EZCORP Reports Record Revenues, Income And Earnings Per Share

AUSTIN, Texas, Nov. 6, 2012 /PRNewswire/ -- EZCORP, Inc. (NASDAQ: EZPW), a leading provider of instant cash solutions for consumers, today announced record results for its fourth quarter and fiscal year ended September 30, 2012.

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

For the quarter, total revenues were $258.4 million, net income was $38.6 million and earnings per share were $0.75, all records for the Company's fourth fiscal quarter.

The Company also generated record-setting performance for the full fiscal year.  Compared with the prior year, total revenues increased 14% to $992.5 million, net income increased 18% to $143.7 million and earnings per share increased 16% to $2.81, all records for the Company.  The Company also added 151 locations in three countries, acquired majority ownership in two lending companies in Mexico and the United Kingdom and signed a multi-year agreement with Western Union to provide money transfer and other payment services across its growing network.

Key Drivers

• International Performance -  Reflecting the continued successful execution of the Company's geographic, product and channel diversification strategy, 31% of the Company's consolidated segment contribution in the quarter was attributable to areas outside the United States, up from 8% a year earlier.  Furthermore, combined total revenue in the Latin America and Other International segments more than doubled during the quarter compared to the same quarter last year.  For the full fiscal year, earnings generated outside the United States increased from 8% of consolidated segment contribution to 18%.  These 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.

• Mexico Pawn Operations - Empeno Facil, the Company's Mexico pawn operation, continued its strong performance.  Compared to the fourth quarter of last year, merchandise sales were up 51%, pawn service charges were up 40% and pawn loan balances increased 54%.  Jewelry scrapping sales declined 15% reflective of the continued challenging gold dynamics.  Year-over-year increases were due to the continued development and maturity of the existing store base and the addition of new stores.  The Company now operates 230 pawn stores in Mexico, having opened 52 during fiscal 2012.
• Mexico Payroll Withholding Lending - Crediamigo recorded net revenues of $10.4 million in the quarter, and $27.4 million since the acquisition in late January, with bad debt as a percentage of fees of 1%.  As expected, Crediamigo again refinanced portions of its $90 million third party debt at lower rates of interest.  The lower interest rates will result in significantly reduced interest expense going forward.  The weighted average interest rate on Crediamigo's third party debt is now 11%, compared to 19% before acquisition.  Purchase accounting income impact during the quarter totaled $6.7 million, of which $4.0 million was attributable to EZCORP, with the majority of the adjustment coming from the accelerated amortization of debt premium associated with the refinanced debt.  When reduced by income taxes and the noncontrolling interest, the net income attributable to EZCORP was $8.2 million for the quarter and $10.1 million during the fiscal year.
• U.K. Online Lending -  Cash Genie, the Company's U.K online lending business, was profitable for the year as expected.  Cash Genie is one of the top 10 largest online lenders in the U.K.
• Affiliates -  The Company's equity investments in Albemarle & Bond Holdings PLC and Cash Converters International Limited combined generated a 9% and 7% increase, in earnings attributable to EZCORP for the quarter and full fiscal year, respectively, as compared to the prior same periods. 

• Storefront Growth - During the quarter, the Company added 12 new stores (2 acquired and 10 de novo).  For the full fiscal year, the Company added 151 new stores (96 acquired, of which 45 came with the Crediamigo acquisition, and 55 de novo) and now operates 1,262 locations in the United States, Canada and Mexico.  Based on the strength of its high return de novo performance over the last several years, the Company expects to accelerate its de novo openings in fiscal 2013 and beyond.  During fiscal 2013, the Company expects to triple its annual de novo openings compared to fiscal 2012, opening roughly 175 locations in the United States, Mexico and Canada.  

• U.S. Pawn Performance - U.S. Pawn loan balances grew 5% to $141 million at quarter-end, and pawn service charges increased 10% during the quarter, compared with the year-ago quarter.  With the exception of jewelry sales and scrapping activities, the Company's pawn operations in the United States showed continued strength.  General merchandise pawn loan balances grew 9% compared to the prior year quarter, with sales of general merchandise up 18%.  Excluding earnings from scrap, the U.S. pawn operating contribution for the quarter increased 15% over the same quarter last year, while the year-over-year increase was 18%.

• Gold -  In terms of dollars, jewelry as a percentage of total U.S. pawn loan balances has remained largely unchanged quarter-over-quarter, while jewelry redemption rates increased 50 bps, resulting in a 17% same-store decrease in jewelry scrapping sales in the quarter and a 24% 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 prior year quarter caused a deterioration of approximately $11 million in net revenue for the U.S. and Canada segment. 

• Consumer Lending Performance - Consumer loan balances increased to $96 million globally at September 30, driving consumer loan fees earned during the quarter up 27%.  In addition, improved underwriting and collections effectiveness, coupled with consolidation of the lower risk profile Crediamigo business, led to a significant improvement in bad debt as a percentage of consumer loan fees.  On a consolidated basis, the measure improved 220 bps (from 24% to 22%).  Within the United States, fee net revenues decreased by 5%, driven by regulatory pressures within Texas, but mostly offset by growth in other states; installment loan net revenues increased by 50% and auto title net revenues were flat.

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

• Total revenues of $258.4 million, up 10%, were driven by a 27% increase in consumer loan fees, a 14% increase in merchandise sales and a 13% increase in pawn service charges. 
• Net revenues of $163.3 million were up 11%, with the increase primarily attributable to a combination of margin rate improvement in merchandise sales and 220 bps improvement in bad debt expense.
• Net income increased 6% to $38.6 million, and diluted earnings per share were $0.75, up 4% over prior year's quarter. 
• Cash and cash equivalents at quarter-end were $52.8 million, with debt of $219.9 million (including Crediamigo third party debt of $89.9 million, all of which is non-recourse to EZCORP).
• For the quarter, administrative expense of $30.3 million reflected an $11.3 million increase over the same quarter last year, $5.0 million of which result from the consolidation of Crediamigo and Cash Genie.  Of the remaining $6.3 million increase, roughly half was associated with supporting accelerated growth of the de novo and international operations.
• Income tax expense for the quarter was 29% of income before income taxes, compared with 35% last year fourth quarter.    The decrease in rate was attributable to increased earnings outside the United States and the benefit of state net operating loss carryovers. 

Consolidated Financial Highlights – Fiscal year ended September 30, 2012 versus the prior year

• Total revenues increased 14% to a record $992.5 million due primarily to a 21% increase in consumer loan fees, a 19% increase in merchandise sales and a 17% increase in pawn service charges. 
• Net revenues increased 17% due primarily to a 30 bps improvement on merchandise margins and a 260 bps improvement in consumer bad debt expense.
• Net income increased 18% to $143.7 million for the fiscal year, and diluted earnings per share were $2.81, a 16% increase over the prior year. 
• For the fiscal year, administrative expense of $94.0 million reflects an $18.8 million increase over last year, $11.7 million of which result from the consolidation of Crediamigo and Cash Genie.  The remaining $7.1 million year-over-year increase  was attributable to supporting the Company's domestic and international growth. 
• The Company's effective tax rate for the year was reduced from 35% to 32%, reflecting the continued success and growth of the Company's business in areas outside the United States and the benefit of state NOL's mentioned previously.
• The Company delivered strong return on equity of 19% for the trailing twelve months.

Strategic Developments

The Company also announced that it has entered into a multi-year agreement with The Western Union Company, a leader in global payment services.  The agreement will allow the Company to offer its customers Western Union's products and services (such as money transfer, money order and consumer bill payment services) through its ever widening network.  The roll-out of these services is anticipated to begin in the first half of the Company's fiscal year 2013.  

CEO Comments

Commenting on the year's results, EZCORP's President and Chief Executive Officer, Paul Rothamel, said, "I am very pleased with our 2012 performance as we delivered record financial results in revenue, net income and EPS in a difficult trading environment.  We also positioned the Company for long-term growth as we continue our multi-year plan to maximize our core pawn and lending business, diversify our geographic footprint, and innovate new products, services and channels.

"While we have doubled our revenues and net income over the last three years, we expect 2013 to be a year of investment to position the Company to again double in size over the next four to five years.  We will continue to solidify our market leading position by accelerating our proven de novo store growth in the United States and Mexico; we will capitalize on our investments in Crediamigo and Cash Genie; and we will continue to look for additional investments that position us first in the customers' mind for instant cash.

"We expect these investments to propel the Company to double digit revenue and net income growth in fiscal 2014 and beyond."

Company Outlook

The Company expects fiscal 2013 earnings per share to be between $2.55 and $2.80, which would be down 9% to roughly flat from fiscal 2012.  The Company expects first quarter earnings per share to be between $0.55 and $0.60, down from $0.78 in the first quarter of fiscal 2012.  The decrease in the quarter is driven primarily by expected continued weaknesses in the gold marketplace, regulatory pressures in Texas (the Company's largest financial services market), and the drag associated with accelerated de novo growth and U.S. online lending initiatives.  The Company expects to return to quarter-over-quarter earnings growth in the second half of the fiscal year.   

About EZCORP

EZCORP is a leading provider of instant cash solutions for consumers employing approximately 6,500 teammates and operating 1,262 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 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 almost 700 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. 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 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 fiscal year ended September 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
[email protected]
www.ezcorp.com

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.

SOURCE EZCORP, Inc.