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EZCORP Reports 17% Increase In Net Income Apr 19, 2012 (04:04 PM EDT)
Completes key strategic investments in Mexico and the U.K.
Revises full-year EPS guidance down 6% due to U.S. Pawn inventory shift
AUSTIN, Texas, April 19, 2012 /PRNewswire/ -- EZCORP, Inc. (Nasdaq: EZPW), a leading provider of instant cash solutions for consumers, today announced results for its second fiscal quarter ended March 31, 2012. For the quarter, net income was $37.3 million, a 17% increase over the prior year's quarter, and diluted earnings per share were $0.73, a 16% increase over the prior year. During the quarter, the Company completed the acquisition of 60% of Crediamigo, one of the largest and fastest growing providers of payroll deduction loans in Mexico. Since the end of the quarter, the Company has completed the acquisition of 72% of Cash Genie, a leading provider of online loans in the United Kingdom. The Company incurred costs associated with acquisitions of $2.0 million ($0.03 per share) in the quarter.
The Company also announced it is revising its fiscal 2012 earnings guidance to a range of $2.85 to $2.95 per share, about 6% lower than the previous guidance. The mid-point of this range represents an increase of 13% over fiscal 2011 earnings per share, non-GAAP, and 19% on a GAAP basis. This revision in guidance is due to slightly slower than expected growth rates in the U.S. pawn business for both loans and sales (including scrap sales) as a result of customers' using a greater proportion of general merchandise instead of gold to satisfy their immediate cash needs. The effect of this shift will be to slow inventory turns, place downward pressure on margin rates and delay income into next year. The Company expects to continue to grow its same store loan balances and sales in the low-to-mid single digits for the rest of fiscal 2012.
Commenting on the quarter's results, EZCORP's President and Chief Executive Officer, Paul Rothamel, said "While we are very pleased with consolidated net income growth of 17% for the quarter and 15% for the first half, particularly given the strategic transactions we recently closed, we expect earnings growth in the back half of the year to be slightly slower than we originally expected. Nevertheless, the fundamentals of all our cash solutions businesses, including our inventory and loan yields, remain strong and we are filling the pipeline with new stores, new products, and additional talent."
Consolidated Financials – Three months ended March 31, 2012 versus the prior year quarter:
Net income of $37.3 million, up 17%.
Diluted earnings per share of $0.73, up 16%.
Total revenues of $256.3 million, up 20%.
Net revenues of $161.6 million, up 23%.
Consolidated operating income of $55.7 million, up 24%.
Combined loan balances (pawn and consumer loans, including CSO) at quarter end were $219.1 million, up 57%. Excluding Crediamigo, loan balances were $156.5M, up 12%.
Cash and cash equivalents at quarter-end were $47.5 million, with debt of $132.4 million. Crediamigo had third party debt outstanding of $94.6 million, all of which is non-recourse to EZCORP.
Key Operating Segment Metrics – Three months ended March 31, 2012 versus the prior year quarter:
U.S. & Canada:
Total revenue was $229.4 million, up 14% in total and 4% on a same store basis.
Total sales increased 16% to $134.9 million, with margin improving 90 basis points to 41%. Same store sales were up 2%.
Pawn service charges increased 17% to $50.5 million, up 9% on a same store basis.
Consumer loan fees increased 6% to $42.8 million, up 3% on a same store basis.
Consumer loan bad debt as a percentage of fees improved 45 bps to 14%.
Segment contribution increased 16% to $64.9 million.
Pawn loan balance was $108.8 million at quarter end, up 12% in total and 6% on a same store basis.
Combined loan balances (pawn and consumer loans, including CSO) at quarter end were $142.9 million, up 9%.
Latin America :
Total revenue was $26.7 million, up 110% in total and 9% on a same store basis.
Total sales increased 47% to $13.3 million. Same store sales were up 4%.
Pawn service charges increased 61% to $5.9 million, up 20% on a same store basis.
Consumer loan fees were $7.4 million.
Consumer loan bad debt as a percentage of fees was 7%.
Segment contribution increased to $1.3 million, with an improvement in margin from -1% to 5%.
Crediamigo recorded net revenue of $6.9 million and net income attributable to EZCORP of $0.2 million for the two months ended March 31, 2012.
Growth Drivers
U.S. & Canada:
Acquired 15 stores during the quarter and opened eight new de novo locations, bringing the total number of Company-owned stores to 970 at quarter end. In the first half of fiscal 2012, the Company has added 48 stores (40 acquired and eight de novo) in the U.S. and Canada, and is now a leader in 48 markets across the U.S. and Canada. The Company now offers instant cash solutions in 24 U.S. states and, including franchises, five Canadian provinces.
On April 13, completed the acquisition of nine pawn stores in the Minneapolis metropolitan area, where the Company had not previously had a presence. The Company now operates pawn shops in 19 U.S. states, up six from this time last year.
Converted nine CASHMAX stores to the Cash Converters brand. At quarter end, 35 of the 67 Company-owned stores in Canada operated under the Cash Converters brand, with an additional 12 Cash Converters stores managed by franchisees.
Latin America:
Empeno Facil opened 13 stores during the quarter and 27 for the first half, bringing total store count to 205. Of these, 153 are full size, full service stores.
Empeno Facil opened its first store in Monterrey, Mexico and now operates in 30 of 55 principal metro areas in Mexico and in 17 of 31 Mexican states primarily in the central and southern part of the country.
On January 30, 2012, the Company closed its acquisition of a 60% interest in Crediamigo, marking EZCORP's first entry into unsecured lending in Mexico. Crediamigo offers loans with typical APRs of around 85% and collects interest and principal through payroll deductions. The average loan is approximately $1,200 with a term of 27 months. Crediamigo has approximately 170 payroll withholding agreements with Mexican employers, primarily government and state agencies, with potential access to over 3 million employees. At March 31, 2012, Crediamigo's loan portfolio totaled $68.4 million and the company had $94.6 million of third party debt (non-recourse to EZCORP).
Other International:
On April 13, 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 significantly accelerates EZCORP's online strategy in the U.K., and EZCORP's existing U.K. online lending operations, most of which are outsourced, will be rolled into Cash Genie. Founded in 2009 and based in Ipswich, England, Cash Genie is one of the top 10 largest online lenders in the U.K. It currently has back office and collections functions based in the Philippines, and expects to launch online lending in Finland in May. The company offers unsecured 30-day cash advance loans from $120 to $1,200 with an average loan of $230. The company has 300,000 customers with almost 70,000 loans outstanding and a net loan balance of $17.6 million at the end of February.
Company Outlook
Commenting on the Company's outlook, Mr. Rothamel stated: "We believe that we are well positioned to continue our very strong growth. The consumer demand for our products in the U.S., Mexico, and Canada, as well as the rest of the world is expanding. The combination of our large and rapidly growing U.S. businesses, accelerated growth in Mexico through Empeno Facil and Crediamigo, our U.K. investments in Cash Genie and Albemarle & Bond, and our Cash Converters investments in Australia, the U.K. and Canada position us well for rapid, diversified growth around the world."
About EZCORP
EZCORP is a leading provider of instant cash solutions for consumers. Through more than 1,200 company-operated pawn, buy/sell and personal financial services stores 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. 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 fiscal 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.
Highlights of Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data and percents)
Three Months Ended March 31,
Six Months Ended March 31,
2012
2011
2012
2011
Revenues:
Merchandise sales
$ 94,997
$ 77,773
$ 181,891
$ 149,653
Jewelry scrapping sales
53,175
47,995
109,578
98,660
Pawn service charges
56,444
46,769
116,236
96,579
Consumer loan fees
50,319
40,472
95,407
86,782
Other
1,343
245
2,039
406
Total revenues
256,278
213,254
505,151
432,080
Cost of goods sold:
Cost of merchandise sales
55,880
44,639
104,276
85,950
Cost of jewelry scrapping sales
32,310
31,925
67,734
64,180
Total cost of goods sold
88,190
76,564
172,010
150,130
Bad debt:
Consumer loan bad debt
6,466
5,740
17,491
16,768
Net revenue
161,622
130,950
315,650
265,182
Operations expense
77,269
66,045
151,770
130,549
Administrative expense
21,353
15,733
41,064
41,871
Depreciation and amortization
7,259
4,466
12,514
8,645
(Gain) / loss on sales / disposal of assets
27
(178)
(174)
(171)
Operating income
55,714
44,884
110,476
84,288
Interest income
(314)
(11)
(353)
(14)
Interest expense
2,560
300
3,150
600
Equity in net income of unconsolidated affiliates
(4,577)
(4,691)
(8,738)
(8,058)
Other
802
4
(317)
(57)
Income before income taxes
57,243
49,282
116,734
91,817
Income tax expense
19,870
17,444
40,009
32,550
Net income
37,373
31,838
76,725
59,267
Attributable to noncontrolling interest
112
-
112
-
Net income attributable to EZCORP, Inc.
$ 37,261
$ 31,838
$ 76,613
$ 59,267
Net income per share, diluted
$ 0.73
$ 0.63
$ 1.51
$ 1.18
Weighted average shares, diluted
51,069
50,362
50,887
50,243
EZCORP, Inc.
Highlights of Consolidated Balance Sheets
(in thousands)
March 31, (unaudited)
September 30,
2012
2011
2011
Assets:
Current assets:
Cash and cash equivalents
$ 47,499
$ 59,785
$ 23,969
Pawn loans
122,305
106,525
145,318
Consumer loans, net
23,998
11,948
14,611
Pawn service charges receivable, net
22,296
19,976
26,455
Consumer Loan fees receivable, net
24,551
6,026
6,775
Inventory, net
87,891
70,275
90,373
Deferred tax asset
18,228
23,319
18,125
Federal income tax receivable
2,391
1,427
-
Prepaid expenses and other assets
34,443
20,045
30,611
Total current assets
383,602
319,326
356,237
Investments in unconsolidated affiliates
120,056
112,364
120,319
Property and equipment, net
95,046
70,105
78,498
Goodwill
320,692
143,404
173,206
Intangible assets, net
38,904
16,122
19,790
Non-current consumer loans, net
52,740
-
-
Other assets, net
18,129
7,572
8,400
Total assets
$ 1,029,169
$ 668,893
$ 756,450
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable and other accrued expenses
$ 75,865
$ 44,754
$ 57,400
Current maturities of long-term debt
7,224
10,000
-
Customer layaway deposits
7,193
6,844
6,176
Federal income taxes payable
-
-
693
Total current liabilities
90,282
61,598
64,269
Long-term debt, less current maturities
125,131
10,000
17,500
Deferred tax liability
9,507
1,192
8,331
Deferred gains and other long-term liabilities
14,423
2,314
2,102
Total liabilities
239,343
75,104
92,202
EZCORP, Inc. stockholders' equity
755,718
593,789
664,248
Noncontrolling interest
34,108
-
-
Total stockholders' equity
789,826
593,789
664,248
Total liabilities and stockholders' equity
$ 1,029,169
$ 668,893
$ 756,450
EZCORP, Inc.
Operating Segment Results (Unaudited)
(In thousands)
Three Months Ended March 31, 2012
U.S. & Canada
Latin America
Other International
Consolidated
Revenues:
Merchandise sales
$ 85,498
$ 9,499
$ -
$ 94,997
Jewelry scrapping sales
49,414
3,761
-
53,175
Pawn service charges
50,505
5,939
-
56,444
Consumer loan fees
42,806
7,383
130
50,319
Other
1,219
124
-
1,343
Total revenues
229,442
26,706
130
256,278
-
Merchandise cost of goods sold
50,499
5,381
-
55,880
Jewelry scrapping cost of goods sold
29,537
2,773
-
32,310
Consumer loan bad debt
5,878
508
80
6,466
Net revenues
143,528
18,044
50
161,622
Operating expenses:
Store operations
68,890
8,211
168
77,269
Administrative
5,424
4,334
2
9,760
Depreciation
3,382
842
14
4,238
Amortization
142
1,555
-
1,697
Loss on sale/disposal of assets
25
2
-
27
Interest, net
-
1,769
-
1,769
Equity in net income of unconsolidated affiliates
-
-
(4,577)
(4,577)
Other
791
11
-
802
Segment contribution
$ 64,874
$ 1,320
$ 4,443
$ 70,637
Corporate expenses
13,394
Income before taxes
57,243
Income tax expense
19,870
Net income
$ 37,373
Net income attributable to noncontrolling interest
112
Net income attributable to EZCORP, Inc.
$ 37,261
EZCORP, Inc.
Operating Segment Results (Unaudited)
(In thousands)
Three Months Ended March 31, 2011
U.S. & Canada
Latin America
Other International
Consolidated
Revenues:
Merchandise sales
$ 72,420
$ 5,353
$ -
$ 77,773
Jewelry scrapping sales
44,351
3,644
-
47,995
Pawn service charges
43,073
3,696
-
46,769
Consumer loan fees
40,472
-
-
40,472
Other
220
25
-
245
Total revenues
200,536
12,718
-
213,254
-
Merchandise cost of goods sold
41,484
3,155
-
44,639
Jewelry scrapping cost of goods sold
28,848
3,077
-
31,925
Consumer loan bad debt
5,740
-
-
5,740
Net revenues
124,464
6,486
-
130,950
Operating expenses:
Store operations
61,196
4,849
-
66,045
Administrative
4,407
1,079
27
5,513
Depreciation
2,764
578
-
3,342
Amortization
121
100
-
221
Gain on sale/disposal of assets
(178)
-
-
(178)
Interest, net
-
1
-
1
Equity in net income of unconsolidated affiliates
-
-
(4,691)
(4,691)
Other
3
1
-
4
Segment contribution
$ 56,151
$ (122)
$ 4,664
$ 60,693
Corporate expenses
11,411
Income before taxes
49,282
Income tax expense
17,444
Net income
$ 31,838
Net income attributable to noncontrolling interest
-
Net income attributable to EZCORP, Inc.
$ 31,838
EZCORP, Inc.
Operating Segment Results (Unaudited)
(In thousands)
Six Months Ended March 31, 2012
U.S. & Canada
Latin America
Other International
Consolidated
Revenues:
Merchandise sales
$ 162,050
$ 19,841
$ -
$ 181,891
Jewelry scrapping sales
102,280
7,298
-
109,578
Pawn service charges
104,875
11,361
-
116,236
Consumer loan fees
87,818
7,383
206
95,407
Other
1,795
244
-
2,039
Total revenues
458,818
46,127
206
505,151
-
Merchandise cost of goods sold
93,950
10,326
-
104,276
Jewelry scrapping cost of goods sold
62,687
5,047
-
67,734
Consumer loan bad debt
16,768
508
215
17,491
Net revenues
285,413
30,246
(9)
315,650
Operating expenses:
Store operations
137,215
14,209
346
151,770
Administrative
11,871
5,629
422
17,922
Depreciation
6,499
1,522
36
8,057
Amortization
272
1,652
-
1,924
(Gain)/loss on sale/disposal of assets
(175)
1
-
(174)
Interest, net
4
1,733
-
1,737
Equity in net income of unconsolidated affiliates
-
-
(8,738)
(8,738)
Other
(269)
16
(64)
(317)
Segment contribution
$ 129,996
$ 5,484
$ 7,989
$ 143,469
Corporate expenses
26,735
Income before taxes
116,734
Income tax expense
40,009
Net income
$ 76,725
Net income attributable to noncontrolling interest
112
Net income attributable to EZCORP, Inc.
$ 76,613
EZCORP, Inc.
Operating Segment Results (Unaudited)
(In thousands)
Six Months Ended March 31, 2011
U.S. & Canada
Latin America
Other International
Consolidated
Revenues:
Merchandise sales
$ 138,725
$ 10,928
$ -
$ 149,653
Jewelry scrapping sales
91,554
7,106
-
98,660
Pawn service charges
89,509
7,070
-
96,579
Consumer loan fees
86,782
-
-
86,782
Other
378
28
-
406
Total revenues
406,948
25,132
-
432,080
-
Merchandise cost of goods sold
79,681
6,269
-
85,950
Jewelry scrapping cost of goods sold
58,465
5,715
-
64,180
Consumer loan bad debt
16,768
-
-
16,768
Net revenues
252,034
13,148
-
265,182
Operating Expenses:
Store operations
121,422
9,127
-
130,549
Administrative
9,810
2,016
52
11,878
Depreciation
5,366
1,084
-
6,450
Amortization
236
197
-
433
(Gain)/loss on sale/disposal of assets
(172)
1
-
(171)
Interest, net
-
2
-
2
Equity in net income of unconsolidated affiliates
-
-
(8,058)
(8,058)
Other
3
1
(61)
(57)
Segment contribution
$ 115,369
$ 720
$ 8,067
$ 124,156
Corporate expenses
32,339
Income before taxes
91,817
Income tax expense
32,550
Net income
$ 59,267
Net income attributable to noncontrolling interest
-
Net income attributable to EZCORP, Inc.
$ 59,267
EZCORP, Inc.
Store Count Activity
Three Months Ended March 31, 2012
Company-owned Stores
Franchises
U.S. & Canada
Latin America
Other International
Consolidated
Beginning of period
950
192
-
1,142
12
De novo
8
13
21
-
Acquired
15
45
60
-
Sold, combined or closed
(3)
(3)
-
End of period
970
250
-
1,220
12
Six Months Ended March 31, 2012
Company-owned Stores
Franchises
U.S. & Canada
Latin America
Other International
Consolidated
Beginning of period
933
178
-
1,111
13
De novo
8
27
35
-
Acquired
40
45
85
-
Sold, combined or closed
(11)
(11)
(1)
End of period
970
250
-
1,220
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.
