, which is recorded in "Accounts payable and accrued expense" in the accompanying consolidated balance sheets. The Company has filed an appeal of the judgment with the Fourth Circuit Court of Appeals.

On August 8, 2018, the Fourth Circuit Court of Appeals issued an unpublished opinion affirming in part, vacating in part, and remanding to the District Court with instructions via the opinion. The Court of Appeals affirmed the District Courts finding that the Company breached the PSA first, however, the Court of Appeals concluded the District Court erred as a matter of law when it determined that the defendants were entitled to lost profits based on the purported extension of the PSA buyback deadline. The Court of Appeals held the alleged extension was not supported by independent consideration and thus not enforceable. It remanded the case for the District Court to recalculate damages consistent with said opinion.

On August 22, 2018, the defendants filed a petition for rehearing of the Fourth Circuit's decision. On September 5, 2018 the Fourth Circuit issued an order denying the petition for rehearing. On September 13, 2018 the Fourth Circuit issued a mandate that the judgment of the Fourth Circuit entered August 8, 2018 takes effect as of the same date of said filing. The matter has now officially been sent back to the District Court to recalculate damages consistent with the Fourth Circuit’s decision. The District Court entered an order on October 18, 2018 ordering Aime to provide the Court with a brief on damages within ten days of the entry of the Order and the Company has ten days to respond after the filing of the defendants' brief. The parties have filed their respective briefs and the Court held a hearing on damages on November 28, 2018. On November 29, 2018, the Court issued an order awarding Aime approximately $0.3 million in damages.

Before the District Court on remand, the parties briefed the question of what damages remained in place after the Court of Appeals’ ruling. On November 30, 2018, the District Court ruled that the Company remained liable to Aime for $0.3 million in damages. The court also ordered return of the Company's appeal bond. As a result of this ruling, the Company reduced the liability from $2.7 million to $0.3 million in the third quarter of fiscal 2019.

Aime filed a petition for certiorari in the United States Supreme Court on December 4, 2018. On January 7, 2019 the Supreme Court denied certiorari.

On December 28, 2018 Aime filed a motion for reconsideration of the District Court’s November 30, 2018 Order. On January 11, 2019 the Company filed its opposition to Aime’s motion for reconsideration. On January 17, 2019 Aime filed his reply memorandum in further support of his motion for reconsideration. The motion for reconsideration is fully briefed and pending before the court. The ultimate outcome of this action and the timing of such outcome is uncertain and there can be no assurance that the Company will benefit financially from such litigation.

Class Action Litigation

Rene Labrado v. JTH Tax, Inc. (Case BC 715076). On July 3, 2018, a class action complaint was filed in the Superior Court of California, County of Los Angeles by a former employee for herself and on behalf of all other “similarly situated” persons. The Complaint alleges, among other things, that the Company allegedly violated various provisions of the California Labor Code, including: unpaid overtime, unpaid meal period premiums, unpaid rest premiums, unpaid minimum wages, final wages not timely paid, wages not timely paid, non-compliant wage statements, failure to keep pay records, unreimbursed business expenses and violation of California Business and Profession Code Section 17200. The Complaint seeks actual, consequential and incidental losses and damages, injunctive relief and other damages. The Company highly disputes the allegations set forth in the Complaint and plans on filing a dispositive motion. The Company intends to defend the case vigorously.

Other Matters

From time to time, certain of our franchisees and Company-owned offices are the subject of IRS investigations to review their tax return preparation activities, and in certain cases the Department of Justice has sought injunctions and other remedies with respect to some of our former franchisees or area developers. In addition to those activities, the IRS has been conducting an investigation of our policies, practices and procedures in connection with such tax return preparation activities. We are cooperating fully with the government in connection with these matters, including by providing documents and other information. The Company is unable to predict what action, if any, might be taken in the future as a result of these matters or the impact, if any, of the cost of responding to the government or any potential remedies as a result of these matters could have on the Company. It is possible, however, that any such remedies could have a material adverse impact on the Company's consolidated results of operations, financial position, or cash flows.

The Company is also party to claims and lawsuits that are considered to be ordinary, routine litigation incidental to the business, including claims and lawsuits concerning the preparation of customers' income tax returns, the fees charged to customers for various products and services, relationships with franchisees, intellectual property disputes, employment matters, and contract disputes. Although the Company cannot provide assurance that it will ultimately prevail in each instance, it believes the amount, if any, it will be required to pay in the discharge of liabilities or settlements in these claims will not have a material adverse impact on its consolidated results of operations, financial position, or cash flows.

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Subsequent Event Subsequent Events (Notes)

9 Months Ended

Jan. 31, 2019

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Subsequent Events

None.

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Organization and Significant Accounting Policies (Policies)

9 Months Ended

Jan. 31, 2019

Accounting Policies [Abstract]

Description of Business

(1) Organization and Significant Accounting Policies

Description of Business

Liberty Tax, Inc. (the "Company"), a Delaware corporation, is a holding company engaged through its subsidiaries as a franchisor and, to a lesser degree, an operator of a system of income tax preparation offices located in the United States of America (the "U.S.") and Canada. The Company's principal operations are conducted through JTH Tax, Inc. (d/b/a Liberty Tax Service), the Company's largest subsidiary. Through this system of income tax preparation offices, the Company also facilitates refund-based tax settlement financial products, such as refund transfer products in the U.S. and personal income tax refund discounting products in Canada. The Company also offers online tax preparation services. In fiscal 2015, the Company changed its name from JTH Holding, Inc. to Liberty Tax, Inc.

The Company provides a substantial amount of lending to its franchisees and area developers ("ADs"). The Company allows franchisees and ADs to defer a portion of the franchise fee and AD fee, which are paid over time. The Company also offers its franchisees working capital loans to assist in funding their operations between tax seasons.

The Company’s operating revenues are seasonal in nature, with peak revenues occurring in the months of January through April.  Therefore, results for interim periods are not indicative of results to be expected for the full year.

Unless the context requires otherwise, the terms "Liberty Tax," "Liberty Tax Service," "we," the "Company," "us," and "our" refer to Liberty Tax, Inc. and its consolidated subsidiaries.

Basis of Presentation

Basis of Presentation

 The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Assets and liabilities of the Company's Canadian operations have been translated into U.S. dollars using the exchange rate in effect at the end of the period. Revenues and expenses have been translated using the average exchange rates in effect each month of the period. Foreign exchange transaction gains and losses are recognized when incurred. The Company reclassifies to accounts payable checks issued in excess of funds available and reports them as cash flow from operating activities. The Company consolidates any entities in which it has a controlling interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation an entity in which the Company has certain interests where a controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity ("VIE"), is required to be consolidated by its primary beneficiary. The Company does not possess any ownership interests in franchisee entities; however, the Company may provide financial support to franchisee entities. Because the Company's franchise arrangements provide franchisee entities the power to direct the activities that most significantly impact their economic performance, the Company does not consider itself the primary beneficiary of any such entity that might be a VIE. Based on the results of management's analysis of potential VIEs, the Company has not consolidated any franchisee entities. The Company's maximum exposure to loss resulting from involvement with potential VIEs is attributable to accounts and notes receivables and future lease payments due from franchisees. When the Company does not have a controlling interest in an entity but has the ability to exert significant influence over the entity, the Company applies the equity method of accounting. Intercompany balances and transactions have been eliminated in consolidation. Other current assets is comprised of prepaid expenses and bank product fees and discounting, net.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information.  The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required only in annual financial statements.  The consolidated balance sheet data as of April 30, 2018 was derived from the Company’s April 30, 2018 Annual Report on Form 10-K filed on October 5, 2018, as amended by Amendment No. 1 to the Annual Report on Form 10-K filed on October 10, 2018.

In the opinion of management, all adjustments necessary for a fair presentation of such condensed consolidated financial statements in accordance with GAAP have been recorded.  These adjustments consisted only of normal recurring items.  The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its April 30, 2018 Annual Report on Form 10-K filed on October 5, 2018

Office Count

Office Count

Use of Estimates

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period, to prepare these condensed consolidated financial statements and accompanying notes in conformity with GAAP. Actual results could differ from those estimates.

New Accounting Pronouncements, Policy

Accounting Pronouncements

Foreign Operations

Foreign Operations

Canadian operations contributed $0.7 million and $0.3 million in revenues for the three months ended January 31, 2019 and 2018, respectively

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Restructuring Expense (Tables)

9 Months Ended

Jan. 31, 2019

Restructuring and Related Activities [Abstract]

Schedule of restructuring costs

The composition of the restructuring expenses incurred for the nine months endedJanuary 31, 2019 were as follows:

Expense	Cash		Accrued Expenses		Non-cash		Total Expense
	(In thousands)
Contract termination costs - maintenance	$	37	$	—	$	—	$	37
Property and intangible impairments and exit costs	1,486		2,263		5,559		9,308
Total	$	1,523	$	2,263	$	5,559	$	9,345

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Notes and Accounts Receivable (Tables)

9 Months Ended

Jan. 31, 2019

Receivables [Abstract]

Schedule of activity in the allowance for doubtful accounts

Activity in the allowance for doubtful accounts for the three and nine months ended January 31, 2019 and 2018 was as follows: 

	Three Months Ended January 31,						Nine Months Ended January 31,
	2019			2018			2019			2018
	(In thousands)
Balance at beginning of period	$	13,562		$	9,849		$	12,487		$	12,021
Provision for doubtful accounts	1,804			4,410			5,798			7,865
Write-offs	(3,517		)	(5,330		)	(6,398		)	(11,054		)
Foreign currency adjustment	(25		)	64			(63		)	161
Balance at end of period	$	11,824		$	8,993		$	11,824		$	8,993

Schedule of allocation of allowance for doubtful accounts

The allowance for doubtful accounts at January 31, 2019, April 30, 2018 and January 31, 2018, was allocated as follows:

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Impaired:
Notes and interest receivable, net of unrecognized revenue	$	10,281		$	11,654		$	9,778
Accounts receivable	12,336			13,891			9,189
Less amounts due to ADs and franchisees	(905		)	(1,907		)	(817		)
Amounts receivable less amounts due to ADs and franchisees	$	21,712		$	23,638		$	18,150
Allowance for doubtful accounts for impaired notes and accounts receivable	$	10,341		$	10,322		$	8,013
Non-impaired:
Notes and interest receivable, net of unrecognized revenue	$	74,147		$	20,721		$	81,389
Accounts receivable	49,805			38,626			58,361
Less amounts due to ADs and franchisees	(9,055		)	(11,722		)	(11,213		)
Amounts receivable less amounts due to ADs and franchisees	$	114,897		$	47,625		$	128,537
Allowance for doubtful accounts for non-impaired notes and accounts receivable	$	1,483		$	2,165		$	980
Total:
Notes and interest receivable, net of unrecognized revenue	$	84,428		$	32,375		$	91,167
Accounts receivable	62,141			52,517			67,550
Less amounts due to ADs and franchisees	(9,960		)	(13,629		)	(12,030		)
Amounts receivable less amounts due to ADs and franchisees	$	136,609		$	71,263		$	146,687
Total allowance for doubtful accounts	$	11,824		$	12,487		$	8,993

Schedule of aging of accounts and notes receivable

The breakdown of accounts and notes receivable past due at January 31, 2019 was as follows:

	Past due		Current		Interest receivable, net		Total receivables
	(In thousands)
Accounts receivable	$	33,290	$	28,851	$	—	$	62,141
Notes and interest receivable, net (1)	11,251		69,698		3,479		84,428
Total accounts, notes and interest receivable	$	44,541	$	98,549	$	3,479	$	146,569

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Jan. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

Changes in the carrying amount of goodwill for the nine months ended January 31, 2019 and 2018 were as follows:

	January 31, 2019			January 31, 2018
	(In thousands)
Balance at beginning of period	$	8,640		$	8,576
Acquisitions of assets from franchisees and others	372			1,850
Disposals and foreign currency changes, net	(4,614		)	(184		)
Purchase price reallocation	—			(1,032		)
Transfers	2,950			—
Balance at end of period	$	7,348		$	9,210

Schedule of the amortizable other intangible assets

Components of intangible assets were as follows as of January 31, 2019, April 30, 2018 and January 31, 2018:

	January 31, 2019
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	1,373	$	(1,096	)	$	277
Trade names	3 years	216		(119		)	97
Non-compete agreements	2 years	54		(52		)	2
Assets acquired from franchisees:
Customer lists	4 years	2,091		(1,248		)	843
Reacquired rights	2 years	1,711		(1,323		)	388
AD rights	9 years	32,002		(13,007		)	18,995
Total intangible assets		$	37,447	$	(16,845	)	$	20,602

	April 30, 2018
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	3,187	$	(1,555	)	$	1,632
Trade names	3 years	431		(172		)	259
Non-compete agreements	2 years	241		(145		)	96
Assets acquired from franchisees:
Customer lists	4 years	1,842		(1,427		)	415
Reacquired rights	2 years	1,436		(1,393		)	43
AD rights	9 years	30,907		(10,515		)	20,392
Total intangible assets		$	38,044	$	(15,207	)	$	22,837

	January 31, 2018
	Weighted average amortization period	Gross carrying amount		Accumulated amortization			Net carrying amount
	(In thousands)
Customer lists acquired from unrelated third parties	5 years	$	3,187	$	(1,390	)	$	1,797
Trade names	3 years	431		(136		)	295
Non-compete agreements	2 years	241		(115		)	126
Assets acquired from franchisees:
Customer lists	4 years	2,193		(1,642		)	551
Reacquired rights	2 years	1,712		(1,642		)	70
AD rights	9 years	29,932		(9,703		)	20,229
Total intangible assets		$	37,696	$	(14,628	)	$	23,068

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Assets Held For Sale (Tables)

9 Months Ended

Jan. 31, 2019

Assets Held For Sale Disclosure [Abstract]

Rollforward of Assets Held for Sale

Changes in the carrying amount of assets held for sale for the nine months ended January 31, 2019 and 2018 were as follows:

	Nine Months Ended January 31,
	2019			2018
	(In thousands)
Balance at beginning of period	$	8,941		$	11,989
Reacquired and acquired from third parties	945			6,992
Sold or terminated, impairments and other	(4,886		)	(6,911		)
Reclassification to reacquired rights, customer lists, and goodwill	(5,000		)	—
Balance at end of period	$	—		$	12,070

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Debt (Tables)

9 Months Ended

Jan. 31, 2019

Debt Disclosure [Abstract]

Schedule of debt

Long-term obligations at January 31, 2019, April 30, 2018, and January 31, 2018 consisted of the following:

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Credit Facility:
Revolver	$	107,893		$	—		$	120,189
Term loan, net of debt issuance costs	11,974			14,855			15,376
Total credit facility	119,867			14,855			135,565
Long-Term Obligations
Term loan, net of debt issuance costs	11,974			14,855			15,376
Due former ADs, franchisees and third parties	1,791			3,490			4,198
Mortgages	1,944			2,038			2,070
	15,709			20,383			21,644
Less: current installments	(13,763		)	(18,113		)	(5,223		)
Long-term obligations, excluding current installments, net	$	1,946		$	2,270		$	16,421

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Stockholders' Equity (Tables)

9 Months Ended

Jan. 31, 2019

Equity [Abstract]

Schedule of activity in stockholders' equity

During the nine months ended January 31, 2019 and 2018, activity in stockholders’ equity was as follows:

	Nine Months Ended January 31,
	2019		2018
	(In thousands, except for share amounts)
Class A common stock issued from the exercise of stock options	—		9,000
Class A common stock issued from the vesting of restricted stock and as director compensation	14,069		58,507
Class B common stock converted to Class A common stock	200,000		—
Exchangeable shares exchanged for Class A common stock	1,000,000		—
Proceeds from exercise of stock options	$	153	$	95
Stock-based compensation expense	$	733	$	2,523
Dividends declared	$	2,267	$	6,777

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The components of accumulated other comprehensive loss at January 31, 2019, April 30, 2018 and January 31, 2018 were as follows.

	January 31, 2019			April 30, 2018			January 31, 2018
	(In thousands)
Foreign currency adjustment	$	(1,685	)	$	(1,381	)	$	(1,008	)
Unrealized gain on interest rate swap agreement, net of taxes	12			34			18
Forward contracts related to foreign currency exchange rates	(25		)	—			—
Total accumulated other comprehensive loss	$	(1,698	)	$	(1,347	)	$	(990	)

Schedule of computation of basic and diluted net income (loss) per share

The computation of basic and diluted net loss per share for the three and nine months ended January 31, 2019 and 2018 is as follows:

	Three Months Ended   January 31, 2019					Three Months Ended   January 31, 2018
	Class A			Class B		Class A			Class B
	Common Stock			Common Stock		Common Stock			Common Stock
	(In thousands, except for share and per share amounts)
Basic and diluted net loss per share:
Numerator
Allocation of undistributed losses	$	(310	)	$	—	$	(1,499	)	$	(23	)
Amounts allocated to participating securities:
Exchangeable shares	—			—		108			2
Net loss attributable to common stockholders	$	(310	)	$	—	$	(1,391	)	$	(21	)
Denominator
Weighted-average common stock outstanding	14,043,218			—		12,734,941			200,000
Basic and diluted net loss per share	$	(0.02	)	$	—	$	(0.11	)	$	(0.11	)

Diluted net income (loss) per share excludes the impact of shares of potential common stock from the exercise of options to purchase 477,094 and 1,147,386 shares for the three months ended January 31, 2019 and 2018, respectively, because the effect would be anti-dilutive.

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Stock Compensation Plans (Tables)

9 Months Ended

Jan. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of information about stock options outstanding and exercisable

The following table summarizes information about stock options outstanding and exercisable at January 31, 2019:

	Options Outstanding				Options Exercisable
Range of exercise prices	Number of shares outstanding	Weighted average exercise price		Weighted average remaining contractual life (in years)	Number of options exercisable	Weighted average exercise price
$0.00 - $10.89	572,569	$	9.78	6.2	50,000	$	8.30
$10.90 - $16.38	196,345	12.00		4.3	64,400	11.96
$16.39 - $26.17	18,858	22.57		1.5	18,858	22.57
$26.18 - $33.38	8,472	33.38		0.6	8,472	33.38
	796,244	$	10.88		141,730	$	13.36

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

Restricted stock activity during the nine months endedJanuary 31, 2019 was as follows:

	Number of restricted stock units		Weighted average fair value at grant date
Balance at beginning of period	127,030		$	12.48
Granted	147,991		10.40
Vested	(28,029	)	13.47
Forfeited	(77,770	)	12.31
Balance at end of period	169,222		$	10.56

Schedule of stock option activity

Stock option activity during the nine months ended January 31, 2019 was as follows:

	Number of options		Weighted average exercise price
Balance at beginning of period	472,503		$	17.41
Granted	704,514		10.20
Exercised	(14,069	)	10.90
Expired or forfeited	(366,704	)	17.99
Balance at end of period	796,244		$	10.88

Schedule of nonvested (options that did not vest in the period in which granted) stock option activity

Nonvested stock options activity during the nine months endedJanuary 31, 2019 was as follows: 

	Nonvested options		Weighted average exercise price
Balance at beginning of period	267,433		$	14.27
Granted	704,514		10.20
Vested	(92,207	)	9.49
Forfeited	(225,226	)	14.22
Balance at end of period	654,514		$	10.35

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Jan. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis, for each of the fair value hierarchy levels

The following tables present, at January 31, 2019, April 30, 2018 and January 31, 2018, for each of the fair value hierarchy levels, the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis (In thousands):

	January 31, 2019
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Interest rate swap agreement	$	16	$	—	$	16	$	—
Total recurring assets	16		—		16		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	12,276		—		—		12,276
Total nonrecurring assets	12,276		—		—		12,276
Total recurring and nonrecurring assets	$	12,292	$	—	$	16	$	12,276
Liabilities:
Recurring liabilities:
Forward contract related to foreign currency exchange rates	$	43	$	—	$	—	$	43
Contingent consideration included in obligations due to former ADs, franchisees and others	1,243		—		—		1,243
Total recurring liabilities	$	1,286	$	—	$	—	$	1,286

	April 30, 2018
			Fair value measurements using
	Total		Level 1		Level 2		Level 3
Assets:
Recurring assets:
Cash equivalents	$	12,056	$	12,056	$	—	$	—
Interest rate swap agreement	57		—		57		—
Total recurring assets	12,113		12,056		57		—
Nonrecurring assets:
Impaired accounts and notes receivable, net of unearned revenue	15,223		—		—		15,223
Impaired goodwill	109		—		—		109
Impaired customer lists	4		—		—		4
Assets held for sale	8,941		—		—		8,941
Total nonrecurring assets	24,277		—		—		24,277
Total recurring and nonrecurring assets	$	36,390	$	12,056	$	57	$	24,277
Liabilities:
Recurring liabilities:
Contingent consideration included in obligations due to former ADs, franchisees and others	$	1,545	$	—	$	—	$	1,545
Total recurring liabilities	$	1,545	$	—	$	—	$	1,545

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Organization and Significant Accounting Policies (Details)	3 Months Ended			6 Months Ended	9 Months Ended
	Jan. 31, 2019 USD ($) office	Jan. 31, 2018 USD ($) office	Oct. 31, 2017 USD ($)	Oct. 31, 2017 USD ($)	Jan. 31, 2019 USD ($) office	Jan. 31, 2018 USD ($) office	Jan. 31, 2017 office	Apr. 30, 2018 USD ($)
Geographical concentration
Finite-lived Intangible Assets Reacquired and Acquired						$ 6,992,000
Significant Changes, Franchises Closed | office					(547)	(493)	(422)
Significant Changes, Franchised Outlets in Operation | office	2,791	3,282			2,791	3,282	3,710
franchised offices | office					2,968	3,266	3,715
office locations | office					3,108	3,610	4,077
company-owned offices | office					140	344	362
franchises opened during prior tax season | office					3,282	3,710	3,960
Significant Changes, Franchises Opened | office					56	65	172
Processing Centers | office					29	37	46
Fresh-Start Adjustment, Increase (Decrease), Retained Earnings (Deficit)	$ 1.7				$ 1.7
Deferred Revenue Balance at beginning of period prior to adopting Topic 606					5,667,000
Receivables from Customers	80,948,000				80,948,000			$ 30,849,000
Franchisor Revenue	596,000	$ 90,000			1,602,000	$ 354,000
Area Developer Revenue	1,018,000	507,000			2,665,000	2,209,000
Financial Products Revenue	9,882,000	18,106,000			10,938,000	19,324,000
Electronic Filing Fee Revenue	428,000	2,872,000			486,000	2,872,000
Operating Income (Loss)	1,507,000	(195,000)			(45,206,000)	(36,443,000)
Notes, Loans and Financing Receivable, Gross, Current	69,513,000	69,015,000			69,513,000	69,015,000		24,295,000
Revenues	32,884,000	48,244,000			46,824,000	64,202,000
General and Administrative Expense	6,294,000	22,366,000			27,649,000	41,120,000
Operating Expenses	31,377,000	48,439,000			92,030,000	100,645,000
Other Revenue, Net	132,000	1,222,000			1,165,000	3,423,000
Allowance for Doubtful Accounts Notes and Interest Receivable Current	10,878,000	7,987,000			10,878,000	7,987,000		11,522,000
Income Taxes Receivable, Current	16,329,000	14,820,000			16,329,000	14,820,000		0
Notes, Loans and Financing Receivable, Gross, Noncurrent	11,435,000	17,676,000			11,435,000	17,676,000		6,554,000
Intangible Assets, Net (Excluding Goodwill)	20,602,000	23,068,000			20,602,000	23,068,000		22,837,000
Deferred Income Taxes and Other Assets, Noncurrent	307,000	174,000			307,000	174,000		343,000
Assets	237,084,000	275,208,000			237,084,000	275,208,000		178,003,000
Deferred Revenue, Current	4,593,000	2,024,000			4,593,000	2,024,000		2,021,000
Deferred Revenue, Noncurrent	5,199,000	5,193,000			5,199,000	5,193,000		4,692,000
Deferred Tax Liabilities, Net, Noncurrent	1,723,000	3,682,000			1,723,000	3,682,000		1,397,000
Liabilities	163,743,000	186,501,000			163,743,000	186,501,000		66,501,000
Retained Earnings (Accumulated Deficit)	62,524,000	78,869,000			62,524,000	78,869,000		101,139,000
Stockholders' Equity Attributable to Parent	73,341,000	88,707,000			73,341,000	88,707,000		111,502,000
Liabilities and Equity	237,084,000	275,208,000			237,084,000	275,208,000		178,003,000
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	378,000	(967,000)				(37,933,000)
Income Tax Expense (Benefit)	688,000	555,000				(13,550,000)
Net Income (Loss) Attributable to Parent	(310,000)	$ (1,522,000)			(32,554,000)	$ (24,383,000)
Contract with Customer, Liability	9,234,000				9,234,000			$ 5,667,000
Deferred Revenue, Increase, cumulative effect of adopting Topic 606	6,940,000				6,940,000
Former Gain Contingency, Recognized in Current Period	(4,267,000)				(4,267,000)
New Deferrals of franchise and AD fees					894,000
Deferred Revenue at the end of period, with adoption of Topic 606					9,234,000
Deferred Revenue, Revenue Recognized					$ 0
Total office locations | office					3,108	3,610	4,077
us franchise locations | office					2,836	3,343	3,823
Canada office locations | office					272	267	254
UNITED STATES
Geographical concentration
Finite-lived Intangible Assets Reacquired and Acquired					$ 945,000	$ 7,000,000
CANADA
Geographical concentration
Revenues	700,000		$ 300,000	$ 1,700,000	1,900,000
Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Geographical concentration
Franchisor Revenue					1,129,000
Area Developer Revenue					1,070,000
Financial Products Revenue					(2,732,000)
Electronic Filing Fee Revenue					(3,280,000)
Operating Income (Loss)					854,000
Notes, Loans and Financing Receivable, Gross, Current	1,543,000				1,543,000
Revenues					(4,736,000)
General and Administrative Expense					(7,069,000)
Operating Expenses					(5,590,000)
Other Revenue, Net					132,000
Allowance for Doubtful Accounts Notes and Interest Receivable Current	344,000				344,000
Income Taxes Receivable, Current	(914,000)				(914,000)
Notes, Loans and Financing Receivable, Gross, Noncurrent	90,000				90,000
Intangible Assets, Net (Excluding Goodwill)	(169,000)				(169,000)
Deferred Income Taxes and Other Assets, Noncurrent	307,000				307,000
Assets	1,203,000				1,203,000
Deferred Revenue, Current	147,000				147,000
Deferred Revenue, Noncurrent	4,528,000				4,528,000
Deferred Tax Liabilities, Net, Noncurrent	(1,260,000)				(1,260,000)
Liabilities	921,000				921,000
Retained Earnings (Accumulated Deficit)	282,000				282,000
Stockholders' Equity Attributable to Parent	282,000				282,000
Liabilities and Equity	1,203,000				1,203,000
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest					2,332,000
Income Tax Expense (Benefit)					749,000
Net Income (Loss) Attributable to Parent					1,583,000
Balance as Reported [Member]
Geographical concentration
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest					(47,412,000)
Income Tax Expense (Benefit)					(14,858,000)
Net Income (Loss) Attributable to Parent					(32,554,000)
Balance, without adoption of Topic 606 [Member]
Geographical concentration
Franchisor Revenue					473,000
Area Developer Revenue					1,595,000
Financial Products Revenue					13,670,000
Electronic Filing Fee Revenue					3,766,000
Operating Income (Loss)					(46,060,000)
Notes, Loans and Financing Receivable, Gross, Current	67,970,000				67,970,000
Revenues					51,560,000
General and Administrative Expense					34,718,000
Operating Expenses					97,620,000
Other Revenue, Net					1,033,000
Allowance for Doubtful Accounts Notes and Interest Receivable Current	(11,222,000)				(11,222,000)
Income Taxes Receivable, Current	17,243,000				17,243,000
Notes, Loans and Financing Receivable, Gross, Noncurrent	11,345,000				11,345,000
Intangible Assets, Net (Excluding Goodwill)	20,771,000				20,771,000
Deferred Income Taxes and Other Assets, Noncurrent	0				0
Assets	235,881,000				235,881,000
Deferred Revenue, Current	4,446,000				4,446,000
Deferred Revenue, Noncurrent	671,000				671,000
Deferred Tax Liabilities, Net, Noncurrent	2,983,000				2,983,000
Liabilities	162,822,000				162,822,000
Retained Earnings (Accumulated Deficit)	62,242,000				62,242,000
Stockholders' Equity Attributable to Parent	73,059,000				73,059,000
Liabilities and Equity	$ 235,881,000				235,881,000
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest					(49,744,000)
Income Tax Expense (Benefit)					(15,607,000)
Net Income (Loss) Attributable to Parent					$ (34,137,000)
seasonal office location [Member]
Geographical concentration
Significant Changes, Franchises Closed | office					(9)	(45)	(181)
Significant Changes, Franchised Outlets in Operation | office	16	24			16	24	67
franchises opened during prior tax season | office					24	67	211
Significant Changes, Franchises Opened | office					1	2	37

XML

Organization and Significant Accounting Policies Organization and Significant Accounting Policies 2 (Details) $ in Thousands	9 Months Ended
	Jan. 31, 2019 USD ($) office	Jan. 31, 2018 office	Jan. 31, 2017 office
Siempre Offices Operated	45	77	159
franchises opened during prior tax season	3,282	3,710	3,960
Deferred Revenue Balance at beginning of period prior to adopting Topic 606 | $	$ 5,667
Significant Changes, Franchises Opened	56	65	172
Significant Changes, Franchises Closed	(547)	(493)	(422)
Significant Changes, Franchised Outlets in Operation	2,791	3,282	3,710
Processing Centers	29	37	46
us franchise locations	2,836	3,343	3,823
Canada office locations	272	267	254
office locations	3,108	3,610	4,077
company-owned offices	140	344	362
franchised offices	2,968	3,266	3,715
Total office locations	3,108	3,610	4,077
seasonal office location [Member]
franchises opened during prior tax season	24	67	211
Significant Changes, Franchises Opened	1	2	37
Significant Changes, Franchises Closed	(9)	(45)	(181)
Significant Changes, Franchised Outlets in Operation	16	24	67

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Organization and Significant Accounting Policies Organization and Significant Accounting Policies 3 (Details) $ in Thousands	Jan. 31, 2019 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-30
Revenue, Remaining Performance Obligation	$ 938
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-30
Revenue, Remaining Performance Obligation	3,393
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-30
Revenue, Remaining Performance Obligation	2,488
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-30
Revenue, Remaining Performance Obligation	1,475
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-30
Revenue, Remaining Performance Obligation	667
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-30
Revenue, Remaining Performance Obligation	273
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil)
Revenue, Remaining Performance Obligation	$ 9,234

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Restructuring Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended	9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Oct. 31, 2017	Jan. 31, 2019	Jan. 31, 2018	Apr. 30, 2018
Restructuring Cost and Reserve [Line Items]
Cash				$ 1,523
Accrued Expenses				2,263
Non-cash				5,559
Total Expense	$ 0	$ (9)	$ 3,371	9,345	$ 3,362
Beginning Balance [Member]
Restructuring Cost and Reserve [Line Items]
Contract Termination Costs, Maintenance						$ 1,359
Property and Intangible Impairments and Exit Costs						0
Accrued Expenses, Total						$ 1,359
Additions Accrued Against the Liability [Member]
Restructuring Cost and Reserve [Line Items]
Contract Termination Costs, Maintenance	0			0
Restructuring Reserve, Accrued Expenses				3,749
Property and Intangible Impairments and Exit Costs	3,749			3,749
Payments for Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
Contract Termination Costs, Maintenance	(669)			(669)
Restructuring Reserve, Accrued Expenses				(2,155)
Property and Intangible Impairments and Exit Costs	(1,486)			(1,486)
Balance at the end of Period [Member]
Restructuring Cost and Reserve [Line Items]
Contract Termination Costs, Maintenance	690			690
Restructuring Reserve, Accrued Expenses				2,953
Property and Intangible Impairments and Exit Costs	$ 2,263			2,263
Contract Termination Costs, Maintenance [Member]
Restructuring Cost and Reserve [Line Items]
Cash				37
Restructuring Reserve, Accrued Expenses				0
Restructuring Reserve, Settled without Cash				0
Non-cash				37
Property and Intangible Impairments and Exit Costs [Member]
Restructuring Cost and Reserve [Line Items]
Cash				1,486
Restructuring Reserve, Accrued Expenses				2,263
Restructuring Reserve, Settled without Cash				5,559
Non-cash				9,308
Accounts Payable and Accrued Liabilities [Member] | Contract Termination Costs, Maintenance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve, Accrued Expenses				$ 0

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Restructuring Expense - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended	9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Oct. 31, 2017	Jan. 31, 2019	Jan. 31, 2018
Restructuring Cost and Reserve [Line Items]
Payments for Restructuring				$ 1,523
Restructuring costs	$ 0	$ (9)	$ 3,371	9,345	$ 3,362
Property and Intangible Impairments and Exit Costs [Member]
Restructuring Cost and Reserve [Line Items]
Payments for Restructuring				$ 1,486

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Accounts and Notes Receivables (Details) - USD ($) $ in Thousands	9 Months Ended
	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018
Schedule of Activity Related to Notes Receivable
Notes, Loans and Financing Receivable, Gross, Current	$ 69,513	$ 24,295	$ 69,015
Notes, Loans and Financing Receivable, Gross, Noncurrent	11,435	6,554	17,676
Activity related to notes receivable
Amounts payable to area developers for their share of receivables	9,818	$ 17,906	$ 11,742
Accounts and Notes Receivable, Unfunded Lending Commitments for Working Capital Loans to Franchisees and Area Developers	$ 16,900
Franchise-related notes
Activity related to notes receivable
Notes Receivable	5 years
Interest rate (as a percent)	12.00%
Working capital and equipment notes
Activity related to notes receivable
Notes Receivable	1 year

XML

Accounts and Notes Receivable Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended	9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Oct. 31, 2017	Jan. 31, 2019	Jan. 31, 2018	Jul. 31, 2018	Apr. 30, 2018	Jul. 31, 2017	Apr. 30, 2017
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Average Recorded Investment			$ 21,200	$ 22,700
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	$ 9,960	$ 12,030		9,960	$ 12,030		$ 13,629
Accounts and Notes Receivable, Net	136,609	146,687		136,609	146,687		71,263
Allowance for Doubtful Accounts Receivable Additions Charged to Expenses	1,804	4,410		5,798	7,865
Allowance for Doubtful Accounts Receivable, Write-offs	(3,517)	(5,330)		(6,398)	(11,054)
Allowance for Doubtful Accounts Receivable Foreign Currency Adjustment	(25)	64		63	161
Allowance for Doubtful Accounts Receivable	11,824	8,993		11,824	8,993	$ 13,562	12,487	$ 9,849	$ 12,021
Accounts and Notes Receivable, Unfunded Lending Commitments for Working Capital Loans to Franchisees and Area Developers	16,900			16,900
Impaired Accounts Notes Loans and Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	905	817		905	817		1,907
Accounts and Notes Receivable, Net	21,712	18,150		21,712	18,150		23,638
Allowance for Doubtful Accounts Receivable, Current	10,341	8,013		10,341	8,013		10,322
Nonimpaired Accounts Notes Loans and Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	9,055	11,213		9,055	11,213		11,722
Accounts and Notes Receivable, Net	114,897	128,537		114,897	128,537		47,625
Allowance for Doubtful Accounts Receivable, Current	1,483	980		1,483	980		2,165
Notes Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable Gross	84,428	91,167		84,428	91,167		32,375
Notes Receivable [Member] | Impaired Accounts Notes Loans and Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable Gross	10,281	9,778		10,281	9,778		11,654
Notes Receivable [Member] | Nonimpaired Accounts Notes Loans and Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable Gross	74,147	81,389		74,147	81,389		20,721
Trade Accounts Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable Gross	62,141	67,550		62,141	67,550		52,517
Trade Accounts Receivable [Member] | Impaired Accounts Notes Loans and Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable Gross	12,336	9,189		12,336	9,189		13,891
Trade Accounts Receivable [Member] | Nonimpaired Accounts Notes Loans and Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Accounts and Notes Receivable Gross	$ 49,805	$ 58,361		$ 49,805	$ 58,361		$ 38,626

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Analysis of Past Due Receivables (Details) - USD ($) $ in Thousands	9 Months Ended
	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018
Aging of accounts and notes receivable
Interest receivable, net of allowance for uncollectible amount	$ 2,900
Past due	44,541
Interest receivable, net	98,549
Financing Receivable Allowance for Uncollected Interest	3,479
Total receivables	146,569
Accounts receivable
Aging of accounts and notes receivable
Past due	33,290
Interest receivable, net	28,851
Financing Receivable Allowance for Uncollected Interest	0
Total receivables	$ 62,141
Past due period	30 days
Notes receivable
Aging of accounts and notes receivable
Past due	$ 11,251
Interest receivable, net	69,698
Financing Receivable Allowance for Uncollected Interest	3,479
Total receivables	$ 84,428
Past due period	90 days
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 11,300	$ 13,600	$ 9,800

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Changes in the Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands	6 Months Ended	9 Months Ended		12 Months Ended
	Oct. 31, 2017	Jan. 31, 2019	Jan. 31, 2018	Apr. 30, 2018
Finite-Lived Intangible Assets [Line Items]
AD Repurchase Auction Program		$ 1,300	$ 3,500
Goodwill Impairments, Gross		7,348	9,210
Goodwill, Purchase Accounting Adjustments		0	(1,032)
Goodwill, Transfers		(2,950)	0
ERROR in label resolution.		37,447	37,696	$ 38,044
Goodwill, Balance at Beginning of Period	$ 8,576	8,640	8,576	8,576
Disposals and foreign currency changes, net		372	1,850
Goodwill, Disposals and foreign currency changes, net		(4,614)	(184)
Finite-Lived Intangible Assets, Accumulated Amortization		(16,845)	(14,628)	(15,207)
Intangible Assets, Net (Excluding Goodwill)		$ 20,602	23,068	22,837
Goodwill, Balance at End of Period				$ 8,640
Franchise Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	9 years	9 years		9 years
ERROR in label resolution.		$ 32,002	29,932	$ 30,907
Finite-Lived Intangible Assets, Accumulated Amortization		(13,007)	(9,703)	(10,515)
Intangible Assets, Net (Excluding Goodwill)		$ 18,995	20,229	$ 20,392
Acquired Customer Lists [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years	5 years		5 years
ERROR in label resolution.		$ 1,373	3,187	$ 3,187
Finite-Lived Intangible Assets, Accumulated Amortization		(1,096)	(1,390)	(1,555)
Intangible Assets, Net (Excluding Goodwill)		$ 277	1,797	$ 1,632
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	3 years	3 years		3 years
ERROR in label resolution.		$ 216	431	$ 431
Finite-Lived Intangible Assets, Accumulated Amortization		(119)	(136)	(172)
Intangible Assets, Net (Excluding Goodwill)		$ 97	295	$ 259
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	2 years	2 years		2 years
ERROR in label resolution.		$ 54	241	$ 241
Finite-Lived Intangible Assets, Accumulated Amortization		(52)	(115)	(145)
Intangible Assets, Net (Excluding Goodwill)		$ 2	$ 126	$ 96

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Components of Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended	9 Months Ended	12 Months Ended
	Oct. 31, 2017	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018
Amortizable other intangible assets:
Accounts Receivable, Net, Current		$ (111)
AD Repurchase Auction Program		1,300		$ 3,500
Gross carrying amount		37,447	$ 38,044	37,696
Accumulated amortization		(16,845)	(15,207)	(14,628)
Net carrying amount		20,602	22,837	23,068
Property, Plant and Equipment, Net		34,648	$ 38,636	40,050
Finite-Lived Customer Lists, Gross		965
Finite-Lived Trade Names, Gross		130
Finite-Lived Noncompete Agreements, Gross		19
Goodwill, Impaired, Accumulated Impairment Loss		2,896
Goodwill and Intangible Asset Impairment		3,965
Intangible Assets, Net (Including Goodwill)		2,900
Business Combination, Contingent Consideration, Asset		1,400
Gain (Loss) on Sale of Assets and Asset Impairment Charges		1,100
Asset Impairment Charges		$ 200
Acquired customer lists
Amortizable other intangible assets:
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years	5 years	5 years
Gross carrying amount		$ 1,373	$ 3,187	3,187
Accumulated amortization		(1,096)	(1,555)	(1,390)
Net carrying amount		$ 277	$ 1,632	1,797
Trade Names [Member]
Amortizable other intangible assets:
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	3 years	3 years	3 years
Gross carrying amount		$ 216	$ 431	431
Accumulated amortization		(119)	(172)	(136)
Net carrying amount		$ 97	$ 259	295
Noncompete Agreements [Member]
Amortizable other intangible assets:
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	2 years	2 years	2 years
Gross carrying amount		$ 54	$ 241	241
Accumulated amortization		(52)	(145)	(115)
Net carrying amount		$ 2	$ 96	126
Customer lists
Amortizable other intangible assets:
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	4 years	4 years	4 years
Gross carrying amount		$ 2,091	$ 1,842	2,193
Accumulated amortization		(1,248)	(1,427)	(1,642)
Net carrying amount		$ 843	$ 415	551
Reacquired rights
Amortizable other intangible assets:
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	2 years	2 years	2 years
Gross carrying amount		$ 1,711	$ 1,436	1,712
Accumulated amortization		(1,323)	(1,393)	(1,642)
Net carrying amount		$ 388	$ 43	70
Area developer rights
Amortizable other intangible assets:
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	9 years	9 years	9 years
Gross carrying amount		$ 32,002	$ 30,907	29,932
Accumulated amortization		(13,007)	(10,515)	(9,703)
Net carrying amount		18,995	$ 20,392	20,229
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Amortizable other intangible assets:
Net carrying amount				$ 23,068
Property, Plant and Equipment, Other Types [Member]
Amortizable other intangible assets:
Property, Plant and Equipment, Net		$ 66

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Assets Held For Sale Narrative (Details) - USD ($) $ in Thousands	9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Apr. 30, 2018
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	$ 9,960	$ 12,030	$ 13,629
Finite-lived Intangible Assets Reacquired and Acquired		6,992
finite-lived intangible assets disposed	4,886	6,911
UNITED STATES
Assets, Reacquired and Acquired by Third Parties	1,000
Finite-lived Intangible Assets Reacquired and Acquired	945	7,000
finite-lived intangible assets disposed	(4,900)
Restructuring Costs and Asset Impairment Charges	3,800
Customer Lists and Reacquired Rights [Member] | UNITED STATES
Finite-lived Intangible Assets Acquired	500	3,500
Goodwill [Member] | UNITED STATES
Finite-lived Intangible Assets Acquired	$ 500	$ 3,500

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Assets Held For Sale Carrying Amount of Assets HFS (table) (Details) - USD ($) $ in Thousands	9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Apr. 30, 2018	Apr. 30, 2017
Property, Plant and Equipment [Line Items]
Assets Held for Sale	$ 0	$ 12,070	$ 8,941	$ 11,989
Finite-lived Intangible Assets Reacquired and Acquired		6,992
finite-lived intangible assets disposed	(4,886)	(6,911)
Finite-lived Intangible Assets, Reclassified to Reacquired Rights, Customer Lists, and Goodwill	(5,000)	0
UNITED STATES
Property, Plant and Equipment [Line Items]
Finite-lived Intangible Assets Reacquired and Acquired	945	$ 7,000
finite-lived intangible assets disposed	$ 4,900

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Debt (Details) $ in Thousands	9 Months Ended
	Jan. 31, 2019 USD ($)	Apr. 30, 2018 USD ($)	Jan. 31, 2018 USD ($)
Credit facility
Total debt	$ 15,709	$ 20,383	$ 21,644
Less: current installments	(13,763)	(18,113)	(5,223)
Long-term obligations, excluding current installments, net	$ 1,946	2,270	16,421
Days to Have Zero Debt	45
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	0.00%
Interest Rate Derivative Liabilities, at Fair Value	$ 100
Revolver
Credit facility
Maximum borrowing capacity	170,000
Line of credit facility, increased availability	50,000
Total debt	107,893	0	120,189
Term loan
Credit facility
Maximum borrowing capacity	21,200
Total debt	11,974	14,855	15,376
Credit facility
Credit facility
Total debt	$ 119,867	14,855	$ 135,565
Line of Credit Facility, Average Interest Rate Paid	3.87%		2.99%
Credit facility | Minimum | one-month London Inter-Bank Offered Rate (LIBOR)
Credit facility
Interest rate margin (as a percent)	1.50%
Credit facility | Maximum | one-month London Inter-Bank Offered Rate (LIBOR)
Credit facility
Interest rate margin (as a percent)	2.25%
Allowance for Franchise Notes Receivable [Member]
Credit facility
Total debt	$ 1,791	3,490	$ 4,198
Other debt
Credit facility
Total debt	$ 1,944	$ 2,038	$ 2,070

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Forward Contracts (Details) number in Thousands, $ in Millions	Jan. 31, 2019 USD ($)
Forward Contracts [Abstract]
Foreign Currency Contracts, Liability, Fair Value Disclosure	$ 0.1
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	0.00%
Interest Rate Derivative Liabilities, at Fair Value	$ 0.1

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Income Taxes Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Jan. 31, 2019	Jan. 31, 2018
Effective Income Tax Rate Reconciliation, Tax Cuts and Jobs Act, Transition Tax on Accumulated Foreign Earnings, Amount			$ 1.2	$ 1.2
Tax Cuts and Jobs Act, Incomplete Accounting, Provisional Income Tax Expense (Benefit)			$ 0.8	$ 1.6
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	182.01058%	(57.394%)	31.33806%	35.72088%

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Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended	9 Months Ended		12 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Oct. 31, 2017	Jan. 31, 2019	Jan. 31, 2018	Apr. 30, 2018
Stockholders' Equity
Proceeds from Stock Options Exercised				$ 153	$ 95
Unrealized Gain (Loss) on Derivatives			$ 18	12		$ 34
Available-for-sale Securities, Income Tax Expense on Change in Unrealized Holding Gain (Loss)				$ 0	$ 0	324
Earnings Per Share, Basic and Diluted	$ (0.02)	$ (0.11)		$ (2.37)	$ (1.89)
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	$ (1,685)	$ (1,008)		$ (1,685)	$ (1,008)	(1,381)
Incremental Common Shares Attributable to Converted Shares of Preferred Stock				200,000	0
Stock Repurchased During Period, Shares				1,000,000,000	0
Stock-based compensation expense				$ 733	$ 2,523
Payments of Ordinary Dividends			$ 6,777	2,267
Accumulated Other Comprehensive Income (Loss), Net of Tax	$ (1,698)	$ (990)		$ (1,698)	$ (990)	$ (1,347)
Weighted Average Number of Shares Outstanding, Basic and Diluted	14,043,218	12,934,941		13,718,401	12,907,039
Antidilutive securities
Impact of shares of common stock from the exercise of options excluded from computation of diluted net income per share because the effect would be antidilutive	477,094	1,147,386		517,852	1,301,175
Class A common stock
Stockholders' Equity
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures				0	9,000
net income (loss) available to common shareholders, basic and diluted	$ (310)	$ (1,499)		$ (32,399)	$ (24,005)
Earnings Per Share, Basic and Diluted	$ (0.02)	$ (0.11)		$ (2.37)	$ (1.89)
Class A common stock issued from the vesting of restricted stock and as director compensation				14,069	58,507
Weighted Average Number of Shares Outstanding, Basic and Diluted	14,043,218	12,734,941		13,653,184	12,707,039
Antidilutive securities
Dilutive Securities, Effect on Basic Earnings Per Share	$ 0	$ 108
Net Income (Loss) Available to Common Stockholders, Basic	(310)	(1,391)
Class B common stock
Stockholders' Equity
net income (loss) available to common shareholders, basic and diluted	$ 0	$ (23)		$ (155)	$ (378)
Earnings Per Share, Basic and Diluted	$ 0.00	$ (0.11)		$ (2.37)	$ (1.89)
Weighted Average Number of Shares Outstanding, Basic and Diluted	0	200,000		65,217	200,000
Antidilutive securities
Dilutive Securities, Effect on Basic Earnings Per Share	$ 0	$ 2
Net Income (Loss) Available to Common Stockholders, Basic	$ 0	$ (21)

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Stock Compensation Plans (Details) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Jan. 31, 2019	Jan. 31, 2018	Jul. 31, 2018
Employee Stock Option [Member]
Stock compensation plan
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 13.36
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 1.2
Unrecognized compensation costs	$ 1.2
Stock option activity, Number of options
Outstanding at the beginning of the period (in shares)	472,503
Exercised (in shares)	(14,069)
Canceled (in shares)	(366,704)
Outstanding at the end of the period (in shares)	796,244
Stock option activity, Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 17.41
Granted (in dollars per share)	10.20
Exercised (in dollars per share)	10.90
Canceled (in dollars per share)	17.99
Outstanding at the end of the period (in dollars per share)	$ 10.88
Nonvested stock option activity, Nonvested options
Granted (in shares)	704,514
Employee Stock Option [Member] | Minimum
Stock compensation plan
Exercise period	4 years
Employee Stock Option [Member] | Maximum
Stock compensation plan
Vesting period	5 years
Exercise period	7 years
Nonvested Stock Option [Member]
Nonvested stock option activity, Nonvested options
Outstanding at the beginning of the period (in shares)	267,433
Granted (in shares)	704,514
Vested (in shares)	(92,207)
Canceled (in shares)	(225,226)
Outstanding at the end of the period (in shares)	654,514
Nonvested stock option activity, Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 14.27
Granted (in dollars per share)	10.20
Vested (in dollars per share)	9.49
Canceled (in dollars per share)	14.22
Outstanding at the end of the period (in dollars per share)	$ 10.35
Restricted Stock Units
Stock compensation plan
Unrecognized compensation costs	$ 1.5
Common Class A [Member]
Stock option activity, Number of options
Exercised (in shares)	(14,000)	(9,000)
Common Class A [Member] | 2011 Equity and Cash Incentive Plan
Stock compensation plan
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			2,500,000
Class A common stock available for grant (in shares)	1,442,211
Exercise Price, Range Four [Member] | Employee Stock Option [Member]
Stock compensation plan
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term	1 year 5 months 20 days
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 22.57
Stock option activity, Number of options
Outstanding at the end of the period (in shares)	18,858
Exercise Price, Range Two [Member] | Employee Stock Option [Member]
Stock compensation plan
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term	4 years 3 months 20 days
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 11.96
Stock option activity, Number of options
Outstanding at the end of the period (in shares)	196,345
Exercise Price, Range Five [Member] | Employee Stock Option [Member]
Stock compensation plan
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term	6 months 20 days
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 33.38
Stock option activity, Number of options
Outstanding at the end of the period (in shares)	8,472

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Stock Compensation Plans (Details 2) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Jan. 31, 2019	Apr. 30, 2018
Employee Stock Option [Member]
Stock options outstanding and exercisable
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 1.2
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	796,244	472,503
Weighted average exercise price (in dollars per share)	$ 10.88
Number of shares exercisable at the end of the period	141,730.00
Weighted average exercise price (in dollars per share)	$ 13.36
Employee Stock Option [Member] | Exercise Price, Range One [Member]
Stock options outstanding and exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	572,569
Weighted average exercise price (in dollars per share)	$ 9.78
Weighted average remaining contractual life	6 years 2 months 20 days
Number of shares exercisable at the end of the period	50,000
Weighted average exercise price (in dollars per share)	$ 8.30
Employee Stock Option [Member] | Exercise Price, Range two
Stock options outstanding and exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	196,345
Weighted average exercise price (in dollars per share)	$ 12.00
Weighted average remaining contractual life	4 years 3 months 20 days
Number of shares exercisable at the end of the period	64,400
Weighted average exercise price (in dollars per share)	$ 11.96
Employee Stock Option [Member] | Exercise Price, Range Four
Stock options outstanding and exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	18,858
Weighted average exercise price (in dollars per share)	$ 22.57
Weighted average remaining contractual life	1 year 5 months 20 days
Number of shares exercisable at the end of the period	18,858
Weighted average exercise price (in dollars per share)	$ 22.57
Employee Stock Option [Member] | Exercise Price, Range Five
Stock options outstanding and exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	8,472
Weighted average exercise price (in dollars per share)	$ 33.38
Weighted average remaining contractual life	6 months 20 days
Number of shares exercisable at the end of the period	8,472
Weighted average exercise price (in dollars per share)	$ 33.38
Restricted Stock Units
Stock options outstanding and exercisable
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 1.5
Minimum | Employee Stock Option [Member]
Stock options outstanding and exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	4 years
Minimum | Employee Stock Option [Member] | Exercise Price, Range two
Stock options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 0.00
Minimum | Employee Stock Option [Member] | Exercise Price, Range three
Stock options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	10.90
Minimum | Employee Stock Option [Member] | Exercise Price, Range Four
Stock options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	16.39
Minimum | Employee Stock Option [Member] | Exercise Price, Range Five
Stock options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 26.18
Maximum | Employee Stock Option [Member]
Stock options outstanding and exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	7 years
Maximum | Employee Stock Option [Member] | Exercise Price, Range two
Stock options outstanding and exercisable
Exercise price, high end of range (in dollars per share)	$ 10.89
Maximum | Employee Stock Option [Member] | Exercise Price, Range three
Stock options outstanding and exercisable
Exercise price, high end of range (in dollars per share)	16.38
Maximum | Employee Stock Option [Member] | Exercise Price, Range Four
Stock options outstanding and exercisable
Exercise price, high end of range (in dollars per share)	26.17
Maximum | Employee Stock Option [Member] | Exercise Price, Range Five
Stock options outstanding and exercisable
Exercise price, high end of range (in dollars per share)	$ 33.38

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Restricted Stock Units (Details 3) - Restricted Stock Units - $ / shares	9 Months Ended
	Jan. 31, 2019	Apr. 30, 2018
Restricted Cash and Cash Equivalents Items [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted	147,991
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number	169,222	127,030
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted, Weighted Average Grant Date Fair Value	$ 10.40
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	28,029
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value	$ 13.47
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Expirations	77,770
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Expirations, Weighted Average Grant Date Fair Value	$ 12.31
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Weighted Average Grant Date Fair Value	$ 10.56	$ 12.48

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Fair Value of Financial Instruments (Details) - USD ($)	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018
Fair value of financial instruments
Available-for-sale Securities	$ 16,000
Assets:
Assets Fair Value Disclosure Recurring and Nonrecurring		$ 36,390,000
Total recurring liabilities	12,292,000	1,545,000	$ 10,983,000
Business Combination, Contingent Consideration, Liability			3,219,000
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	9,960,000	13,629,000	12,030,000
Interest Rate Derivative Liabilities, at Fair Value	100,000
Liabilities, Fair Value Disclosure, Recurring	1,286,000
Level 1
Assets:
Assets Fair Value Disclosure Recurring and Nonrecurring		12,056,000
Total recurring liabilities	0	0	0
Business Combination, Contingent Consideration, Liability			0
Liabilities, Fair Value Disclosure, Recurring	0
Level 2
Assets:
Assets Fair Value Disclosure Recurring and Nonrecurring		57,000
Total recurring liabilities	16,000	0	29,000
Business Combination, Contingent Consideration, Liability			0
Liabilities, Fair Value Disclosure, Recurring	0
Level 3
Assets:
Assets Fair Value Disclosure Recurring and Nonrecurring		24,277,000
Total recurring liabilities	12,276,000	1,545,000	10,954,000
Business Combination, Contingent Consideration, Liability			3,219,000
Liabilities, Fair Value Disclosure, Recurring	1,286,000
Nonrecurring
Assets:
Impaired accounts and notes receivable, net of unearned revenue	12,276,000	15,223,000	10,954,000
Impaired goodwill		109,000
Impaired Acquired Online Customer Lists, Fair Value Disclosure		4,000
Assets Held for Sale, net of impairment		8,941,000
Total nonrecurring assets	12,276,000	24,277,000	10,954,000
Liabilities, Fair Value Disclosure, Recurring			3,219,000
Nonrecurring | Level 1
Assets:
Impaired accounts and notes receivable, net of unearned revenue	0	0	0
Impaired goodwill		0
Impaired Acquired Online Customer Lists, Fair Value Disclosure		0
Assets Held for Sale, net of impairment		0
Total nonrecurring assets	0	0	0
Liabilities, Fair Value Disclosure, Recurring			0
Nonrecurring | Level 2
Assets:
Impaired accounts and notes receivable, net of unearned revenue	0	0	0
Impaired goodwill		0
Impaired Acquired Online Customer Lists, Fair Value Disclosure		0
Assets Held for Sale, net of impairment		0
Total nonrecurring assets	0	0	0
Liabilities, Fair Value Disclosure, Recurring			0
Nonrecurring | Level 3
Assets:
Impaired accounts and notes receivable, net of unearned revenue	12,276,000	15,223,000	10,954,000
Impaired goodwill		109,000
Impaired Acquired Online Customer Lists, Fair Value Disclosure		4,000
Assets Held for Sale, net of impairment		8,941,000
Total nonrecurring assets	12,276,000	24,277,000	10,954,000
Liabilities, Fair Value Disclosure, Recurring			3,219,000
Recurring
Fair value of financial instruments
Available-for-sale Securities		57,000	29,000
Assets:
Cash equivalents, money market account		12,056,000
Assets, Fair Value Disclosure, Recurring	16,000	12,113,000	29,000
Foreign Currency Contract, Asset, Fair Value Disclosure	43,000
Business Combination, Contingent Consideration, Liability		1,545,000
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	1,243,000
Recurring | Level 1
Fair value of financial instruments
Available-for-sale Securities		0	0
Assets:
Cash equivalents, money market account		12,056,000
Assets, Fair Value Disclosure, Recurring	0	12,056,000	0
Foreign Currency Contract, Asset, Fair Value Disclosure	0
Business Combination, Contingent Consideration, Liability		0
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	0
Recurring | Level 2
Fair value of financial instruments
Available-for-sale Securities		57,000	29,000
Assets:
Cash equivalents, money market account		0
Assets, Fair Value Disclosure, Recurring	16,000	57,000	29,000
Foreign Currency Contract, Asset, Fair Value Disclosure	0
Business Combination, Contingent Consideration, Liability		0
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	0
Recurring | Level 3
Fair value of financial instruments
Available-for-sale Securities		0	0
Assets:
Cash equivalents, money market account		0
Assets, Fair Value Disclosure, Recurring	0	0	$ 0
Foreign Currency Contract, Asset, Fair Value Disclosure	43,000
Business Combination, Contingent Consideration, Liability		$ 1,545,000
Accounts and Notes Receivable, Allowance for Uncollected Interest Amounts Due ADs Related Deferred Revenue and Amounts Due Franchisees	1,243,000
Equity Securities [Member] | Recurring | Level 1
Fair value of financial instruments
Available-for-sale Securities	0
Equity Securities [Member] | Recurring | Level 2
Fair value of financial instruments
Available-for-sale Securities	16,000
Equity Securities [Member] | Recurring | Level 3
Fair value of financial instruments
Available-for-sale Securities	$ 0

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Related Party Transactions (Details)	9 Months Ended
	Jan. 31, 2019 USD ($)
Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Amounts of Transaction	$ 60,041
York Debt Guarantees [Member] | Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	3,606,236
York Area Development Arrangements, Accounts Receivable [Member] | Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Amounts of Transaction	0
Related Party Transaction, Revenue Earned by Related Party	102,000
York Area Development Arrangements, Notes Receivable [Member] | Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Notes Receivable, Related Parties	1,789,040
Payments to Acquire Notes Receivable	$ 4,059,460
Notes Receivable, Related Parties, Stated Interest Rate	1200.00%
York Franchise, Accounts Receivable for Royalties, Advertising and Financial Product Charges [Member] | Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Amounts of Transaction	$ 58,626
Accounts Receivable, Related Parties	60,155
York Franchise, Operating Funds Borrowed for Working Capital [Member] | Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Payments for Advance to Affiliate	225,286
Loans and Leases Receivable, Related Parties	217,377
Ossenfort Franchise, Accounts Receivable for Royalties, Advertising and Financial Product Charges [Member] | Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Accounts Receivable, Related Parties	$ 15,621

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Commitments and Contingencies (Details) - USD ($)						3 Months Ended		9 Months Ended
	Nov. 29, 2018	Feb. 15, 2017	Jan. 13, 2017	Sep. 09, 2016	Jun. 09, 2016	Jan. 31, 2019	Jan. 31, 2018	Jan. 31, 2019	Jan. 31, 2018
Commitments and contingencies
Dividends declared per share of common stock and common stock equivalents						$ 0.00	$ 0.16	$ 0.16	$ 0.48
Virginia Action [Domain]
Commitments and contingencies
Litigation Settlement, Expense								$ 295,000
JTH Tax, Inc. and Siempre Tax LLC v. Gregory Aime, Aime Consulting, LLC, Aime Consulting, Inc. and Wolf Ventures, Inc. (Case No. 2:16-cv279) [Member]
Commitments and contingencies
Loss Contingency, Damages Sought					three
Loss Contingency, Damages Sought, Value				$ 2,400,000
Loss Contingency, Trial Period			3 days
Litigation Settlement, Amount Awarded to Other Party		$ 2,700,000
Loss Contingency Accrual		$ 2,700,000
Litigation Settlement, Amount Awarded from Other Party	$ 300,000