EZCORP ANNOUNCES GROWTH IN REVENUES AND EARNING ASSETS FOR ITS FISCAL THIRD QUARTER OF 2013

AUSTIN, Texas, July 30, 2013 /PRNewswire/ -- EZCORP, Inc. (NASDAQ: EZPW), a leading provider of easy cash solutions for consumers, announced total revenues from continuing operations for its third fiscal quarter ended June 30, 2013 increased 5% to $235 million. Excluding gold scrapping revenues, total revenues were up 13%. Earning assets increased 21% over last year. Net income from continuing operations was $16 million, or $0.29 per share. The negative impact of the gold marketplace in the quarter was roughly $10 million in net income and $0.18 in earnings per share. The quarter also included one-time charges related to expense reduction in continuing operations and other investment costs, which reduced earnings per share by $0.02.

During the quarter, the company implemented a plan to exit certain components of its business and close over 100 legacy stores that did not fit the company's future growth profile. In connection with the reorganization, the company recorded a charge of $21 million net of taxes, or $0.40 per share, resulting in a total net loss for the quarter of $6 million, or $0.11 per share.

The company also continued its strategic plan to diversify geographically, add new channels, and broaden its product lines. So far this fiscal year, the company has added 172 locations, 93 of which are outside the United States; has introduced multiple new products to serve both domestic and international customers; and has added a U.S. online lending channel to complement its existing U.K. online lending business.

The following metrics refer to continuing operations, unless otherwise noted. The store count activity attached does not exclude the stores that are part of the discontinued operations.

Consolidated Financial Highlights — Third Quarter of Fiscal 2013 vs. Prior Year Quarter

• Total revenues were $235 million, an increase of 5%, representing growth across all business segments. Excluding gold scrapping, total revenues were up 13%.
• Earning assets (which consist of pawn loans, consumer loans and inventory on the balance sheet, combined with CSO loans not on the balance sheet, net of reserves) were $416 million, an increase of 21%. This was a result of increases in all categories of earning assets, including pawn, payday, installment, and auto title loans, as well as inventory in the U.S. and Mexico.
• Net income declined mainly due to the previously announced impact of volatility in the gold market in both the U.S. and Mexico, which caused a deterioration of approximately $15 million in consolidated net revenues. It was also impacted by one-time investment, and expense reduction costs of $2 million. Net income from continuing operations was $16 million, down 48%.
• Cash and cash equivalents, including restricted cash, were $51 million at quarter-end, with debt of $232 million, including $109 million of Grupo Finmart third-party debt, which is non-recourse to EZCORP.

U.S. & Canada — Growth in Loan Balances

• De Novo Growth — During the quarter, the company added 5 new locations in the U.S. & Canada segment. During the nine-month period ended June 30, 2013, the company added a total of 80 locations in the U.S. & Canada segment, consisting of 24 pawn stores and 56 financial services locations.
• Pawn — The U.S. Pawn & Retail business, which consists of 501 stores in 21 states, continued to be challenged by the gold environment. Core non-gold loan and merchandise sales posted solid year-over-year gains.
  • Pawn loan balances were $137 million at quarter end, up 2% from the prior year quarter. General merchandise loan balances were up 11% in total and 9% on a same store basis, and jewelry loan balances declined 8% in total and on a same store basis and continue to constitute approximately 60% of the total loan portfolio.
  • Revenues from pawn service charges increased 5% in total and 2% on a same store basis.
  • Redemption rates were 84%, up from 83% a year ago, in spite of a significant increase in the company's loan-to-value ratio. The jewelry redemption rate increased 100 basis points to 87%, while the general merchandise redemption rate remained at 77%.
  • Merchandise sales increased 9% in total and 5% on a same store basis. Gross margin on merchandise sales was 41%, unchanged from the same quarter last year. Online retail accounted for 6% of total U.S. sales during the quarter, compared to less than 1% for the same period last year.
• Financial Services — The U.S. financial services business now consists of 492 storefront locations in 15 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, which reinforces its stated strategy of becoming a geographically diverse, multi-channel, multi-product provider.
  • Total loan balances, including U.S. online loans, were $44 million, up 22%. Storefront loan balances alone, were up 19%. Balances related to second generation single payment, multiple payment and auto title loan products were up approximately 48%, driven by auto title loans, as customers continued to shift from first generation to second generation loan products. Total loan balances, including online loan balances, outside of Texas grew 22%, driven by new locations and new products. Loan balances, including online loan balances, in Texas grew 21%.
  • Loan fees were $38 million, up 7%, reflecting loan growth in new states and the addition of the new U.S. online lending channel.
  • Bad debt as a percentage of fees was 25%, up 100 basis points, driven by the expected higher bad debt from online loans.
  • Local and federal regulatory changes negatively impacted the profitability of the financial services business by approximately $1 million during the quarter. Regulatory impact over the first nine months of the year was roughly $3 million.
  • The U.S. online business continued to grow, and the loan book increased by 63% over the previous quarter. The company now offers online loans in five states, after successfully transitioning from the export lending model to the state-by-state compliant model. This business negatively impacted earnings per share by $(0.03) during the third quarter, and by $(0.07) year-to-date. The company has increased its marketing efforts in an effort to accelerate loan growth, and now expects this business to cross into profitability in the first half of fiscal 2014.
• Cash Converters U.S. and Canada — The company's Cash Converters operations in the U.S. and Canada now include 47 stores (40 in Canada and 7 in the U.S.), plus another 8 franchise stores in Canada. The company expects this group of stores to positively impact segment contribution beginning in the fourth quarter of fiscal 2013.

Latin America — Strong Increase in Segment Contribution

Contribution from the Latin America segment increased 79%, excluding the one-time purchase accounting adjustment related to the refinancing of Grupo Finmart debt in the prior year quarter. Including this adjustment, segment contribution decreased 21%. The segment now accounts for 14% of consolidated segment contribution, up from 13% a year ago.

• Pawn — Empeño Fácil, the company's Mexico pawn operation, operated 235 stores in Mexico at the end of the quarter.
  • During the quarter, Empeño Fácil added 15 new de novo locations for a total of 62 thus far in fiscal 2013.
  • Pawn loan balances grew to $16 million, up 30% in total and 18% on a same store basis. General merchandise loan balances grew 42% in total and 18% on a same store basis, while jewelry loan balances decreased 20% in total and 36% on a same store basis. General merchandise loans now comprise 92% of Empeño Fácil's pawn loan portfolio, up from 87% last year.
  • Revenue from pawn service charges increased 39% in total and 17% on a same-store basis.
  • Merchandise sales increased 44% in total and 18% on a same store basis. Gross margin on merchandise sales was 39%, down 500 basis points from a year ago, reflecting more aggressive pricing.
• Payroll Withholding Lending — Grupo Finmart continues to gain market share through the addition of new contracts, multi-channel growth, and increased contract penetration. During the quarter, Grupo Finmart also completed a $30 million cross-border debt offering at 8.5%.
  • Total loan balances at the end of the quarter were $98 million, up 53%.
  • Net revenues were $13 million in the quarter, with bad debt as a percentage of fees of 5%, which improved 100 bps over the prior year quarter.
  • Grupo Finmart added 17 contracts during the quarter representing 240,000 employees. Contract penetration across all convenios was 5.6% in the quarter, compared to 3% in the prior year quarter.
  • Subsequent to the end of the quarter, Grupo Finmart was granted access to the Mexican Social Security Institute (Instituto Mexicano del Seguro Social or "IMSS"), which will allow it to offer payroll deduction loans to Mexican retirees of the private sector. This is a very important and stable market in Mexico and includes 90,000 direct employees, and 2.5 million people collecting pensions or social security.

Other International — U.K. Online Business Growing

• Loan balances at Cash Genie, the company's U.K. online lending business, increased 9% over the second quarter and more than doubled from a year ago. Net fee revenue increased 50% over last year, and the company is now offering installment loans, broadening its product offerings.
• The company's combined equity investments in Cash Converters International and Albemarle & Bond generated a 3% increase in earnings attributable to EZCORP for the quarter, as compared to the same period last year.

Discontinued Operations

During the third quarter, the company implemented a plan to exit certain components of its business and close over 100 legacy stores. These stores are generally older, smaller stores that did not fit the company's future growth profile.

The following table summarizes the one-time, pre-tax termination costs recorded in the third quarter related to the reorganization. An additional $2 million of third quarter pre-tax operating losses from stores being closed is reflected in discontinued operations on the statement of operations.                                                

The accrued reorganization charges are included in "Accounts payable and accrued liabilities" in the consolidated balance sheet and in "Loss from discontinued operations" in the consolidated statements of operations.

Growth Strategy Update

• New Stores in Key Markets — The company opened 20 de novo locations, bringing total de novo stores opened so far in fiscal 2013 to 134. Including acquisitions, the company has added 172 locations this fiscal year.
• New Channels — Loan balances at Grupo Finmart grew 53% year-over-year. Online loan balances within the U.K. grew 170% over the same quarter last year. At quarter end, 40% of the company's loan balances were attributable to loans other than pawn loans or payday loans, compared to 32% a year ago. Online retail accounted for 6% of total U.S. sales during the quarter, compared to less than 1% for the same period last year.
• New Products — The company continues to develop new products to respond to customer preferences and regulatory changes. Both online lending businesses added installment products. The company launched its partnership with Western Union, and is now successfully retailing inventory online.

CEO Commentary

"We are pleased to report strong consolidated revenues for the third fiscal quarter, particularly in the face of the volatile gold market. And our non-gold businesses are performing very well. While the customer is certainly impacted by the current macro trends, they continue to pick us as their preferred provider of cash, as evidenced by our significant, consistent growth in earning assets," said Paul Rothamel, EZCORP's President and Chief Executive Officer.

"Our team members have remained committed to our vision, and as a result of their hard work, we continue to make progress in diversifying our business across geographies, products and channels."

"Looking ahead, we are confident that our size, scale and industry expertise are significant competitive advantages over the long term. We intend to continue to grow by providing our customers with the products and services they want, when they want and how they want, and we expect to be a market leader in the communities we serve for decades to come," said 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 is a leading provider of easy cash solutions for consumers, employing approximately 7,800 teammates and operating over 1,300 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.

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
[email protected]
http://investors.ezcorp.com/

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SOURCE EZCORP, Inc.