2014

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

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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