EZCORP, INC. 
By 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 Consolidated
International
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 Consolidated
International
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 Non-GAAP GAAP Non-GAAP
Adjustment 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.
