EZCORP REPORTS 2013 REVENUES OF MORE THAN $1 BILLION

AUSTIN, Texas, Nov. 7, 2013 /PRNewswire/ -- EZCORP, Inc. (NASDAQ: EZPW), a leading provider of easy cash solutions for consumers, announced that for the fiscal year ended September 30, 2013, total revenues  were $1.01 billion, a record for the company. Net income from continuing operations attributable to EZCORP was $57 million.

EZCORP's core lending and retail businesses in the United States and Latin America showed continued strength, highlighted by the following:

• Merchandise sales in the U.S. increased 7% during the year, as the company continued to diversify its retail channels.  Online sales, primarily of general merchandise, totaled $19 million during the year, and now account for 8% of general merchandise retail sales in the U.S.
• Total loan balances in the company's U.S. Financial Services division (including online loans) were up 29%, including 23% growth in storefront loans. Loan fees were up 7%, offsetting the negative impact of various regulatory changes that reduced net income by $7 million.
• Latin America's segment contribution improved 40% during the year, after normalizing the prior year's results for a $16 million positive purchase accounting adjustment.  This significant growth was driven by strong performance in the company's Mexico payroll withholding lending business (Grupo Finmart), where loan balances increased 46% during the year and total revenues increased 89%.

For the fiscal year, the combined effect of reduced gold volumes and the gold price decline had a $31 million negative impact on the company's after tax earnings. The company's fiscal year results also included $35 million of one-time charges, including an impairment charge of $29 million on the company's long-term investment in Albemarle & Bond Holdings, PLC, a gold and jewelry pawnbroker in the U.K.  In addition, investments in long-term growth initiatives (including the company's online lending businesses in the U.S. and the U.K. and denovo growth) further negatively impacted earnings by $20 million.

The following metrics refer to continuing operations, unless otherwise noted. 

Consolidated Financial Highlights — Fiscal Year ended September 30, 2013 versus the prior year

• Total revenues exceeded $1 billion, a record for the company. Excluding jewelry scrapping, total revenues grew 14%, driven by a 24% increase in consumer loan fees, an 11% increase in merchandise sales, and an 8% increase in pawn service charges.
• Net income from continuing operations attributable to EZCORP was $57 million, while diluted earnings per share from continuing operations attributable to EZCORP were $1.06.
• Cash and cash equivalents, including restricted cash, were $42 million at year-end, with long-term debt of  $246 million, including $105 million of Grupo Finmart third-party debt, which is non-recourse to EZCORP.
• Net earning assets, including discontinued operations, were $466 million, a 20% increase over last year.  Net earning assets consist of pawn loans, consumer loans and inventory on the balance sheet, combined with CSO loans not on the balance sheet, net of reserves.  The growth in net earnings assets was driven by a 35% increase in loan balances in our combined financial services businesses, and a 13% increase in earning assets related to our pawn and retail businesses.

Fiscal Year 2013 Business Review

U.S. & Canada

• Storefront Growth — At year end, the company operated over 1,000 locations in 26 states.  During the year, the company opened 84 de novo stores, and acquired 12 stores in key markets.
• Pawn —
  • Pawn loan balances increased to $143 million from $141 million for the prior year, and revenues from pawn service charges increased 5% in total and 2% on a same store basis. General merchandise loan balances grew by 11%, while jewelry loan balances declined 6%.
  • Overall merchandise sales were up 7% in total and 3% on a same store basis. General merchandise sales increased 10% in total and 6% on a same store basis. The company's online retail channel continued to grow, and reported $19 million in revenues primarily in general merchandise sales, for the fiscal year. During the year, jewelry sales decreased 1% in total and 4% on a same store basis. However, in the fourth quarter, jewelry sales increased 18% in total and 14% on a same store basis, reflecting our previously announced strategy to sell more gold through our retail channel and scrap less.
  • Gross margin on merchandise sales was 41%, down 130 basis points from last year. This decrease was driven by a higher mix of general merchandise sales as general merchandise gross margin remained flat at 40% while gross margin on jewelry sales was 45%.
  • The overall redemption rate was 83%, up 80 basis points, driven by a jewelry redemption rate of 86%, up 150 basis points. Redemption rates for general merchandise were at unchanged at 76%.
• Financial Services (Storefront and Online) —
  • Total loan balances (including CSO loans not on the balance sheet) were $51 million, up 29%, driven by a 70% increase in second generation loan products (such as installment and other multiple payment products and auto title loans). Storefront loan growth was strong as well, increasing 23%.
  • Loan fees were $175 million, up 7%, as a result of new products in existing stores, storefront growth, and new fees from the U.S. online lending channel.
  • Bad debt as a percentage of fees was 25%, an increase of 300 basis points as we attracted new customers and our customers transitioned to our new multi-payment products, including auto title and our online channel.
  • The U.S. online business's loan book continues to grow and at year end was $2 million, net of reserves. While this business negatively impacted segment contribution in 2013, it is expected to make a positive contribution in fiscal 2014.

Latin America

The Latin America segment contribution was $27 million, a 40% increase over the prior year after normalizing for the prior year's purchase accounting adjustments. This increase was driven by strong performance at Grupo Finmart, the company's payroll withholding lending division.

• Payroll Withholding Lending — 
  • Total loan balances at Grupo Finmart at the end of the year were $107 million, up 46%.
  • Total revenue was $52 million, an increase of 89%, as a result of better contract terms and better penetration. Net revenues, including a credit for aged consumer loans that were sold, were $53 million. Absent this credit, bad debt as a percentage of fees was approximately 2%.
  • Grupo Finmart ended the year with 72 active convenios, compared to 67 at the end of last year. Contract penetration across all convenios was 6% for the year, compared to 3% in the prior year.
• Pawn —  
  •  Empeno Facil, the company's Mexico pawn operation, opened 66 locations during the year and operated 239 stores at the end of the year. As previously announced, the company closed 57 legacy, gold-only stores during the year, which is a part of the discontinued operations charge.
  • Pawn loan balances at year-end were $14 million, a 10% decrease from the prior year-end. General merchandise loan balances were down 4%, while jewelry loan balances decreased 31%. General merchandise loans now comprise 92% of Empeno Facil's pawn loan portfolio, up from 89% last year.
  • Revenue from pawn service charges increased 29% in total and 10% on a same store basis.
  • Merchandise sales increased 40% in total and 10% on a same store basis. Gross margin on merchandise sales was 39%, down 700 basis points from a year ago, reflecting a much more competitive lending and selling marketplace.

Other International

• At fiscal year end, after reviewing the valuation of our holdings in Albemarle & Bond Holdings PLC, we recognized an impairment charge of $43 million ($29 million net of tax). 
• Cash Genie, the company's online lending operation in the U.K., performed well during the second and third quarters of the year, but a poorly executed introduction of an installment loan product caused performance to deteriorate in the fourth quarter. The company took rapid action to improve performance and is on track to return to profitability in fiscal 2014.

CEO Commentary

Paul Rothamel, EZCORP's President and Chief Executive Officer, stated: "Obviously, we are disappointed with our financial results in 2013, particularly after posting three straight years of record revenue and net income. We are committed to improving the operational performance of our existing businesses, including our recently acquired online lending businesses. We are confident that our consistent execution against that commitment will ensure that we will deliver superior long-term value to our shareholders."

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 instant cash solutions to our customers across channels, products, services and markets. With approximately 7,800 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 significant investments in Albemarle & Bond Holdings PLC (ABM.L), one of the U.K.'s largest pawnbroking businesses with over 180 full-line stores offering pawnbroking, jewelry retailing, gold buying and financial services; and 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.

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.

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

Contact:

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

SOURCE EZCORP, Inc.