EZCORP Reports Record Third Quarter Net Income Of $28.5 Million, Driven By Strong International Growth

Jul 24, 2012, 16:10 ET from EZCORP, Inc.

AUSTIN, Texas, July 24, 2012 /PRNewswire/ -- EZCORP, Inc. (NASDAQ: EZPW), a leading provider of instant cash solutions for consumers, today announced results for its third fiscal quarter ended June 30, 2012. For the quarter, net income was $28.5 million, a company record for its third fiscal quarter, and earnings per share were $0.56.  For the year-to-date, the company reported a 23% increase in net income and a 20% increase in earnings per share, compared with the comparable period last year (13% and 11%, respectively, on a non-GAAP basis).

(Logo: http://photos.prnewswire.com/prnh/20090713/EZCORPLOGO)

Key Drivers

  • International Growth With continued execution of the company's geographic and product diversification strategy, nearly 20% of the company's consolidated segment contribution in the quarter was attributable to areas outside the United States, up from 9% a year earlier.  Total revenue in the Latin America and Other International segments combined more than doubled, with combined segment contribution increasing 142%.  These year-over-year increases are the result of continued strength in the company's Empeno Facil business in Mexico, the acquisition of controlling interests in Crediamigo and Cash Genie, and the company's strategic investments in the United Kingdom and Australia.
  • Storefront Growth During the quarter, the company added 30 new stores (9 acquired and 21 de novo).  So far this fiscal year, the company has added 139 new stores (94 acquired and 45 de novo) and now operates 1,250 locations in the United States, Canada and Mexico.
  • Mexico Pawn Operations Empeno Facil, the company's Mexico pawn operation, continued its strong performance.  Compared to the third quarter of last year, merchandise sales were up 59%, pawn service charges were up 37%, and pawn loan balances increased 37%.  In a challenging gold environment, jewelry scrapping sales were up 6%.  These year-over-year increases are attributable to the continued development and maturity of the existing store base and the addition of new stores.  The company now operates 223 pawn stores in Mexico, having opened 45 this fiscal year.
  • Consumer Lending Performance Consumer loan balances increased to $79.1 million globally at June 30, driving consumer loan fees earned during the quarter up 38%.  In addition, improved underwriting and collections effectiveness, coupled with the consolidation of the lower risk profile Crediamigo business, led to a significant improvement in bad debt as a percentage of consumer loan fees.  In the U.S. & Canada segment, that measure improved 450 bps (from 28.4% to 23.9%), and on a consolidated basis, the measure improved 740 bps (from 28.4% to 21.0%).
  • U.S. Pawn Performance With the exception of jewelry sales and scrapping activities, the company's pawn operations in the United States showed continued strength.  Merchandise sales were up 12%, with sales of general merchandise up 23%.  Pawn loan balances grew 7% to $134.1 million at quarter-end, and pawn service charges increased 14%.
  • Gold Moderating gold prices and declining gram volume in the United States continued to negatively impact year-over-year profitability in the quarter.  Fewer purchases of gold, coupled with less jewelry forfeited from pawn lending operations, resulted in a 26% decrease in same-store jewelry scrapping sales and a 19% same-store decrease in jewelry merchandise sales.  The company estimates that, on a same-store basis, the change in gold metrics (price and volume) from the year-over-year quarter caused a decrease of $6 million in net revenue for the U.S. & Canada segment.

Consolidated Financial Highlights Three months ended June 30, 2012 versus the prior year quarter

  • Total revenues of $229.0 million, up 13%, were driven by a 16% increase in pawn service charges, a 38% increase in consumer loan fees and an 18% increase in merchandise sales.
  • Net revenues of $145.3 million, were up 18%, with the increase attributable to improvement in bad debt expense.
  • Net income was up 8% to $28.5 million, a company record for the third fiscal quarter, and diluted earnings per share were $0.56, up 6%.
  • Combined loan balances (pawn and consumer loans, including CSO) at quarter-end were $250.0 million, up 43%, and reflected growth in all segments. Cash and cash equivalents at quarter-end were $51.8 million, with debt of $206.9 million (including Crediamigo third party debt of $92.2 million, all of which is non-recourse to EZCORP).
  • Administrative expense of $22.7 million includes an $8.3 million increase over last year, $4.9 million of which result from the consolidation of Crediamigo and Cash Genie, which are not store-based operations.   With the exception of sales commissions, the majority of their cost base is included in administrative expenses.  The remainder includes the company's continued investment in growth and profitability initiatives.
  • Income tax expense for the quarter was 30% of income before income taxes, compared with 35% last year, as the company's effective tax rate for the year was reduced from 35% to 33.5%, reflecting the success and growth of the company's business in areas outside the United States.
  • The company continued to deliver strong return on average equity of 20% for the trailing twelve months.

Strategic Acquisitions

  • Crediamigo recorded total revenues of $10.8 million and bad debt as a percentage of fees of 6.1%, which produced net revenues of $10.2 million.  During the quarter, Crediamigo refinanced a portion of its $92.2 million of third party debt at a lower rate of interest.  This refinancing led to a one-time reduction in interest expense of $2.8 million during the third quarter due to accelerated amortization of debt premium associated with the refinanced debt.  The lower interest rate will result in reduced interest expense going forward.  When combined with business results and reduced by taxes and the noncontrolling interest, the net income attributable to EZCORP was $1.8 million for the quarter.  Crediamigo is continuing to refinance other portions of its debt at lower interest rates, which will further enhance future profitability.
  • On April 14, the company acquired 72% of the shares in Artiste Holding Limited, which provides online loans in the U.K. under the name "Cash Genie." Cash Genie is one of the top 10 largest online lenders in the U.K.  The company expects that Cash Genie will be accretive to earnings within its first year following acquisition.

Company Outlook

The Company expects that, as a result of continuation of recent gold and jewelry trends, earnings for the full year will be at the lower end of its previously announced guidance range of $2.85 to $2.95 per share.

Commenting on the quarter's results, EZCORP's President and Chief Executive Officer, Paul Rothamel, said "I am pleased with our financial performance this year and the overall trajectory of our business as we continue to transition EZCORP to a multi-national provider of instant cash solutions to a growing marketplace.  Our investments in new stores, new products and new businesses continue to improve our ability to serve the sophisticated consumer.  We expect these high-return investments, funded with our conservative capital structure and balance sheet, will provide very strong shareholder value for years to come."

About EZCORP

EZCORP is a leading provider of instant cash solutions for consumers.  Through 1,250 company-operated pawn, buy/sell and personal financial services locations in the U.S., Mexico and Canada, we provide a variety of instant cash solutions, including pawn loans, consumer loans, and fee-based credit services to customers seeking loans.  At our pawn and buy/sell stores, we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers.

EZCORP owns controlling interests in Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. (doing business under the name "Crediamigo"), a leading provider of payroll deduction loans in Mexico, and in Artiste Holding Limited (doing business under the name "Cash Genie"), a leading provider of online loans in the U.K.  The company also has significant investments in Albemarle & Bond Holdings PLC (ABM.L), one of the U.K.'s largest pawnbroking businesses with over 170 full-line stores offering pawnbroking, jewelry retailing, gold buying and financial services; and in Cash Converters International Limited (CCV.L and CCV.ASX), which franchises and operates a worldwide network of over 600 stores that provide personal financial services and sell pre-owned merchandise.

Special Note Regarding Forward-Looking Statements

This announcement contains certain forward-looking statements regarding the Company's expected operating and financial performance for future periods, including expected future earnings and growth rates.  These statements are based on the Company's current expectations. A ctual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including changes in the regulatory environment, changing market conditions in the overall economy and the industry, fluctuations in gold prices or the desire of our customers to pawn or sell their gold items, and consumer demand for the Company's services and merchandise.  For a discussion of these and other factors affecting the Company's business and prospects, see the Company's annual, quarterly and other reports filed with the Securities and Exchange Commission.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company has provided non-GAAP net income and non-GAAP earnings per share for the nine months ended June 30, 2011.  The only difference between the presented non-GAAP measures and the most closely comparable GAAP measures is the exclusion of a one-time charge related to the retirement of the Company's former Chief Executive Officer and the related tax benefit included in the quarter ended December 31, 2010.  The Company's management uses these non-GAAP financial measures to understand its financial performance from period to period.  Management does not believe that the excluded one-time charge is reflective of underlying operating performance.  The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the corresponding GAAP measures, but rather are provided to facilitate an enhanced understanding of the Company's actual and expected performance and to enable more meaningful period-to-period comparisons.  A reconciliation of the non-GAAP financial measures to the most closely comparable GAAP financial measures is provided in the accompanying financial schedules.

EZCORP Investor Relations (512) 314-2220 Investor_Relations@ezcorp.com www.ezcorp.com

 

EZCORP, Inc. Highlights of Consolidated Statements of Operations (Unaudited) (in thousands, except per share data and percents)

Three Months Ended

June 30,

Nine Months Ended

June 30,

2012

2011

2012

2011

Revenues:

Merchandise sales

$

75,958

$

64,574

$

257,849

$

214,227

Jewelry scrapping sales

41,974

50,771

151,552

149,431

Pawn service charges

56,163

48,365

172,399

144,944

Consumer loan fees

53,504

38,870

148,911

125,652

Other

1,365

572

3,404

978

Total revenues

228,964

203,152

734,115

635,232

Merchandise cost of goods sold

44,254

36,691

148,530

122,641

Jewelry scrapping cost of goods sold

28,199

32,437

95,933

96,617

Consumer loan bad debt

11,251

11,027

28,742

27,795

Net revenue

145,260

122,997

460,910

388,179

Operations expense

75,709

66,753

227,479

197,302

Administrative expense

22,697

14,379

63,761

56,250

Depreciation

6,215

4,458

16,805

12,670

Amortization

1,162

221

3,086

654

(Gain) / loss on sales / disposal of assets

312

169

138

(2)

Operating income

39,165

37,017

149,641

121,305

Interest income

(133)

(21)

(486)

(35)

Interest expense

1,030

586

4,180

1,186

Equity in net income of unconsolidated affiliates

(4,197)

(4,099)

(12,935)

(12,157)

Other

160

(103)

(157)

(160)

Income before income taxes

42,305

40,654

159,039

132,471

Income tax expense

12,594

14,127

52,603

46,677

Net income

29,711

26,527

106,436

85,794

Attributable to reedemable noncontrolling interest

1,188

1,300

Net income attributable to EZCORP, Inc.

$

28,523

$

26,527

$

105,136

$

85,794

Net income per share, diluted

$

0.56

$

0.53

$

2.06

$

1.71

Weighted average shares, diluted

51,340

50,385

51,042

50,292

 

EZCORP, Inc. Highlights of Consolidated Balance Sheets (in thousands)

June 30, (unaudited)

September 30,

2012

2011

2011

Assets:

Current assets:

Cash and cash equivalents

$

51,825

$

27,492

$

23,969

Pawn loans

147,503

134,633

145,318

Consumer loans, net

28,487

14,437

14,611

Pawn service charges receivable, net

26,092

24,372

26,455

Consumer loan fees receivable, net

25,729

6,884

6,775

Inventory, net

94,421

79,031

90,373

Deferred tax asset

18,226

16,150

18,125

Federal income tax receivable

9,898

3,099

Prepaid expenses and other assets

40,268

21,932

30,611

Total current assets

442,449

328,030

356,237

Investments in unconsolidated affiliates

125,309

114,777

120,319

Property and equipment, net

100,196

75,049

78,498

Goodwill

321,423

167,017

173,206

Intangible assets, net

78,666

20,192

19,790

Non-current consumer loans, net

50,587

Other assets, net

19,443

8,556

8,400

Total assets

$

1,138,073

$

713,621

$

756,450

Liabilities and stockholders' equity:

Current liabilities:

Accounts payable and other accrued expenses

$

71,091

$

53,242

$

57,400

Current maturities of long-term debt

31,126

Customer layaway deposits

6,740

6,131

6,176

Federal income taxes payable

693

Total current liabilities

108,957

59,373

64,269

Long-term debt, less current maturities

175,740

26,500

17,500

Deferred tax liability

7,788

1,237

8,331

Deferred gains and other long-term liabilities

14,951

2,209

2,102

Total liabilities

307,436

89,319

92,202

Temporary equity:

Redeemable noncontrolling interest

44,864

Stockholders' equity

785,773

624,302

664,248

Total liabilities and stockholders' equity

$

1,138,073

$

713,621

$

756,450

 

EZCORP, Inc. Operating Segment Results (Unaudited) (In thousands)

Three Months Ended June 30, 2012

U.S. & Canada

Latin America

Other

International

Consolidated

Revenues:

Merchandise sales

$

65,799

$

10,159

$

$

75,958

Jewelry scrapping sales

37,456

4,518

41,974

Pawn service charges

49,979

6,184

56,163

Consumer loan fees

39,243

10,381

3,880

53,504

Other

649

558

158

1,365

Total revenues

193,126

31,800

4,038

228,964

Merchandise cost of goods sold

38,519

5,735

44,254

Jewelry scrapping cost of goods sold

24,415

3,784

28,199

Consumer loan bad debt

9,368

632

1,251

11,251

Net revenues

120,824

21,649

2,787

145,260

Operating expenses:

Store operations

65,975

8,792

942

75,709

Administrative

5,970

4,335

1,870

12,175

Depreciation

3,622

1,054

73

4,749

Amortization

142

999

21

1,162

Loss on sale/disposal of assets

93

(4)

223

312

Interest, net

(1)

22

(1)

20

Equity in net income of unconsolidated affiliates

(4,197)

(4,197)

Other

614

(13)

(441)

160

Segment contribution

$

44,409

$

6,464

$

4,297

$

55,170

Corporate expenses

12,865

Income before taxes

42,305

Income tax expense

12,594

Net income

29,711

Net income attributable to reedemable noncontrolling interest

1,188

Net income attributable to EZCORP, Inc.

$

28,523

 

EZCORP, Inc. Operating Segment Results (Unaudited) (In thousands)

Three Months Ended June 30, 2011

U.S. & Canada

Latin America

Other

International

Consolidated

Revenues:

Merchandise sales

$

58,173

$

6,401

$

$

64,574

Jewelry scrapping sales

46,514

4,257

50,771

Pawn service charges

43,846

4,519

48,365

Consumer loan fees

38,870

38,870

Other

566

6

572

Total revenues

187,969

15,183

203,152

Merchandise cost of goods sold

32,924

3,767

36,691

Jewelry scrapping cost of goods sold

28,951

3,486

32,437

Consumer loan bad debt

11,027

11,027

Net revenues

115,067

7,930

122,997

Operating expenses:

Store operations

61,347

5,406

66,753

Administrative

4,293

1,014

506

5,813

Depreciation

2,828

639

3,467

Amortization

117

104

221

Gain on sale/disposal of assets

157

12

169

Interest, net

20

2

22

Equity in net income of unconsolidated affiliates

(4,099)

(4,099)

Other

2

2

(107)

(103)

Segment contribution

$

46,303

$

751

$

3,700

$

50,754

Corporate expenses

10,100

Income before taxes

40,654

Income tax expense

14,127

Net income

26,527

Net income attributable to redeemable noncontrolling interest

Net income attributable to EZCORP, Inc.

$

26,527

 

EZCORP, Inc. Operating Segment Results (Unaudited) (In thousands)

Nine Months Ended June 30, 2012

U.S. & Canada

Latin America

Other

International

Consolidated

Revenues:

Merchandise sales

$

227,849

$

30,000

$

$

257,849

Jewelry scrapping sales

139,736

11,816

151,552

Pawn service charges

154,854

17,545

172,399

Consumer loan fees

127,061

17,764

4,086

148,911

Other

2,444

802

158

3,404

Total revenues

651,944

77,927

4,244

734,115

Merchandise cost of goods sold

132,469

16,061

148,530

Jewelry scrapping cost of goods sold

87,102

8,831

95,933

Consumer loan bad debt

26,136

1,140

1,466

28,742

Net revenues

406,237

51,895

2,778

460,910

Operating expenses:

Store operations

203,190

23,001

1,288

227,479

Administrative

17,841

9,964

2,292

30,097

Depreciation

10,121

2,576

109

12,806

Amortization

414

2,651

21

3,086

(Gain)/loss on sale/disposal of assets

(82)

(3)

223

138

Interest, net

3

1,755

(1)

1,757

Equity in net income of unconsolidated affiliates

(12,935)

(12,935)

Other

345

3

(505)

(157)

Segment contribution

$

174,405

$

11,948

$

12,286

$

198,639

Corporate expenses

39,600

Income before taxes

159,039

Income tax expense

52,603

Net income

106,436

Net income attributable to redeemable noncontrolling interest

1,300

Net income attributable to EZCORP, Inc.

$

105,136

 

EZCORP, Inc. Operating Segment Results (Unaudited) (In thousands)

Nine Months Ended June 30, 2011

U.S. & Canada

Latin America

Other

International

Consolidated

Revenues:

Merchandise sales

$

196,898

$

17,329

$

$

214,227

Jewelry scrapping sales

138,068

11,363

149,431

Pawn service charges

133,355

11,589

144,944

Consumer loan fees

125,652

125,652

Other

944

34

978

Total revenues

594,917

40,315

635,232

Merchandise cost of goods sold

112,605

10,036

122,641

Jewelry scrapping cost of goods sold

87,416

9,201

96,617

Consumer loan bad debt

27,795

27,795

Net revenues

367,101

21,078

388,179

Operating Expenses:

Store operations

182,769

14,533

197,302

Administrative

14,103

3,030

558

17,691

Depreciation

8,194

1,723

9,917

Amortization

353

301

654

(Gain)/loss on sale/disposal of assets

(15)

13

(2)

Interest, net

20

4

24

Equity in net income of unconsolidated affiliates

(12,157)

(12,157)

Other

5

3

(168)

(160)

Segment contribution

$

161,672

$

1,471

$

11,767

$

174,910

Corporate expenses

42,439

Income before taxes

132,471

Income tax expense

46,677

Net income

85,794

Net income attributable to redeemable noncontrolling interest

Net income attributable to EZCORP, Inc.

$

85,794

 

EZCORP, Inc. Store Count Activity

Three Months Ended June 30, 2012

Company-owned Stores

Franchises

U.S. & Canada

Latin America

Other

International

Consolidated

Beginning of period

970

250

1,220

12

De novo

4

19

23

Acquired

9

9

Sold, combined or closed

(1)

(1)

(2)

End of period

982

268

1,250

12

Nine Months Ended June 30, 2012

Company-owned Stores

Franchises

U.S. & Canada

Latin America

Other

International

Consolidated

Beginning of period

933

178

1,111

13

De novo

12

46

58

Acquired

49

45

94

Sold, combined or closed

(12)

(1)

(13)

(1)

End of period

982

268

1,250

12

Reconciliation of GAAP to Non-GAAP Results (Unaudited)

(in thousands, except per share data)

The following tables provide a reconciliation of the differences between the reported or projected non-GAAP financial measures for the periods indicated and the most comparable GAAP financial measures. The non-GAAP financial measures presented may not be directly comparable to similarly titled measures reported by other companies and their usefulness for such purposes are therefore limited. EZCORP management believes presentation of the non-GAAP financial measures enhances investors' ability to analyze the Company's operating results. However, non-GAAP financial measures are not an alternative to GAAP financial measures and should be read only in conjunction with financial measures presented on a GAAP basis.

Nine Months Ended June 30, 2012

Nine Months Ended June 30, 2011

GAAP

Non-GAAP

Adjustments

Non-GAAP

GAAP

Non-GAAP

Adjustments

Non-GAAP

Net revenue

$

460,910

$

460,910

$

388,179

$

388,179

Operations expense

227,479

227,479

197,302

197,302

Administrative expense

63,761

63,761

56,250

(10,945)

45,305

Depreciation

16,805

16,805

12,670

12,670

Amortization

3,086

3,086

654

654

(Gain) / loss on sale/disposal of assets

138

138

(2)

(2)

Operating income

149,641

149,641

121,305

10,945

132,250

Interest income

(486)

(486)

(35)

(35)

Interest expense

4,180

4,180

1,186

1,186

Equity in net income of unconsolidated affiliates

(12,935)

(12,935)

(12,157)

(12,157)

Other

(157)

(157)

(160)

(160)

Income before income taxes

159,039

159,039

132,471

10,945

143,416

Income tax expense

52,603

52,603

46,677

3,831

50,508

Net income

106,436

106,436

85,794

7,114

92,908

Attributable to noncontrolling interest

1,300

1,300

Net income attributable to EZCORP, Inc.

$

105,136

$

$

105,136

$

85,794

$

7,114

$

92,908

Net income per share, diluted

$

2.06

$

$

2.06

$

1.71

$

0.14

$

1.85

Weighted average shares, diluted

51,042

51,042

50,292

50,292

50,292

SOURCE EZCORP, Inc.



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