EZCORP REPORTS REVENUES OF $269 MILLION AND EARNINGS PER SHARE OF $0.42

AUSTIN, Texas, Jan. 28, 2014 /PRNewswire/ -- EZCORP, Inc. (NASDAQ: EZPW), a leading provider of easy cash solutions for consumers, today announced its financial results for its first quarter of fiscal 2014.

For the quarter, total revenues were $269 million with net income of $23 million and earnings per share of $0.42. Excluding the negative impact of the company's minority investment in Albemarle & Bond and losses related to the company's immature online lending businesses, net income was $27 million and earnings per share were $0.49, both non-GAAP measures.

Paul Rothamel, EZCORP's President and Chief Executive Officer, stated, "I am pleased with our consolidated financial results this quarter and our underlying revenue and expense trends in our core U.S. and Latin America pawn and financial services businesses. Additionally we saw solid quarter-over-quarter progress in our newer online lending and selling channels. Most encouraging is that in a soft U.S. holiday shopping environment we delivered same-store sales growth of 8% in the quarter with jewelry same-store sales up 29% at very healthy margins. Online sales grew 21% as well and accounted for 9% of our overall sales volume."

Consolidated Financial Highlights

  • Total revenues were $269 million compared to $273 million in the same period last year. Excluding gold scrapping, total revenues were up 6%, driven by strong retail sales and consumer loan fee growth in the United States and Mexico.
  • Net income for the quarter was $23 million, net of a $1 million impact from Albemarle & Bond and a $3 million impact from the company's online lending businesses. The $27 million of net income before those impacts was driven primarily by the company's U.S. storefront businesses, which accounted for 82% of total adjusted segment contribution. The company's Latin America segment accounted for 14% of total adjusted segment contribution in the quarter.
  • Earning assets were $471 million at quarter-end, an increase of 13%, as a result of growth in payroll withholding, installment, and auto title loans, as well as inventory in the U.S. and Mexico. Net inventory was $143 million, a 19% increase over the same period last year, as the company executed against its strategy to drive jewelry retail sales rather than scrapping. The second quarter is typically the highest retail selling quarter of the year.
  • Cash and cash equivalents, including restricted cash, were $45 million at quarter-end, with debt of $252 million, including $106 million of Grupo Finmart third-party debt, which is non-recourse to EZCORP.
  • The effective tax rate was 30% compared to 33% for the same period last year, as the company continued to diversify its operations worldwide.

U.S. & Canada

Pawn —

  • Merchandise sales increased 12% in total and 8% on a same-store basis driven by strong performance in storefronts and online. Gross margin on merchandise sales remained strong at 40%, with only a 100 basis point decrease from the same quarter last year as the company aggressively pursued market share.
  • Jewelry sales increased 33% in total and 29% on a same-store basis, with gross margin of 45% compared to 46% last year, due to improved presentation, pricing and promotions at the company's 489 storefronts. This strong performance compares very favorably to traditional retail jewelers in the U.S. who generally reported mid-single digit same-store growth this past quarter.
  • Total general merchandise sales increased 4% in the quarter and were up 1% on a same-store basis.
  • Online sales grew 21% over last year and accounted for roughly 9% of the company's total merchandise sales. Online sales are driven from storefront inventory and the company currently has over 50,000 items available for sale online.
  • Pawn loan balances were $141 million at quarter-end, roughly flat to last year, as the company's customers continue to increase their use of general merchandise for collateral. The general merchandise loan balance grew 9% while the jewelry loan balance declined 8%. Transactions were up 3% and average loan size decreased approximately 8% compared to the same quarter last year. The average loan for general merchandise is roughly one-third that of an average jewelry loan.
  • Redemption rates were 83%, up 100 basis points compared to a year ago, driven by a 200 basis point increase in the jewelry redemption rate to 87%, while the general merchandise redemption rate decreased 100 basis points to 75%.
  • Segment contribution from the 52 Cash Converters stores in Canada and the U.S. improved by $0.7 million on a pre-tax basis in the quarter, and this operating unit crossed into profitability for the first time. The company continues to refine the model and expects continued profit growth for the rest of the year.

Financial Services —

  • Total loan balances, net of reserves, were $58 million at quarter-end, a 20% increase over the same quarter last year. This increase was driven by solid growth at the company's 494 storefronts as well as the addition of its online channel acquired late in the first quarter of fiscal 2013. At quarter-end, the online loan balance was $3 million, 5% of the segment's total consumer loan balance. Loan balances in Texas cities affected by restrictive local ordinances declined 41% year-over-year.
  • Loan fees were $49 million, up 10%. The gap in growth between loan balances and fees year-over-year is the result of lower yields driven by a competitive marketplace and regulatory impact. The company expects to continue to grow loan balances aggressively against declining yields.
  • Bad debt as a percentage of fees was 32%, up 700 basis points. Approximately half of this increase reflects the impact of regulatory changes at the local and federal level. These changes will continue to negatively impact the profitability of the business. The remaining roughly 350 basis point decline was driven primarily by new store growth, most of which came outside of Texas, and the penetration of the company's online channel. The company expects both of these impacts to moderate over the next several quarters as the new stores naturally mature and online bad debt continues its quarter-over-quarter improvement.
  • The company also expects improved expense leverage within the business as it realizes the effects of cost savings initiatives launched in fiscal 2013. Improvements in underwriting and loan management systems and service and collection center consolidation are well underway and should be materially completed by the end of fiscal 2014.

Latin America

Payroll Withholding Lending —

  • Total loan balances at the end of the quarter were $114 million, up 42%, driven primarily by significant growth in loan originations in existing contracts. The company also added or renewed 18 contracts in the quarter. Grupo Finmart now has 52 active contracts providing access to over 4 million customers.
  • Net revenues were $32 million in the quarter, with bad debt as a percentage of fees of 10%, compared to a bad debt benefit of 9% in the prior year due to a large aged debt sale. Bad debt is expected to decline over the next several quarters to approximately 5% to 8% of loan fees.

Pawn —

  • Pawn loan balances were $13 million, down 6%, with pawn service fees down 2% as Empeno Facil focused on better quality lending. Yield on the loan balance improved 1,200 basis points from 193% to 205%. General merchandise now accounts for 92% of the total loan portfolio compared to 89% a year ago.
  • Merchandise sales increased 12% compared to last year with margins of 37%, down 500 basis points driven by aggressive pricing in an increasingly competitive marketplace. The company expects margins to continue to be pressured for the remainder of the year.

Other International

Online Lending —

  • Cash Genie, the company's U.K. online lending business, showed improved performance in the quarter compared to the fourth quarter of last year. In the quarter the company narrowed its operating loss to under $2 million, a 51% improvement from the fourth quarter of fiscal 2013. New loans made during the quarter increased 28% and the number of loans increased 25% over the immediately preceding quarter. Expense reduction initiatives in the U.K. have reduced costs by 18% quarter-over-quarter. The company expects these trends to continue for the remainder of the year.

Strategic Affiliates —

  • The company's income from affiliates was down sharply, 75% year-over-year, driven primarily by profit decline at its non-controlled affiliate Albemarle & Bond. On January 27, 2014, Albemarle & Bond announced the termination of their formal sales process, and stated that there may be limited value attributable to the ordinary shares. As a result, EZCORP may be required to write off the remaining $7.9 million of its investment in the second quarter.

CEO Commentary

"The first quarter of fiscal 2014 represents a clear demarcation for us at EZCORP. We spent much of the last two years investing in new businesses and channels to diversify our business as we focus on serving our evolving customer. This diversification was also intended to seize emerging opportunities as well as insulate us from market shocks. We made those investments and in the third quarter of last year we exited certain legacy business models. Today we are solely focused on executing within the businesses and channels we have," said Mr. Rothamel.

"In the first quarter, our U.S. and Canada storefronts in pawn and financial services delivered 82% of our consolidated segment contribution while our Latin America operations delivered 14%. Our immature online lending channels and our strategic affiliate Albemarle & Bond were a drag to our segment contribution and net income.

"We expect year-over-year financial comparisons in the second quarter to be challenging as our U.S. pawn and financial services businesses continue to anniversary gold volume declines and regulatory changes respectively. Our online businesses will continue their quarter-over-quarter improvement, but will not cross into profitability until the third quarter. We expect year-over-year growth in Latin America and also expect to see expense leverage improvements as our expense control initiatives, begun in fiscal 2013, take hold.

"By the third quarter, we expect to see significant improvements in our year-over-year comparisons and the fourth quarter will show significant growth to the same quarter last year, as all of our operating segments and channels contribute to earnings.

"That run rate should then carry us to fiscal 2015 when we expect to deliver growth in all of our businesses with the online selling and lending channels growing fastest, followed by our Latin America businesses and our U.S. storefronts," added Rothamel.

The company provides supplemental information on its website. For additional content, please see "Investor Resources & Supplemental Information" at http://investors.ezcorp.com/.

About EZCORP

EZCORP, Inc. is a leader in delivering easy cash solutions to our customers across channels, products, services and markets. With approximately 7,600 teammates and approximately 1,400 locations and branches, we give our customers multiple ways to access instant cash, including pawn loans and consumer loans in the United States, Mexico, Canada and the United Kingdom. We offer these products through four primary channels: in-store, online, at the worksite and through our mobile platform. At our pawn and buy/sell stores and online, 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 names "Crediamigo" and "Adex"), a leading provider of payroll deduction loans in Mexico; and in Renueva Commercial, S.A.P.I. de C.V., an operator of buy/sell stores in Mexico under the name "TUYO." The company also has a significant investment in Cash Converters International Limited (CCV.ASX), which franchises and operates a worldwide network of over 700 stores that provide personal financial services and sell pre-owned merchandise, and an investment in Albemarle & Bond Holdings PLC, a U.K. pawnbroking business.

For the latest information on EZCORP, please visit our website at: http://investors.ezcorp.com/.

Forward-Looking Statements

This announcement contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations. Actual 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 fluctuations in gold prices or the desire of our customers to pawn or sell their gold items, changes in the regulatory environment, changing market conditions in the overall economy and the industry, 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.

Contact:

Mark Trinske
Vice President, Investor Relations and Communications
EZCORP, Inc.
(512) 314-2220
Investor_Relations@ezcorp.com
http://investors.ezcorp.com/


EZCORP, Inc.

Highlights of Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)



Three Months Ended December 31,


2013


2012

Revenues:




Merchandise sales

$

105,587


$

94,604

Jewelry scrapping sales

27,703


44,709

Pawn service charges

64,133


65,400

Consumer loan fees and interest

66,329


63,134

Other revenues

5,605


4,814

Total revenues

269,357


272,661

Merchandise cost of goods sold

63,588


54,945

Jewelry scrapping cost of goods sold

20,020


31,305

Consumer loan bad debt

18,432


13,521

Net revenues

167,317


172,890

Operating expenses:




Operations

112,769


103,285

Administrative

15,745


13,671

Depreciation

7,466


6,560

Amortization

1,940


714

(Gain) loss on sale or disposal of assets

(6,290)


29

Total operating expenses

131,630


124,259

Operating income

35,687


48,631

Interest expense, net

4,332


3,637

Equity in net income of unconsolidated affiliates

(1,271)


(5,038)

Other income

(168)


(501)

Income from continuing operations before income taxes

32,794


50,533

Income tax expense

9,881


16,672

Income from continuing operations, net of tax

22,913


33,861

Income (loss) from discontinued operations, net of tax

1,482


(1,706)

Net income

24,395


32,155

Net income from continuing operations attributable to redeemable noncontrolling interest

1,826


1,438

Net income attributable to EZCORP, Inc.

$

22,569


$

30,717





Diluted earnings (loss) per share attributable to EZCORP, Inc.:




Continuing operations

$

0.39


$

0.62

Discontinued operations

0.03


(0.03)

Diluted earnings per share

$

0.42


$

0.59





Weighted average shares outstanding diluted

54,362


52,112





Net income from continuing operations attributable to EZCORP, Inc.

$

21,087


$

32,423

Income (loss) from discontinued operations attributable to EZCORP, Inc.

1,482


(1,706)

Net income attributable to EZCORP, Inc.

$

22,569


$

30,717

 


EZCORP, Inc.

Highlights of Consolidated Balance Sheets (Unaudited)

(in thousands)



December 31,


2013


2012

Assets:




Current assets:




Cash and cash equivalents

$

38,486


$

46,668

Restricted cash

4,019


1,133

Pawn loans

153,421


162,150

Consumer loans, net

82,807


40,470

Pawn service charges receivable, net

30,842


31,077

Consumer loan fees and interest receivable, net

40,181


34,073

Inventory, net

142,711


120,271

Deferred tax asset

13,825


15,716

Income tax receivable

7,268


Prepaid expenses and other assets

42,895


50,394

Total current assets

556,455


501,952

Investments in unconsolidated affiliates

97,424


144,232

Property and equipment, net

114,539


114,082

Restricted cash, non-current

2,742


1,994

Goodwill

434,835


434,671

Intangible assets, net

65,178


59,562

Non-current consumer loans, net

60,750


66,615

Deferred tax asset

7,521


Other assets, net

29,685


19,198

Total assets

$

1,369,129


$

1,342,306

Liabilities and stockholders' equity:




Current liabilities:




Current maturities of long-term debt

$

16,737


$

27,562

Current capital lease obligations

533


533

Accounts payable and other accrued expenses

77,619


70,829

Other current liabilities

11,106


24,396

Customer layaway deposits

5,782


6,254

Income taxes payable


659

Total current liabilities

111,777


130,233

Long-term debt, less current maturities

235,289


207,978

Long-term capital lease obligations

253


771

Deferred tax liability


10,815

Deferred gains and other long-term liabilities

22,938


31,019

Total liabilities

370,257


380,816

Temporary equity:




Redeemable noncontrolling interest

57,578


49,323

EZCORP, Inc. stockholders' equity

941,294


912,167

Total liabilities and stockholders' equity

$

1,369,129


$

1,342,306

 

EZCORP, Inc.

Operating Segment Results (Unaudited)

(in thousands)



Three Months Ended December 31, 2013


U.S. & Canada


Latin America


Other International


Consolidated

Revenues:








Merchandise sales

$

88,890


$

16,697


$


$

105,587

Jewelry scrapping sales

25,925


1,778



27,703

Pawn service charges

57,069


7,064



64,133

Consumer loan fees and interest

48,702


14,293


3,334


66,329

Other revenues

485


5,122


(2)


5,605

Total revenues

221,071


44,954


3,332


269,357

Merchandise cost of goods sold

53,047


10,541



63,588

Jewelry scrapping cost of goods sold

18,570


1,450



20,020

Consumer loan bad debt

15,556


1,391


1,485


18,432

Net revenues

133,898


31,572


1,847


167,317

Segment expenses (income):








Operations

90,682


18,382


3,705


112,769

Depreciation

4,267


1,459


103


5,829

Amortization

652


617


26


1,295

(Gain) loss on sale or disposal of assets

(6,318)


6



(6,312)

Interest expense (income), net

5


3,148


(2)


3,151

Equity in net income of unconsolidated affiliates



(1,271)


(1,271)

Other income


(30)


(29)


(59)

Segment contribution (loss)

$

44,610


$

7,990


$

(685)


$

51,915

Corporate expenses:








Administrative







15,745

Depreciation







1,637

Amortization







645

Loss on sale or disposal of assets







22

Interest expense, net







1,181

Other income







(109)

Income from continuing operations before income taxes







32,794

Income tax expense







9,881

Income from continuing operations, net of tax







22,913

Income from discontinued operations, net of tax







1,482

Net income







24,395

Net income from continuing operations attributable to redeemable noncontrolling interest




1,826

Net income attributable to EZCORP, Inc.







$

22,569

 

EZCORP, Inc.

Operating Segment Results (Unaudited)

(in thousands)



Three Months Ended December 31, 2012


U.S. & Canada


Latin America


Other International


Consolidated

Revenues:








Merchandise sales

$

79,704


$

14,900


$


$

94,604

Jewelry scrapping sales

41,988


2,721



44,709

Pawn service charges

58,197


7,203



65,400

Consumer loan fees and interest

44,328


11,877


6,929


63,134

Other revenues

2,791


1,641


382


4,814

Total revenues

227,008


38,342


7,311


272,661

Merchandise cost of goods sold

46,322


8,623



54,945

Jewelry scrapping cost of goods sold

29,074


2,231



31,305

Consumer loan bad debt expense (benefit)

10,928


(1,048)


3,641


13,521

Net revenues

140,684


28,536


3,670


172,890

Segment expenses (income):








Operations

84,572


14,635


4,078


103,285

Depreciation

3,691


1,105


71


4,867

Amortization

147


435


26


608

Loss on sale or disposal of assets

29




29

Interest expense, net

17


2,613



2,630

Equity in net income of unconsolidated affiliates



(5,038)


(5,038)

Other (income) expense

(4)


20


(69)


(53)

Segment contribution

$

52,232


$

9,728


$

4,602


$

66,562

Corporate expenses:








Administrative







13,671

Depreciation







1,693

Amortization







106

Interest expense, net







1,007

Other income







(448)

Income from continuing operations before income taxes







50,533

Income tax expense







16,672

Income from continuing operations, net of tax







33,861

Loss from discontinued operations, net of tax







(1,706)

Net income







32,155

Net income from continuing operations attributable to redeemable noncontrolling interest



1,438

Net income attributable to EZCORP, Inc.







$

30,717

 

EZCORP, Inc.

Store Count Activity



Three Months Ended December 31, 2013


Company-owned Stores


Franchises


U.S. & Canada


Latin America


Other

International


Consolidated



Beginning of period

1,030


312



1,342


8

De novo

5


4



9


Acquired





Sold, combined or closed

(7)




(7)


(2)

End of period

1,028


316



1,344


6












Three Months Ended December 31, 2012


Company-owned Stores


Franchises


U.S. & Canada


Latin America


Other

International


Consolidated



Beginning of period

987


275



1,262


10

De novo

51


24



75


Acquired

12


20



32


Sold, combined or closed





End of period

1,050


319



1,369


10











Discontinued operations

(50)


(57)



(107)


Stores in continuing operations:

1,000


262



1,262


10

 

 

EZCORP, Inc.

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.



Three Months Ended December 31, 2013


Three Months Ended December 31, 2012


GAAP


Non-GAAP Adjustment


Non-GAAP


GAAP


Non-GAAP Adjustment


Non-GAAP

Segment Contribution:












U.S. & Canada*

$

44,610


$

2,778


$

47,388


$

52,232


$

396


$

52,628

Latin America

7,990



7,990


9,728



9,728

Other International**

(685)


2,924


2,239


4,602


(877)


3,725

Total Segment Contribution

51,915


5,702


57,617


66,562


(481)


66,081













Administrative

15,745



15,745


13,671



13,671

Depreciation

1,637



1,637


1,693



1,693

Amortization

645



645


106



106

Loss on sale or disposal of assets

22



22




Interest expense, net

1,181



1,181


1,007



1,007

Other Income

(109)



(109)


(448)



(448)

Income from continuing operations before income taxes

32,794


5,702


38,496


50,533


(481)


50,052

Income tax expense

9,881


1,716


11,597


16,672


159


16,831

Income from continuing operations, net of tax

22,913


3,986


26,899


33,861


(640)


33,221

Income from discontinued operations, net of tax

1,482



1,482


(1,706)



(1,706)

Net income

24,395


3,986


28,381


32,155


(640)


31,515

Net income from continuing operations attributable to redeemable noncontrolling interest

1,826



1,826


1,438


(354)


1,084

Net income attributable to EZCORP, Inc.

$

22,569


$

3,986


$

26,555


$

30,717


$

(286)


$

30,431













Weighted Average Shares Outstanding

54,362



54,362


52,112



52,112

EPS

$

0.42


$

0.07


$

0.49


$

0.59


$

(0.01)


$

0.58


* The U.S. & Canada non-GAAP adjustment is due to losses in our EZOnline business.

** The Other International non-GAAP adjustment includes a $1.2 million loss and $1.9 million income due to Albemarle & Bond during the three months ended December 31, 2013 and 2012 respectively, and losses of $1.8 million and $0.4 million due to our online business in the U.K. for three months ended December 31, 2013 and 2012 respectively.

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

 

SOURCE EZCORP, Inc.



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