EZCORP ANNOUNCES SECOND QUARTER RESULTS

Delivers Earnings in Upper Half of Guidance Range

Apr 30, 2013

AUSTIN, Texas, April 30, 2013 /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, 2013.

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

For the quarter, total revenues were $272 million, a record for the Company.  Net income was $34 million, and earnings per share were $0.63, within the Company's previously announced guidance range of $0.60 to $0.65.

EZCORP continued to execute its growth strategy of developing new stores, new channels and new products:

  • New Stores During the quarter, the Company opened 39 de novo locations, bringing total de novo stores opened in the first half of fiscal 2013 to 114.  Including the 32 stores acquired during the first quarter, the Company has added 146 new locations so far this fiscal year.  Combined, these locations, as well as the 153 other de novo locations opened in fiscal 2011 and 2012, are performing ahead of the Company's pro forma expectations.
  • New Channels The Company continues to develop and grow its payroll withholding lending business in Mexico through its Grupo Finmart subsidiary (doing business under the names "Crediamigo" and "Adex"), where total loans outstanding were up 37% year-over-year.  And in the first full quarter since acquisition, the Company's U.S. online lending business more than doubled its total loans outstanding and is now offering loan products in five states.  At quarter end, over 70% of the Company's non-pawn loan balances were attributable to payroll withholding and online lending.
  • New Products The Company continues to develop new short-term loan products to respond to customer demand and preferences and to address regulatory changes.  In addition, the Company is now offering Western Union services in almost 650 locations in the United States and Canada, with roll-out to the remaining locations to be completed in the third quarter.

Consolidated Financial Highlights — Second quarter of fiscal 2013 vs. prior year quarter

  • Total revenues were $272 million, up 6%, largely attributable to the acquisition of controlling interests in Grupo Finmart at the end of January 2012 and Cash Genie in April 2012 and the inclusion of 100% of their revenues in EZCORP's consolidated revenues.
  • Net income was $34 million, down 9%, primarily attributable to the continuing challenging gold and jewelry environment. Excluding the impact of gold scrap, net income was up 6% compared to prior year quarter. The Company estimates the change in gold metrics (price and volume) from the prior year quarter caused a deterioration of approximately $10 million in consolidated net revenues.  The Company has provided supplemental information regarding the impact of the gold environment in the Investor Relations section of its website (www.ezcorp.com).

    This decrease in net income follows a 22% year-over-year net income decline in the first quarter, and reflects expected improvement in trajectory largely attributable to the following:
    • The drag associated with the 111 de novo stores opened during the nine months ended December 31, 2012 improved during the quarter, as these stores approach profitability in line with the pro forma operating model.
    • Investments in IT and other infrastructure improvements, including decision science models and tools, led to direct improvements in bad debt and inventory management and other operational efficiencies, and contributed to the Company's ability to develop new products and services.
    • Aggressive expense management led to significant quarter-over-quarter improvement in corporate administrative expenses.
  • The Company ended the quarter with $389 million in earning assets, an increase of 25%, driven primarily by increases in consumer loans in Mexico, as well as inventory and pawn loans in the U.S. and Mexico.   Earning assets consist of pawn loans, consumer loans and inventory on the balance sheet, combined with CSO loans not on the balance sheet.
  • Cash and cash equivalents, including restricted cash, at quarter-end were $43 million, with debt of $172 million, including $98 million Crediamigo third party debt, which is non-recourse to EZCORP.

U.S. & Canada — Strong Growth in Loan Balances

  • De Novo Growth — During the quarter, the Company added 12 new locations in the U.S. & Canada segment.  During the first half of fiscal 2013, the Company added a total of 75 locations in the U.S & Canada segment, consisting of 22 pawn stores and 53 financial services locations.
  • Pawn — The Company's U.S. Pawn & Retail business, consisting of 499 stores in 21 states, continued to perform well in a challenging gold and jewelry environment.  Excluding the impact of expected declines in the gold scrapping business, the core pawn loan and merchandise sales business posted solid year-over-year gains.
    • Pawn loan balances were $120 million at quarter end, reflecting 10% growth in total and 3% on a same store basis.  The overall pawn loan portfolio continues to reflect the ongoing shift to general merchandise collateral, with general merchandise loan balances up 12% in total and 9% on a same store basis.  Even in the challenging gold and jewelry environment, jewelry loan balances increased 3% in total and 1% on a same store basis, and jewelry continues to constitute approximately two-thirds of the total loan portfolio.
    • Pawn service charges increased 8% in total and 3% on a same store basis.  This increase is largely attributable to operational efficiencies driven by infrastructure investments the Company has been making for the past several quarters.
    • Redemption rates were 84%, up from 83% a year ago.  The jewelry redemption rate increased 100 basis points to 87%, while the general merchandise redemption rate decreased 100 basis points to 78%.
    • Merchandise sales increased 2% in total, but decreased 4% on a same store basis.  These results reflect the continuing softness in the jewelry retail market, as well as the delay in this year's federal tax refunds.  Gross margin on merchandise sales was 41%, which was flat to the same quarter last year.
  • Financial Services — The U. S. financial services business now consists of 490 storefront locations in 16 states and online lending in five states.  The Company is now offering financial services products, in storefronts, online or both, in a total of 17 states.
    • Total loan balances were $38 million, up 13%.  Customers continued to shift from first generation loan products (traditional payday and installment loans) to second generation single payment, multiple payment and auto title loan products.   Balances related to these products increased approximately 57%, driven by auto title loans.  In a challenging regulatory environment, loan balances in Texas grew 7%.  Total loan balances outside of Texas grew 17%, driven by new locations and new products.
    • Fees were $42 million, up 3%, reflecting loan growth in new states and the addition of online lending, somewhat offset by the shift to lower-yielding products and the challenging regulatory environment in Texas.
    • Bad debt as a percentage of fees was 15%, up 150 basis points, driven by the growth in new stores and new products, as well as higher bad debt experience from online generated loans.
    • The profitability of the financial services business was negatively impacted by approximately $1 million during the quarter as a result of ordinances enacted in Dallas, San Antonio and Austin.  
  • Online Lending — As expected, the U.S. online business negatively impacted earnings per share by $0.03 during the second quarter.  The Company expects a similar earnings drag in the third quarter, but expects that the business will cross over to profitability by the end of the fiscal year.  During the second quarter, the U.S. online business more than doubled its loan book and increased its average loan size.  The Company is now offering online loans in five states and is on track to be offering online loan products in 12 to 15 states by the end of the fiscal year. 

Latin America — Strong Increase in Segment Contribution

Contribution from the Latin America segment increased 133% and now accounts for over 10% of consolidated segment contribution, up from less than 4% a year ago.

  • Pawn — Empeno Facil, the Company's Mexico pawn operation, continued its strong performance.  At the end of the quarter, the Company operated 277 pawn stores in Mexico, 72 of which have been open less than 12 months.  Full-line format locations (which make up 81% of all Empeno Facil locations), regardless of age, are running well ahead of the Company's investment model.
    • During the quarter, Empeno Facil added 23 new de novo locations for a total of 47 during the first half of the fiscal year.
    • Pawn loan balances grew to $19 million, up 39% in total and 21% on a same store basis.  General merchandise loan balances grew 48% in total and 25% on a same store basis, while jewelry loan balances decreased 11% in total and 24% on a same store basis.  General merchandise loans now comprise 84% of Empeno Facil's pawn loan portfolio, up from 79% last year.
    • Pawn service charges increased 36% in total and 17% on a same store basis, reflecting significant operational improvements from the Company's increasingly experienced Mexican storefront teams.
    • Merchandise sales increased 37% in total and 12% on a same store basis.  Gross margin on merchandise sales was 41%, down 190 basis points from a year ago, reflecting more aggressive pricing.
  • Payroll Withholding Lending — Grupo Finmart, the Company's Mexico payroll withholding lending business (now doing business under two names, Crediamigo and Adex), continues to gain market share through the addition of new contracts and increased contract penetration.
    • Total loan balances at the end of the quarter were $91 million, up 37%.
    • Grupo Finmart added four new employer contracts during the quarter, and has increased its contract penetration rates by 500% since March 31, 2012.
    • Net revenues were $13 million in the quarter, with bad debt as a percentage of fees less than 1%.

Other International — Highlighted by Cash Converters International's Strong Performance

  • In February, Cash Converters International Limited, the Company's strategic affiliate in Australia, announced that it had achieved a 39% increase in net income during the first half of its fiscal 2013 (ended December 31, 2012), which resulted in a 43% contribution increase to EZCORP's results in its second quarter (ended March 31, 2013).  The net income increase was due principally to strong growth in Cash Converters International's personal loan business in Australia and the U.K.
  • Albemarle & Bond Holdings PLC, the Company's strategic affiliate in the U.K., announced a 31% decrease in net income during the first half of its fiscal 2013 (ended December 31, 2012), mainly due to a reduction in gold buying profits.  In addition, Albemarle & Bond recently announced that it expected profits for the full year (ending June 30, 2013) to be materially below current market expectations, citing further reductions in gold buying profits and pressure on its pawn loan business due to the challenging gold environment and increased competition.
  • The Company's combined equity investments in Cash Converters International and Albemarle & Bond generated a 10% decrease in earnings attributable to EZCORP for the quarter, as compared to the same period last year.

CEO Commentary

Paul Rothamel, EZCORP's President and Chief Executive Officer, stated:  "The second quarter shows the trajectory that we originally planned this year.  Our year-over-year earnings decline moderated significantly during the quarter, and we expect to deliver year-over-year earnings growth by the end of the year and to return to double-digit earnings growth next year.  This improvement is the direct result of investments we have made to deliver new stores, new channels and new products, and we believe those investments will continue to pay off in the form of net income growth."

Company Outlook

The Company affirms its fiscal 2013 earnings per share guidance of $2.55 to $2.80, and currently expects earnings per share for the third quarter of fiscal 2013 to be between $0.47 and $0.52.  The Company believes its performance, in year-over-year comparison terms, will improve each quarter for the rest of fiscal 2013, and expects to return to year-over-year earnings growth in the second half of the year.  A continuation of the challenging gold environment and the unfavorable financial services regulatory environment in Texas will likely lead to earnings in the lower end of the guidance range.

About EZCORP

EZCORP is a leading provider of instant cash solutions for consumers, employing approximately 7,800 teammates and operating over 1,400 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 names "Crediamigo" and "Adex"), a leading provider of payroll deduction loans in Mexico; in Ariste Holding Limited (doing business under the name "Cash Genie"), a leading provider of online loans in the U.K.; 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.

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.

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)



Three Months Ended
March 31,


Six Months Ended
March 31,


2013


2012


2013


2012


(in thousands, except per share amounts)

Revenues:








Merchandise sales

$

100,906



$

94,997



$

196,488



$

181,891


Jewelry scrapping sales

43,568



53,175



89,493



109,578


Pawn service charges

62,594



56,444



128,618



116,236


Consumer loan fees

62,310



50,319



127,075



95,407


Other revenues

2,696



1,343



7,526



2,039


Total revenues

272,074



256,278



549,200



505,151


Merchandise cost of goods sold

59,177



55,880



114,678



104,276


Jewelry scrapping cost of goods sold

30,092



32,310



62,291



67,734


Consumer loan bad debt

8,880



6,466



22,954



17,491


Net revenues

173,925



161,622



349,277



315,650


Operating expenses:








Operations

105,547



86,624



212,809



169,182


Administrative

8,603



11,998



22,274



23,652


Depreciation and amortization

8,763



7,259



16,415



12,514


(Gain) loss on sale or disposal of assets

13



27



42



(174)


Total operating expenses

122,926



105,908



251,540



205,174


Operating income

50,999



55,714



97,737



110,476


Interest income

(138)



(314)



(316)



(353)


Interest expense

3,891



2,560



7,706



3,150


Equity in net income of unconsolidated affiliates

(4,125)



(4,577)



(9,163)



(8,738)


Other (income) expense

405



802



(96)



(317)


Income before income taxes

50,966



57,243



99,606



116,734


Income tax expense

16,086



19,870



32,571



40,009


Net income

34,880



37,373



67,035



76,725


Net income attributable to redeemable noncontrolling interest

899



112



2,337



112


Net income attributable to EZCORP, Inc.

$

33,981



$

37,261



$

64,698



$

76,613










Net income per common share: Diluted

$

0.63



$

0.73



$

1.22



$

1.51


Weighted average shares outstanding: Diluted

54,252



51,069



53,172



50,887


 




EZCORP, Inc.

Highlights of Consolidated Balance Sheets (Unaudited)

(in thousands)




March 31,


2013


2012

Assets:




Current assets:




Cash and cash equivalents

$

41,443



$

46,674


Cash, restricted

1,204



930


Pawn loans

138,380



122,305


Consumer loans, net

36,596



24,275


Pawn service charges receivable, net

25,388



22,296


Consumer loan fees receivable, net

33,507



24,551


Inventory, net

116,517



87,834


Deferred tax asset

15,716



18,228


Income tax receivable

3,079



2,351


Prepaid expenses and other assets

42,421



34,474


Total current assets

454,251



383,918


Investments in unconsolidated affiliates

147,232



120,056


Property and equipment, net

118,979



95,044


Restricted cash, non-current

2,197




Goodwill

432,124



324,281


Intangible assets, net

61,487



38,804


Non-current consumer loans, net

77,414



56,632


Other assets, net

20,723



8,792


Total assets

$

1,314,407



$

1,027,527


Liabilities and stockholders' equity:




Current liabilities:




Current maturities of long-term debt

$

34,912



$

22,849


Current capital lease obligations

533




Accounts payable and other accrued expenses

63,298



58,110


Other current liabilities

36,096



16,723


Customer layaway deposits

8,191



7,193


Total current liabilities

143,030



104,875


Long-term debt, less current maturities

137,376



108,084


Long-term capital lease obligations

648




Deferred tax liability

10,104



8,455


Deferred gains and other long-term liabilities

15,080



13,487


Total liabilities

306,238



234,901


Temporary equity:




Redeemable noncontrolling interest

52,982



36,908


Stockholders' equity

955,187



755,718


Total liabilities and stockholders' equity

$

1,314,407



$

1,027,527






 



EZCORP, Inc.

Operating Segment Results (Unaudited)

(in thousands)




Three Months Ended March 31, 2013


U.S. & Canada


Latin America


Other

International


Consolidated

Revenues:








Merchandise sales

$

87,048



$

13,858



$



$

100,906


Jewelry scrapping sales

40,671



2,897





43,568


Pawn service charges

54,512



8,082





62,594


Consumer loan fees

43,825



11,842



6,643



62,310


Other revenues

1,620



217



859



2,696


Total revenues

227,676



36,896



7,502



272,074


Merchandise cost of goods sold

51,167



8,010





59,177


Jewelry scrapping cost of goods sold

27,663



2,429





30,092


Consumer loan bad debt

6,864



(661)



2,677



8,880


Net revenues

141,982



27,118



4,825



173,925


Segment expenses:








Operations

85,477



16,401



3,669



105,547


Depreciation and amortization

4,909



1,771



143



6,823


(Gain) loss on sale or disposal of assets

(1)



14





13


Interest (income) expense, net

15



2,802



(1)



2,816


Equity in net income of unconsolidated affiliates





(4,125)



(4,125)


Other income

(1)



(315)





(316)


Segment contribution

$

51,583



$

6,445



$

5,139



$

63,167


Corporate expenses:








Administrative







8,603


Depreciation and amortization







1,940


Interest expense, net







937


Other expense







721


Income before taxes







50,966


Income tax expense







16,086


Net income







34,880


Net income attributable to redeemable noncontrolling interest






899


Net income attributable to EZCORP, Inc.







$

33,981


 



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 revenues

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


Segment expenses:








Operations expense

75,364



11,090



170



86,624


Depreciation and amortization

3,390



2,404



14



5,808


Loss on sale or disposal of assets

25



2





27


Interest expense, net



1,769





1,769


Equity in net income of unconsolidated affiliates





(4,577)



(4,577)


Other expense

909



13





922


Segment contribution

$

63,840



$

2,766



$

4,443



$

71,049


Corporate expenses:








Administrative







11,998


Depreciation and amortization







1,451


Interest expense, net







477


Other income







(120)


Income before taxes







57,243


Income tax expense







19,870


Net income







37,373


Net income attributable to redeemable noncontrolling interest






112


Net income attributable to EZCORP, Inc.







$

37,261


 



EZCORP, Inc.

Operating Segment Results (Unaudited)

(in thousands)




Six Months Ended March 31, 2013


U.S. &

Canada


Latin

America


Other

International


Consolidated


(in thousands)

Revenues:








Merchandise sales

$

167,513



$

28,975



$



$

196,488


Jewelry scrapping sales

82,813



6,680





89,493


Pawn service charges

112,722



15,896





128,618


Consumer loan fees

89,784



23,719



13,572



127,075


Other revenues

4,414



1,871



1,241



7,526


Total revenues

457,246



77,141



14,813



549,200


Merchandise cost of goods sold

97,899



16,779





114,678


Jewelry scrapping cost of goods sold

56,820



5,471





62,291


Consumer loan bad debt

18,345



(1,709)



6,318



22,954


Net revenues

284,182



56,600



8,495



349,277


Segment expenses:








Operations

172,920



32,142



7,747



212,809


Depreciation and amortization

9,011



3,446



219



12,676


Loss on sale or disposal of assets

28



14





42


Interest (income) expense, net

32



5,415



(1)



5,446


Equity in net income of unconsolidated affiliates





(9,163)



(9,163)


Other income

(5)



(295)



(69)



(369)


Segment contribution

$

102,196



$

15,878



$

9,762



$

127,836


Corporate expenses:








Administrative







22,274


Depreciation and amortization







3,739


Interest expense, net







1,944


Other expense







273


Income before taxes



99,606


Income tax expense







32,571


Net income







67,035


Net income attributable to noncontrolling interest







2,337


Net income attributable to EZCORP, Inc.







$

64,698


 



EZCORP, Inc.

Operating Segment Results (Unaudited)

(in thousands)




Six Months Ended March 31, 2012


U.S. &

Canada


Latin

America


Other

International


Consolidated


(in thousands)

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 revenues

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 (losses) revenues

285,413



30,246



(9)



315,650


Segment expenses:








Operations

150,358



18,056



768



169,182


Depreciation and amortization

6,613



3,174



36



9,823


(Gain) loss on sale or disposal of assets

(175)



1





(174)


Interest expense, net

4



1,733





1,737


Equity in net income of unconsolidated affiliates





(8,738)



(8,738)


Other (income) expense

(151)



16



(64)



(199)


Segment contribution

$

128,764



$

7,266



$

7,989



$

144,019


Corporate expenses:








Administrative







23,652


Depreciation and amortization







2,691


Interest expense, net







1,060


Other income







(118)


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.

Store Count Activity






Three Months Ended March 31, 2013



Company-owned Stores





U.S. & Canada


Latin America


Other

International


Consolidated


Franchises

Beginning of period

1,050



319





1,369



10


De novo

12



27





39




Acquired










Sold, combined or closed

(4)



(1)





(5)



(1)


End of period

1,058



345





1,403



9













Three Months Ended March 31, 2012



Company-owned Stores





U.S. & Canada


Latin America


Other

International


Consolidated


Franchises

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, 2013



Company-owned Stores





U.S. & Canada


Latin America


Other

International


Consolidated


Franchises

Beginning of period

987



275





1,262



10


De novo

63



51





114




Acquired

12



20





32




Sold, combined or closed

(4)



(1)





(5)



(1)


End of period

1,058



345





1,403



9













Six Months Ended March 31, 2012



Company-owned Stores





U.S. & Canada


Latin America


Other

International


Consolidated


Franchises

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


SOURCE EZCORP, Inc.