2014

Cash Store Financial releases first quarter results

Adjusted EBITDA increases 4.3% compared to Q1 FY12

EDMONTON, Feb. 6, 2013 /PRNewswire/ - The Cash Store Financial Services Inc. (Cash Store Financial) (TSX: CSF; NYSE: CSFS) today announced results for the quarter ended December 31, 2012. The following financial results are expressed in Canadian dollars.

Highlights for the three months ended December 31, 2012 (a table of results can be found at the end of this news release):

  • Loan volume up 1.9% to $203.4 million from $199.6 million in the first quarter last year.

  • Loan fees increased by 15.5% to $38 million from $32.9 million in the same period last year.
    • Adjusted EBITDA of $9.8 million, up 4.3% from $9.4 million for the same quarter last year. EBITDA of $6.7 million, up 63.4% from $4.1 million for the same quarter last year.

    • Quarterly revenue of $49.5 million, up 8.0% from $45.8 million for the same quarter last year. This increase is due primarily to an increase in loan volume growth in both operations in Canada and the United Kingdom.

    • Same branch sales increased 11.3% to $90,000 from $80,000 in the same quarter last year

    • Sales expenses of $26.8 million, down 15.2% from $31.6 million for the same quarter last year.

    • Other revenue of $11.5 million, down 11.5% from $13.0 million for the same quarter last year. This decrease is primarily due to a decrease in other income in Canada due to the simplification and re-pricing of optional services as Cash Store Financial continues to offer more cost efficient ancillary services to customers.

    • Diluted loss per share of $0.09 per share, down from earnings per share of $0.06 per share for the same quarter last year.

    • Net loss of $1.7 million, down from net income of $989,000 for the same quarter last year.

    • Branch count was 536, down 60 branches from 596 branches at December 31, 2011.

Mr. Gordon Reykdal, Chairman and CEO commented, "The first quarter was notable for strong year over year growth in all critical areas of our business and I am pleased with the continued progress over the past three quarters. Year-over-year loan volume was up, loan fees were up, consolidated revenue was up, and same branch sales were up. We continued to secure strong quarter over quarter improvements in branch operating income.  Growth in Adjusted EBITDA increased 4.3% to $9.8 million from $9.4 million in the same period last year.  Overall, I am pleased with our positive direction. During Q2 of fiscal 2012, the Company initiated a number of efficiency initiatives to improve overall performance, including the acquisition of our loan portfolio and an ongoing effort to eliminate underperforming branches. We have effectively executed upon those initiatives, improving the Company's profitability profile and setting the stage for a return to growth during fiscal 2013. Despite having consolidated more than 60 branches from our Canadian operations, same branch revenues have increased by 11% in comparison to the same quarter last year.  The loss in the current period of $1.7 million was attributable primarily to expenses associated with a restatement of results for the second and third quarters of fiscal 2012."

"Over the past three quarters we have achieved consistent year-over-year revenue growth and consistent sales expense reductions across our branch network. We continue to execute upon our strategy to achieve stable profitability going forward," added Mr. Reykdal.

First quarter financial detail

First quarter loan volume was $203.5 million, up 1.9% percent from $199.6 million in the same period last year. Although volume is down sequentially from $207 million in the fourth quarter, this decline is in-line with seasonal trends, and remains reflective of positive quarter over quarter growth. Consolidated revenue for the first quarter was up 8.1% to $49.5 million from $45.8 million in the same period last year.  The year over year increase in revenue is attributable to both the Canadian and UK operations and the recorded interest portion of loan fee revenue in the regulated provinces. Before the Company's acquisition of the loan portfolio, that interest went to third‐party lenders.  Overall revenue growth was offset by a decline in other revenues of 11.5% to $11.5 million from $13.0 million for the same quarter last year, as the Company optimizes its sales processes to simplify and re-price ancillary services in order to encourage greater uptake of basic loans.  Net loss for the quarter was $1.7 million, a sequential decrease of $2.0 million compared to Q4‐ 2012 and a decrease of $2.7 million from a net income of $1.0 million for the same quarter last year. This decrease is primarily attributable to expenses incurred in the quarter associated with a restatement of results for the second and third quarters of fiscal 2012. First quarter Adjusted EBITDA was $9.8 million, up 4.3 percent from $9.4 million for the same quarter last year.  EBITDA for the first quarter was $6.7 million, up 63.4% from $4.1 million for the same quarter last year.

The Board of Directors has determined not to issue a quarterly dividend for the period ending December 31, 2012.  The Board of Directors reviews the Company's dividend distribution policy on a quarterly basis. The review includes evaluating the financial position, profitability, cash flow and other factors that the Board of Directors considers relevant.

Balance sheet

The Company completed the quarter with $22.4 million in consolidated cash balances, compared to $19.1 million as of September 30, 2012.

About Cash Store Financial

Cash Store Financial is the only lender and broker of short‐term advances and provider of other financial services in Canada that is listed on the Toronto Stock Exchange (TSX: CSF). Cash Store Financial also trades on the New York Stock Exchange (NYSE: CSFS). Cash Store Financial operates 512 branches across Canada under the banners "Cash Store Financial" and "Instaloans". Cash Store Financial also operates 25 branches in the United Kingdom.

Cash Store Financial and Instaloans primarily act as lenders and brokers to facilitate short-term advances and provide other financial services to income-earning consumers who may not be able to obtain them from traditional banks. Cash Store Financial also provides a private-label debit card (the Freedom card) and a prepaid credit card (the Freedom MasterCard) as well as other financial services, including bank accounts.

Cash Store Financial employs approximately 1,900 associates and is headquartered in Edmonton, Alberta.

Cash Store Financial is a Canadian corporation that is not affiliated with Cottonwood Financial Ltd. or the outlets Cottonwood Financial Ltd. operates in the United States under the name "Cash Store".  Cash Store Financial does not do business under the name "Cash Store" in the United States and does not own or provide any consumer lending services in the United States.

Non-GAAP Performance Measures
This news release contains non-GAAP performance measures. These measures do not have standardized meanings under U.S. GAAP and are therefore unlikely to be comparable to similar measures used by other companies. The non-GAAP financial measures disclosed by the Company in this release are as set out below.

Sales Expenses are a measure of expenses at the branch and regional operating level. Sales expenses include salaries and benefits, rent, selling, general and administrative, advertising and promotion, depreciation of property and equipment that are attributed to the Company's branch and regional operations.

EBITDA is calculated as net income (loss) and comprehensive income (loss) before interest expense, income tax expense, stock-based compensation expense, depreciation of property and equipment and amortization of intangible assets. Based on EBITDA, the effects of other items and/or non-cash expenses are removed to calculate Adjusted EBITDA. Although EBITDA and Adjusted EBITDA do not have a standardized meaning prescribed by U.S. GAAP, we believe it may be useful in assessing our operating performance and as an indicator of our ability to service or incur indebtedness, make capital expenditures and finance working capital requirements. The items excluded from Adjusted EBITDA are significant in assessing our operating results and liquidity. Therefore, Adjusted EBITDA should not be considered in isolation from or as an alternative to operating income, cash provided from operating activities or other income or cash flow data prepared in accordance with U.S. GAAP. The Company provides a reconciliation of EBITDA and Adjusted EBITDA  to net income reported in accordance with US GAAP below. Investors and readers are encouraged to review the reconciliation of this non-GAAP financial measure to reported net income.

Forward-Looking Information
This news release contains "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning United States federal securities legislation, which we refer to herein, collectively, as "forward-looking information". Forward-looking information includes, but is not limited to, information with respect to our objectives, strategies, operations and financial results, competition as well as initiatives to grow revenue or reduce retention payments. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "estimates", "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved". In particular this news release contains forward-looking information with respect to our goals and strategic priorities, introduction of products, share repurchase initiatives, branch openings and competition as well as initiatives to grow revenue or reduce retention payments.  Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Cash Store Financial, to be materially different from those expressed or implied by such forward-looking information, including, but not limited to, changes in economic and political conditions, legislative or regulatory developments, technological developments, third-party arrangements, competition, litigation, risks associated with but not limited to, market conditions, and other factors described under the heading "Risk Factors" in our Annual Information Form, which is on file with Canadian provincial securities regulatory authorities, and in our Annual Report on Form 20-F filed with the  U.S. Securities and Exchange Commission.  All material assumptions used in providing forward-looking information are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including our knowledge of the current credit, interest rate and liquidity conditions affecting us and the general economic conditions in Canada, the United Kingdom and elsewhere.  Although we believe the assumptions used to make such statements are reasonable at this time and have attempted to identify in our continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended.  Certain material factors or assumptions are applied by us in making forward-looking information, include without limitation, factors and assumptions regarding our continued ability to fund our payday loan business, rates of customer defaults, relationships with, and payments to, third party lenders, demand for our products, as well as our operating cost structure and current consumer protection regulations. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. We do not undertake to update any forward-looking information, except in accordance with applicable securities laws.

Selected First Quarter Information

                       
    3 Months Ended     3 Months Ended        
($000s, except for per share amounts, number of loans and branch count)   31-Dec-11     31-Dec-12       % change
                         
Consolidated results                      
Canadian branch count     573       511        
UK branch count     23       25        
Total branches     596       536       -10%
                         
Loan volume   $ 199,611     $ 203,463       2%
                         
Revenue                        
  Loan fees   $ 32,892     $ 38,018       16%
  Other income     12,956       11,485       -11%
      45,848       49,503       8%
                       
Sales expenses                      
  Salaries and benefits     16,856       14,462       -14%
  Rent     4,763       4,434       -7%
  Selling, general and administrative     6,495       4,969       -23%
  Advertising and promotion     1,690       1,369       -19%
  Depreciation of property and equipment     1,776       1,560       -12%
      31,580       26,794       -15%
      14,268       22,709       59%
Provision for loan losses     668       9,254       1285%
Retention payments     6,557       1,769       -73%
Corporate expenses     5,026       6,712       34%
Interest expense     -       4,400        
Other depreciation and amortization     583       2,172       273%
Income before income taxes     1,434       (1,598)       -211%
Net income (loss) and comprehensive income (loss)   $ 989     $ (1,652)       -267%
EBITDA     4,091       6,679       63%
Adjusted EBITDA     9,435       9,811       4%
Weighted average number of shares outstanding                      
  - basic  
17,420


17,542


1%
  - diluted      17,566       17,542       0%
Basic earnings (loss) per share   $ 0.06     $ (0.09)       -250%
Diluted earnings (loss) per share   $ 0.06     $ (0.09)       -250%
Consolidated Balance Sheet Information                      
Working capital   $ 12,395     $ 63,284       411%
Total assets     125,993       207,697       65%
Total long-term financial liabilities*     10,257       129,754       1165%
Total long-term liabilities     18,270       137,233       651%

*Total long-term financial liabilities excludes long term portion of deferred revenue, deferred lease inducements and deferred tax liabilities 

Summary of Quarterly Results

                                                   
(thousands of dollars, except for per share amounts
and branch figures)
      2011     2012     2013
            Q2     Q3     Q4     Q1     Q2     Q3     Q4     Q1
                                                       
Consolidated Results                                                    
# of branches Canada       573     574     574     573     569     529     511     511
    United Kingdom       6     8     12     23     25     25     25     25
            579     582     586     596     594     554     536     536
                                                       
Loan volume         $ 198,775   $ 204,616   $ 201,720   $ 199,611   $ 191,030   $ 199,861   $ 207,210   $ 203,463
                                                       
Revenue                                                      
   Loan fees         $ 32,813   $ 33,944   $ 33,552   $ 32,892   $ 30,545   $ 36,204   $ 38,353   $ 38,018
   Other income         13,247     14,985     13,625     12,956     11,544     12,454     12,464     11,485
            46,060     48,929     47,177     45,848     42,089     48,658     50,817     49,503
Sales expenses                                                    
   Salaries and benefits         16,406     17,002     16,984     16,856     17,673     16,493     14,921     14,462
   Rent           4,615     4,647     4,706     4,763     4,911     4,719     4,548     4,434
   Selling, general and administrative       6,086     6,127     6,041     6,495     6,406     5,727     4,971     4,969
   Advertising and promotion       1,419     1,367     1,492     1,690     1,063     1,212     1,215     1,369
   Depreciation of property and equipment       1,687     1,710     1,744     1,776     1,785     1,675     1,607     1,560
            30,213     30,853     30,967     31,580     31,838     29,826     27,262     26,794
                                                       
Provision for loan losses         654     662     580     668     10,798     10,104     9,433     9,254
Retention payments         6,578     6,775     6,244     6,557     2,271     554     586     1,769
Corporate expenses         4,256     4,804     5,171     5,026     6,625     5,394     5,707     6,712
Interest expense         -     -     -     -     2,892     4,355     4,376     4,400
Branch closures costs         -     -     -     -     -     908     666     -
Impairment of property and equipment       -     -     -     -     3,017     -     408     -
Expense to settle pre-existing relationships                                                  
with third-party lenders         -     -     -     -     36,820     -     -     -
Other depreciation and amortization       548     456     570     583     1,503     1,770     2,117     2,172
Net income (loss) before income taxes                                                   
and class action settlements       3,811     5,379     3,645     1,434     (53,675)     (4,253)     261     (1,598)
Class action settlements         -     3,206     -     -     -     -     -     -
Taxes           1,311     1,018     1,610     445     (12,645)     (813)     (130)     54
Net income (loss) and comprehensive                                                  
income (loss)       $ 2,500   $ 1,155   $ 2,035   $ 989   $ (41,030)   $ (3,440)   $ 391   $ (1,652)
EBITDA           6,260     4,547     6,207     4,091     (47,274)     3,764     8,583     6,679
Adjusted EBITDA         11,835     12,855     11,161     9,435     2,428     6,960     11,190     9,811
Basic earnings (loss) per share     $ 0.15   $ 0.07   $ 0.12   $ 0.06   $ (2.35)   $ (0.20)   $ 0.02   $ (0.09)
Diluted earnings (loss) per share     $ 0.14   $ 0.07   $ 0.12   $ 0.06   $ (2.35)   $ (0.20)   $ 0.02   $ (0.09)
                                                   

EBITDA and Adjusted EBITDA Reconciliation

                                                       
(thousands of dollars)         2011   2012   2013
            Q2     Q3     Q4     Q1     Q2     Q3     Q4     Q1
                                                       
Consolidated Results                                                      
  Net income (loss) and                                                      
  comprehensive income (loss)         $ 2,500   $ 1,155   $ 2,035   $ 989   $ (41,030)   $ (3,440)   $ 391   $ (1,652)
  Interest expense and other interest           36     34     33     105     2,920     4,383     4,439     4,400
  Income tax           1,311     1,019     1,608     445     (12,645)     (813)     (129)     54
  Stock-based compensation           180     171     218     193     193     189     158     145
  Depreciation of property and equipment                                                      
  and amortization of intangible assets           2,233     2,168     2,313     2,359     3,288     3,445     3,724     3,732
  EBITDA         $ 6,260   $ 4,547   $ 6,207   $ 4,091   $ (47,274)   $ 3,764   $ 8,583   $ 6,679
  Adjustments:                                                      
  Class action settlements         $ -   $ 3,206   $ -   $ -   $ -   $ -   $ -   $ -
  Expense to settle pre-existing relationships                                                      
  with third-party lenders           -     -     -     -     36,820     -     -     -
  Loan loss provision one-time addition           -     -     -     -     3,091     -     -     -
  Unrealized foreign exchange (gains)/losses           14     (5)     (158)     (47)     306     (7)     (70)     (14)
  Branch closures costs           -     -     -     -     -     908     666     -
  Impairment of property and equipment           -     -     -     -     3,017     -     408     -
  Revenue impact related to transitioning                                                      
  to a direct lending model           -     -     -     -     3,210     316     -     -
  Income impact for separately accounting                                                      
  for the acquired loan portfolio           -     -     -     -     1,373     1,425     1,132     640
  Charges related to restatement of fiscal                                                       
  2012 quarters            -     -     -     -     -     -     -     904
  Effective interest component                                                      
  of retention payments           5,561     5,107     5,112     5,391     1,885     554     472     1,602
  Adjusted EBITDA         $ 11,835   $ 12,855   $ 11,161   $ 9,435   $ 2,428   $ 6,960   $ 11,191   $ 9,811

 

 

SOURCE The Cash Store Financial Services Inc.



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