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EZCORP Reports 2014 Financial Results and Establishes Foundation for Sustainable Growth in 2015 and Beyond

AUSTIN, Texas, Nov. 6, 2014 (GLOBE NEWSWIRE) -- EZCORP, Inc. (Nasdaq:EZPW), a leading provider of easy cash solutions for consumers, today announced fiscal fourth quarter financial results consistent with its October 27 pre-release. Adjusted non-GAAP net income from continuing operations was $14 million, or $0.27 per share. On a GAAP-basis, net loss from continuing operations attributable to EZCORP was $2 million or $(0.04) per share.* For the fiscal year ended September 30, 2014 total revenues were $990 million, and net income from continuing operations attributable to EZCORP was $47 million or $0.86 per share.

The fourth quarter marked a significant turning point for EZCORP as the company completed the review of its business units and initiated a number of actions designed to align organizational structure with strategic focus. During the quarter, the company discontinued operations in its online lending businesses in the U.S. and the U.K.; reevaluated its organizational design and overhead structure; and reduced expenses, which will immediately benefit the bottom line and allow the company to reinvest in its storefront businesses. The company improved the depth and experience of its Board of Directors with the addition of experienced and successful pawn, finance and international business executives.

Mark Kuchenrither, EZCORP's President and Chief Executive Officer, stated, "In the fourth quarter, we established our foundation for sustainable growth as a customer-focused company, and we are pleased to welcome our new Executive Chairman, Stuart Grimshaw, to help us build on this foundation. Stuart has an established track record of success in creating and developing customer-centric businesses, and we will benefit from his experience and expertise as we focus our energies and resources on delivering a superior customer experience."

Mr. Grimshaw stated, "I am excited about the tremendous opportunities for growth I see at EZCORP. I look forward to working with the Board of Directors and the management team to deliver superior long-term growth and shareholder returns."

* See the attached non-GAAP EPS reconciliation table.

Financial and Operating Highlights - Fiscal Year ended September 30, 2014 vs. Prior Year

Consolidated

  • For the fiscal year ended September 30, 2014, total revenues were $990 million as compared to $980 million for the same period last year.
  • Net income from continuing operations attributable to EZCORP was $47 million or $0.86 per share, as compared to $69 million or $1.27 per share in the same period a year earlier.
  • Cash and cash equivalents, including restricted cash, were $123 million at year-end, with aggregate consolidated debt of $367 million comprised of the $223 million of convertible debt and $144 million of Grupo Finmart third-party debt, which is non-recourse to EZCORP.

U.S. & Canada Segment

Pawn —

  • Pawn loan balances were $145 million at year-end, up 2% in total and up 3% on a same-store basis.
  • 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 88% with the general merchandise redemption rate remaining flat at 76%.
  • Total merchandise sales were $328 million, an increase of 6% in total and 4% on a same-store basis. Gross margin on merchandise sales was 37% as compared to 41% in the prior year.
  • Inventory turns were 2.3 times as compared to 2.6 times for the same period last year.

Financial Services —

  • Total loan balances including CSO loans, net of reserves, were $46 million at year-end, a 10% decrease over the prior year. At year end including CSO loans, installment loans were up 12% while auto title loans decreased 16% and traditional payday loans declined 15%.
  • Total loan fees were $167 million, down 2% over the prior year.
  • Bad debt as a percentage of fees was 28%, up 400 basis points over the prior year. Bad debt in installment loans was 31%, up 400 basis points over the prior year; auto title loans bad debt was 21%, up 400 basis points over the prior year; and traditional payday loans bad debt was 29%, an increase of 300 basis points over the prior year.

Latin America Segment

Consumer Lending —

  • New loan originations for the year were $81 million, up 30% over the prior year.
  • Total consumer loan and interest fees were $54 million, up 7% as compared to the prior year.
  • Structured financing transactions in fiscal 2014 resulted in approximately $26 million of gains (consisting of consumer loan and interest fees, less commission and other related expenses) reported in "Consumer loan sales and other."
  • Bad debt as a percentage of fees was 13%, up from a bad debt benefit in the prior year. The increase is primarily due to an increase in bad debt reserves after a government agency offered early retirement to its workers, which increased the number of loans outside of the automatic payroll deduction system.
  • The number of contracts, primarily with government agencies, grew by 75% for the fiscal year, from 72 contracts in fiscal year 2013 to 126 contracts in fiscal year 2014.

Pawn —

  • Pawn loan balances were $17 million, up 25% over the prior year.
  • Redemption rates were 77%, up 300 basis points. Jewelry redemption rates were 76%, up 500 basis points from prior year. General merchandise redemption rates were 78%, a 200 basis point increase over the prior year.
  • Total merchandise sales were $60 million, an increase of 2% in total and a 5% decrease on a same-store basis over last year, with gross margin of 29%, as compared to 39% in the prior year.
  • Inventory turns were 2.3 times as compared to 2.5 times for the prior fiscal year.

Other International Segment

  • Income from Cash Converters International was $7 million compared to $10 million in fiscal 2013. The decrease is mainly due to an interest rate cap commencing in Australia on July 1, 2013, which impacted both margins and volumes. The decrease in their financial services operations was partially offset by increases in profitability of store and franchise operations.

Discontinued Operations

  • During the fourth quarter of fiscal 2014 the company discontinued operations of its stand-alone online lending businesses in the U.S. and the U.K. and incurred pre-tax charges for goodwill impairment, asset write-down to net realizable liquidation value, uncollectible receivables, employee severance and lease termination costs of approximately $103 million. These costs have been recorded as part of "Loss from discontinued operations, net of tax."
  • Discontinued operations in fiscal 2014 include $12 million in pre-tax operating losses from the company's online businesses.

CEO Commentary

Mr. Kuchenrither added, "Our organization is focused on one strategy comprised of four pillars: a high-performance culture, a customer-centric business, operational excellence, and disciplined growth. The pillars are being implemented throughout the company using a balanced scorecard approach that measures and manages critical success factors and Key Performance Indicators.

"We are one month into our first fiscal quarter of 2015, and we are seeing positive signs from the renewed strategic focus in each of our operating segments. Same-store pawn sales and pawn service charges in the U.S. and Mexico, and new loan originations at U.S. Financial Services, are exceeding our expectations. New loan originations at Grupo Finmart in October were a record for the company. While these results are encouraging, we are still in the very early stages of fundamental changes in operations and implementation of key initiatives. Our strategy is in place, and we are confident that through focused execution, we will create a great experience for our customers and superior returns for our shareholders."

About EZCORP

EZCORP is a leader in delivering easy cash solutions to our customers across channels, products, services and markets. With approximately 7,300 team members 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 and Canada, and fee-based credit services to customers seeking loans. 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 consumer 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.

Forward-Looking Statements

This announcement contains certain forward-looking statements regarding the company's strategy, initiatives and expected performance. These statements are based on the company's current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the company's strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates will, should or may occur in the future, including future financial or operating results, are forward-looking statements. 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 operating risks, liquidity risks, legislative or regulatory developments, market factors or current or future litigation. 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. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

EZCORP, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended September 30, Fiscal Year Ended September 30,
2014 2013 2014 2013
Revenues:
Merchandise sales $ 89,120 $ 87,504 $ 387,331 $ 368,766
Jewelry scrapping sales 22,074 18,123 96,243 131,702
Pawn service charges 65,166 63,542 248,378 251,354
Consumer loan fees and interest 52,202 59,059 220,643 219,752
Consumer loan sales and other 14,755 (248) 37,045 8,547
Total revenues 243,317 227,980 989,640 980,121
Merchandise cost of goods sold 64,197 53,906 247,393 218,617
Jewelry scrapping cost of goods sold 17,574 15,140 72,836 96,133
Consumer loan bad debt 17,628 15,235 53,206 40,667
Net revenues 143,918 143,699 616,205 624,704
Operating expenses:
Operations 110,136 97,868 420,350 389,386
Administrative 13,875 17,556 64,119 52,474
Depreciation 7,587 7,192 29,801 27,858
Amortization 1,411 1,148 5,475 3,485
(Gain) loss on sale or disposal of assets 440 1,139 (5,629) 1,359
Total operating expenses 133,449 124,903 514,116 474,562
Operating income 10,469 18,796 102,089 150,142
Interest expense, net 7,147 4,140 22,832 15,168
Restructuring expense 6,664 6,664
Equity in net (income) loss of unconsolidated affiliates (2,068) 1,613 (5,948) (11,878)
Impairment of investments 44,598 7,940 44,598
Other income (1,693) (205) (907) (205)
Income (loss) from continuing operations before income taxes 419 (31,350) 71,508 102,459
Income tax expense (benefit) 2,001 (12,062) 20,465 29,582
Income (loss) from continuing operations, net of tax (1,582) (19,288) 51,043 72,877
Loss from discontinued operations, net of tax (86,606) (4,482) (93,426) (34,452)
Net (loss) income (88,188) (23,770) (42,383) 38,425
Net income from continuing operations attributable to redeemable noncontrolling interest 470 984 4,208 4,424
Net loss from discontinued operations attributable to redeemable noncontrolling interest (14) (76)
Net (loss) income attributable to EZCORP, Inc. $ (88,658) $ (24,740) $ (46,591) $ 34,077
Diluted earnings (loss) per share attributable to EZCORP, Inc.:
Continuing operations $ (0.04) $ (0.37) $ 0.86 $ 1.27
Discontinued operations (1.61) (0.09) (1.72) (0.64)
Diluted earnings (loss) per share $ (1.65) $ (0.46) $ (0.86) $ 0.63
Weighted average shares outstanding diluted 53,657 54,310 54,292 53,737
Net income (loss) from continuing operations attributable to EZCORP, Inc. $ (2,052) $ (20,258) $ 46,835 $ 68,529
Loss from discontinued operations attributable to EZCORP, Inc. (86,606) (4,482) (93,426) (34,452)
Net (loss) income attributable to EZCORP, Inc. $ (88,658) $ (24,740) $ (46,591) $ 34,077
EZCORP, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands)
September 30,
2014 2013
Assets:
Current assets:
Cash and cash equivalents $ 56,329 $ 36,317
Restricted cash 62,406 3,312
Pawn loans 162,444 156,637
Consumer loans, net 67,594 64,683
Pawn service charges receivable, net 31,044 30,362
Consumer loan fees and interest receivable, net 31,761 36,292
Inventory, net 139,419 145,200
Deferred tax asset 20,858 13,825
Income tax prepaid 15,976 16,105
Prepaid expenses and other assets 76,959 34,217
Total current assets 664,790 536,950
Investments in unconsolidated affiliates 91,098 97,085
Property and equipment, net 105,900 116,281
Restricted cash, non-current 4,257 2,156
Goodwill 346,577 433,300
Intangible assets, net 49,482 58,772
Non-current consumer loans, net 40,442 70,294
Deferred tax asset 26,174 8,214
Other assets, net 76,200 29,138
Total assets $ 1,404,920 $ 1,352,190
Liabilities and stockholders' equity:
Current liabilities:
Current maturities of long-term debt $ 10,673 $ 30,436
Current capital lease obligations 418 533
Accounts payable and other accrued expenses 97,213 79,967
Other current liabilities 8,595 22,337
Customer layaway deposits 8,097 8,628
Total current liabilities 124,996 141,901
Long-term debt, less current maturities 356,430 215,939
Long-term capital lease obligations 391
Deferred gains and other long-term liabilities 11,359 24,040
Total liabilities 492,785 382,271
Temporary equity:
Redeemable noncontrolling interest 35,498 55,393
EZCORP, Inc. stockholders' equity 876,637 914,526
Total liabilities and stockholders' equity $ 1,404,920 $ 1,352,190
EZCORP, Inc.
Operating Segment Results (Unaudited)
(in thousands)
Three Months Ended September 30, 2014
U.S. & Canada Latin America Other International Total Segments Corporate Items Consolidated
Revenues:
Merchandise sales $ 74,219 $ 14,901 $ — $ 89,120 $ — $ 89,120
Jewelry scrapping sales 20,410 1,664 22,074 22,074
Pawn service charges 56,774 8,392 65,166 65,166
Consumer loan fees and interest 41,524 10,678 52,202 52,202
Consumer loan sales and other 312 14,443 14,755 14,755
Total revenues 193,239 50,078 243,317 243,317
Merchandise cost of goods sold 51,485 12,712 64,197 64,197
Jewelry scrapping cost of goods sold 15,772 1,802 17,574 17,574
Consumer loan bad debt 13,967 3,661 17,628 17,628
Net revenues 112,015 31,903 143,918 143,918
Operating expenses (income):
Operations 84,247 25,889 110,136 110,136
Administrative 13,875 13,875
Depreciation 4,452 1,462 5,914 1,673 7,587
Amortization 112 451 563 848 1,411
Loss on sale or disposal of assets 106 12 118 322 440
Interest expense (income), net (6) 3,615 3,609 3,538 7,147
Restructuring expense 6,664 6,664
Equity in net income of unconsolidated affiliates (2,068) (2,068) (2,068)
Other (income) expense 2 (2,066) (231) (2,295) 602 (1,693)
Segment contribution $ 23,102 $ 2,540 $ 2,299 $ 27,941
Income (loss) from continuing operations before income taxes $ 27,941 $ (27,522) $ 419
EZCORP, Inc.
Operating Segment Results (Unaudited)
(in thousands)
Three Months Ended September 30, 2013
U.S. & Canada Latin America Other International Segments Total Corporate Items Consolidated
Revenues:
Merchandise sales $ 72,944 $ 14,560 $ — $ 87,504 $ — $ 87,504
Jewelry scrapping sales 14,385 3,738 18,123 18,123
Pawn service charges 56,573 6,969 63,542 63,542
Consumer loan fees and interest 45,181 13,878 59,059 59,059
Consumer loan sales and other (565) 317 (248) (248)
Total revenues 188,518 39,462 227,980 227,980
Merchandise cost of goods sold 44,211 9,695 53,906 53,906
Jewelry scrapping cost of goods sold 11,715 3,425 15,140 15,140
Consumer loan bad debt expense 14,324 911 15,235 15,235
Net revenues 118,268 25,431 143,699 143,699
Operating expenses (income):
Operations 81,445 16,013 410 97,868 97,868
Administrative 17,556 17,556
Depreciation 3,988 1,440 5,428 1,764 7,192
Amortization 113 426 539 609 1,148
Loss (gain) on sale or disposal of assets 7 (1) 6 1,133 1,139
Interest expense, net 9 3,074 3,083 1,057 4,140
Equity in net income of unconsolidated affiliates 1,613 1,613 1,613
Impairment of investments 44,598 44,598 44,598
Other (income) expense 2 20 222 244 (449) (205)
Segment (loss) contribution $ 32,704 $ 4,459 $ (46,843) $ (9,680)
Loss from continuing operations before income taxes $ (9,680) $ (21,670) $ (31,350)
EZCORP, Inc.
Operating Segment Results (Unaudited)
(in thousands)
Year Ended September 30, 2014
U.S. & Canada Latin America Other International Total Segments Corporate Items Consolidated
Revenues:
Merchandise sales $ 327,720 $ 59,611 $ — $ 387,331 $ — $ 387,331
Jewelry scrapping sales 89,941 6,302 96,243 96,243
Pawn service charges 217,891 30,487 248,378 248,378
Consumer loan fees and interest 166,505 54,138 220,643 220,643
Consumer loan sales and other 2,082 34,963 37,045 37,045
Total revenues 804,139 185,501 989,640 989,640
Merchandise cost of goods sold 205,349 42,044 247,393 247,393
Jewelry scrapping cost of goods sold 67,029 5,807 72,836 72,836
Consumer loan bad debt 46,339 6,867 53,206 53,206
Net revenues 485,422 130,783 616,205 616,205
Operating expenses (income):
Operations 335,881 84,469 420,350 420,350
Administrative 64,119 64,119
Depreciation 17,265 5,873 23,138 6,663 29,801
Amortization 399 2,004 2,403 3,072 5,475
(Gain) loss on sale or disposal of assets (6,620) 27 (6,593) 964 (5,629)
Interest (income) expense, net (16) 15,243 15,227 7,605 22,832
Restructuring 6,664 6,664
Equity in net income of unconsolidated affiliates (5,948) (5,948) (5,948)
Impairment of investments 7,940 7,940 7,940
Other expense (income) (5) (2,274) 115 (2,164) 1,257 (907)
Segment contribution (loss) $ 138,518 $ 25,441 $ (2,107) $ 161,852
Income (loss) from continuing operations before income taxes $ 161,852 $ (90,344) $ 71,508
EZCORP, Inc.
Operating Segment Results (Unaudited)
(in thousands)
Year Ended September 30, 2013
U.S. & Canada Latin America Other International Segments Total Corporate Items Consolidated
Revenues:
Merchandise sales $ 310,521 $ 58,245 $ — $ 368,766 $ — $ 368,766
Jewelry scrapping sales 123,162 8,540 131,702 131,702
Pawn service charges 221,775 29,579 251,354 251,354
Consumer loan fees and interest 169,291 50,461 219,752 219,752
Consumer loan sales and other 3,811 3,197 1,539 8,547 8,547
Total revenues 828,560 150,022 1,539 980,121 980,121
Merchandise cost of goods sold 183,147 35,470 218,617 218,617
Jewelry scrapping cost of goods sold 88,637 7,496 96,133 96,133
Consumer loan bad debt expense (benefit) 40,780 (113) 40,667 40,667
Net revenues 515,996 107,169 1,539 624,704 624,704
Operating expenses (income):
Operations 325,795 62,496 1,095 389,386 389,386
Administrative 52,474 52,474
Depreciation 15,814 5,222 21,036 6,822 27,858
Amortization 393 1,711 2,104 1,381 3,485
Loss on sale or disposal of assets 209 17 226 1,133 1,359
Interest expense (income), net 16 11,279 11,295 3,873 15,168
Equity in net income of unconsolidated affiliates (11,878) (11,878) (11,878)
Impairment of investments 44,598 44,598 44,598
Other (income) expense (3) (218) 153 (68) (137) (205)
Segment contribution $ 173,772 $ 26,662 $ (32,429) $ 168,005
Income (loss) from continuing operations before income taxes $ 168,005 $ (65,546) $ 102,459
EZCORP, Inc.
Store Count Activity
Fiscal Year Ended September 30, 2014
Company-owned Stores Franchises
Other
U.S. & Canada Latin America International Consolidated
Beginning of period 1,030 312 1,342 8
De novo 25 6 31
Sold, combined, or closed (10) (4) (14) (3)
Discontinued operations (1) (1)
End of period 1,044 314 1,358 5
Fiscal Year Ended September 30, 2013
Company-owned Stores Franchises
Other
U.S. & Canada Latin America International Consolidated
Beginning of period 987 275 1,262 10
De novo 84 73 157
Acquired 12 26 38
Sold, combined, or closed (3) (5) (8) (2)
Discontinued operations (50) (57) (107)
End of period 1,030 312 1,342 8
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 September 30, 2014
(in millions) (per diluted share)
Net Loss Attributable to EZCORP (GAAP) $ (88.7) $ (1.65)
Add Back:
Discontinued Operations Write-off $ 85.1 $ 1.59
Restructuring Charges $ 6.5 $ 0.12
Reserve Adjustments $ 6.4 $ 0.12
Other One Time and Non-trendable Items $ 3.5 $ 0.06
Total One Time and Non-trendable Items $ 9.9 $ 0.18
Discontinued Operations Loss (excluding write-off) $ 1.5 $ 0.03
Adjusted Net Income from Continuing Operations attributable to EZCORP (non-GAAP) $ 14.3 $ 0.27
Fiscal Year Ended September 30, 2014
(in millions) (per diluted share)
Net Loss Attributable to EZCORP (GAAP) $ (46.6) $ (0.86)
Add Back:
Discontinued Operations Write-off $ 85.1 $ 1.57
Restructuring Charges $ 6.5 $ 0.12
Reserve Adjustments $ 6.4 $ 0.12
Other One Time and Non-trendable Items $ 16.3 $ 0.30
Total One Time and Non-trendable Items $ 22.7 $ 0.42
Discontinued Operations Loss (excluding write-off) $ 8.3 $ 0.15
Adjusted Net Income from Continuing Operations attributable to EZCORP (non-GAAP) $ 76.0 $ 1.40

CONTACT: Mark Trinske Vice President, Investor Relations and Communications EZCORP, Inc. (512) 314-2220 Investor_Relations@ezcorp.com http://investors.ezcorp.com/

Source:EZCORP, Inc.