TechWeb

EZCORP Reports 17% Increase In Net Income

Apr 19, 2012 (04:04 PM EDT)
URL: http://www.techweb.com/show-press-release/X899623/ezcorp-reports-17-increase-in-net-income.html

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.

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

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.

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 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.   






















Six Months Ended March 31, 2012


Six Months Ended March 31, 2011








Non-GAAP






Non-GAAP








GAAP


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP



Net revenue

$      315,650


-


$      315,650


$      265,182


-


$      265,182



















Operations expense

151,770


-


151,770


130,549


-


130,549



Administrative expense

41,064


-


41,064


41,871


(10,945)


30,926



Depreciation and amortization

12,514


-


12,514


8,645


-


8,645



(Gain) / loss on sale/disposal of assets

(174)


-


(174)


(171)


-


(171)



















    Operating income

110,476


-


110,476


84,288


10,945


95,233