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EZCORP Reports Third Quarter Revenues Of $241 Million, And Earnings Per Share Of $0.21

AUSTIN, Texas, July 29, 2014 (GLOBE NEWSWIRE) -- EZCORP, Inc. (Nasdaq:EZPW), a leading provider of easy cash solutions for consumers, today announced its financial results for the third quarter of fiscal 2014.

For the quarter, total revenues were $241 million, with net income from continuing operations of $11.3 million and earnings per share of $0.21.

Mark Kuchenrither, EZCORP's Interim President and Chief Executive Officer, stated, "We are pleased to have met our outlook for the third quarter. Our Pawn businesses and our Grupo Finmart business continued to drive our growth, representing 69% of our total revenues this quarter. During the quarter we strengthened our financial flexibility by raising $230 million through a private convertible debt offering which enabled us to pay off all amounts outstanding under our senior secured credit agreement and to buy back one million shares of stock. These capital structure enhancements in combination with our improving operational efficiencies enhance our ability to grow revenue and earnings, while improving the customer experience."

Consolidated Financial Highlights — Third Quarter Fiscal 2014 vs. Prior Year Quarter

  • Earning assets, including credit service organization (CSO) loans, were $443 million at quarter-end, an increase of 7% from continuing operations, as a result of growth in consumer loans at Grupo Finmart, as well as strong growth of installment loans in the U.S.  
  • Total revenues were $241 million, an increase of 3% compared to $235 million in the same period last year. Excluding an expected decrease in gold scrapping, total revenues were up 6%, driven by 3% increases in consumer loan fees and merchandise sales in the United States and Mexico. In addition, we had two structured financing transactions at Grupo Finmart from which we recognized $10 million of revenues.  
  • Cash and cash equivalents, including restricted cash, were $86 million at quarter-end, with aggregate consolidated debt of $382 million, comprised of the $230 million of our newly issued convertible debt and $152 million of Grupo Finmart third-party debt, which is non-recourse to EZCORP. 

U.S. & Canada

Pawn —

  • Pawn loan balances were $141 million at quarter-end, up 2% in total and up 3% on a same-store basis due to transactional growth in new loans made in general merchandise and jewelry.  
  • Redemption rates were 85%, up 100 basis points compared to a year ago, driven by a 200 basis point increase in the jewelry redemption rate to 89%, and a 100 basis point increase in general merchandise redemption rate to 78%.  
  • Total merchandise sales increased 4% in total and 5% on a same-store basis over the same quarter last year, driven by growth in storefront jewelry sales and strong online performance. Gross margin on merchandise sales was 38%.  
  • Jewelry sales increased 18% in total and 16% on a same-store basis compared to the same quarter last year, with gross margin of 43%. For the first nine months of the fiscal year, jewelry sales growth was 27% in total and 23% on a same-store basis.  
  • Online sales grew 51% over the same quarter last year and accounted for roughly10% of the segment's total merchandise sales. Gross margin was 43% as compared to 42% for the same quarter last year.

Financial Services —

  • Total loan balances including CSO loans, net of reserves, were $48 million at quarter-end, a 5% increase over the same quarter last year. For the quarter, including CSO loans, installment loans were up 51% while auto title loans decreased 1% and traditional payday loans declined 9%.  
  • Total loan fees were $42 million, up 4% over the same quarter last year. The gap in growth between loan balances and fees year-over-year is the result of a shift in product mix to lower yielding products driven by a more competitive marketplace and regulatory impact.  
  • Bad debt as a percentage of fees was 31%, up 600 basis points over the same quarter last year, driven primarily by our online lending business.

Latin America

Consumer Lending —

On the last day of the third quarter of fiscal 2014, EZCORP acquired an additional 16% percent ownership of Grupo Finmart and now owns 76% of the company. Grupo Finmart is a vertically integrated lender focused on the following core business activities:

  • Development and servicing of primarily government agency contracts authorizing Grupo Finmart to lend to agency employees.  
  • Origination of new loans through a number of expanding sales channels (direct/indirect sales teams, call center, mobile units and branches).  
  • Grupo Finmart is a financial intermediary that has developed a hybrid business comprised of a distributor model and a loan portfolio model.  
  • Grupo Finmart began using structured financing transactions in the first quarter of this year. As a result, Grupo Finmart operates as a distributor, while continuing to service customer loans.  
  • Grupo Finmart will continue to grow the loan portfolio as well as sell a portion of the portfolio on a regular basis.  
  • The hybrid approach is an important competitive advantage for the business that allows for maximum flexibility, healthy diversification in funding sources and consistent availability of capital for growth.

In the third quarter, Grupo Finmart's financial results were driven by focusing on organic growth initiatives, optimizing financing strategy, and capitalizing on increasing market demand.

  • New loan originations for the quarter grew 22% over last year to $22 million from $18 million.  
  • Total consumer loan fees and interest was $15 million, up 15% as compared to the same period last year.  
  • Three new government contracts were signed including one with the State of Tabasco.   
  • Bad debt as a percentage of fees was 9%, up from 5% in the same last quarter last year.  
  • Our planned structured financing transactions this quarter resulted in $38 million in accelerated cash flow to fund new loan originations, and a $10 million gain reported in "Consumer loan sales and other."  
  • This quarter's structured asset sales represented less than 25% of the company's current loan portfolio.

Pawn — Latin America

  • Pawn loan balances were $17 million, up 7% over the same quarter last year. The yield on the loan balance improved 1100 basis points to 195% as compared to the same period last year.  
  • Redemption rates were 76%, up 300 basis points compared to a year ago, driven by a 600 basis point increase in jewelry redemption rates to 75% and a 300 basis point increase in general merchandise to 76%.  
  • Merchandise sales decreased 4% compared to last year.

Other International

Online Lending —

  • At Cash Genie, our U.K. online lending business, total loan fees were $5 million for the quarter.  
  • Total loan balances at the end of the quarter were $3 million.  
  • Bad debt as a percentage of fees was 66% for the quarter, as a result of business changes related to Financial Conduct Authority (FCA) regulations.

Strategic Affiliates —

  • Our income from our Cash Converters International affiliate was $2 million.

CEO Commentary

Mr. Kuchenrither added, "As we have announced, there have been significant changes to the management and board of EZCORP over the past two weeks. These strategic changes were made in order to refocus the company on building a sustainable growth model which creates long-term shareholder value. We will employ a capital allocation strategy that is focused on achieving a return on invested capital of at least 15%."

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