EZCORP Reports Record Third Quarter Net Income Of $28.5 Million, Driven By Strong International Growth

AUSTIN, Texas, July 24, 2012 /PRNewswire/ -- EZCORP, Inc. (NASDAQ: EZPW), a leading provider of instant cash solutions for consumers, today announced results for its third fiscal quarter ended June 30, 2012. For the quarter, net income was $28.5 million, a company record for its third fiscal quarter, and earnings per share were $0.56.  For the year-to-date, the company reported a 23% increase in net income and a 20% increase in earnings per share, compared with the comparable period last year (13% and 11%, respectively, on a non-GAAP basis).

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Key Drivers

• International Growth – With continued execution of the company's geographic and product diversification strategy, nearly 20% of the company's consolidated segment contribution in the quarter was attributable to areas outside the United States, up from 9% a year earlier.  Total revenue in the Latin America and Other International segments combined more than doubled, with combined segment contribution increasing 142%.  These year-over-year increases are the result of continued strength in the company's Empeno Facil business in Mexico, the acquisition of controlling interests in Crediamigo and Cash Genie, and the company's strategic investments in the United Kingdom and Australia.
• Storefront Growth – During the quarter, the company added 30 new stores (9 acquired and 21 de novo).  So far this fiscal year, the company has added 139 new stores (94 acquired and 45 de novo) and now operates 1,250 locations in the United States, Canada and Mexico.
• Mexico Pawn Operations – Empeno Facil, the company's Mexico pawn operation, continued its strong performance.  Compared to the third quarter of last year, merchandise sales were up 59%, pawn service charges were up 37%, and pawn loan balances increased 37%.  In a challenging gold environment, jewelry scrapping sales were up 6%.  These year-over-year increases are attributable to the continued development and maturity of the existing store base and the addition of new stores.  The company now operates 223 pawn stores in Mexico, having opened 45 this fiscal year.
• Consumer Lending Performance – Consumer loan balances increased to $79.1 million globally at June 30, driving consumer loan fees earned during the quarter up 38%.  In addition, improved underwriting and collections effectiveness, coupled with the consolidation of the lower risk profile Crediamigo business, led to a significant improvement in bad debt as a percentage of consumer loan fees.  In the U.S. & Canada segment, that measure improved 450 bps (from 28.4% to 23.9%), and on a consolidated basis, the measure improved 740 bps (from 28.4% to 21.0%).
• U.S. Pawn Performance – With the exception of jewelry sales and scrapping activities, the company's pawn operations in the United States showed continued strength.  Merchandise sales were up 12%, with sales of general merchandise up 23%.  Pawn loan balances grew 7% to $134.1 million at quarter-end, and pawn service charges increased 14%.
• Gold – Moderating gold prices and declining gram volume in the United States continued to negatively impact year-over-year profitability in the quarter.  Fewer purchases of gold, coupled with less jewelry forfeited from pawn lending operations, resulted in a 26% decrease in same-store jewelry scrapping sales and a 19% same-store decrease in jewelry merchandise sales.  The company estimates that, on a same-store basis, the change in gold metrics (price and volume) from the year-over-year quarter caused a decrease of $6 million in net revenue for the U.S. & Canada segment.

Consolidated Financial Highlights – Three months ended June 30, 2012 versus the prior year quarter

• Total revenues of $229.0 million, up 13%, were driven by a 16% increase in pawn service charges, a 38% increase in consumer loan fees and an 18% increase in merchandise sales.
• Net revenues of $145.3 million, were up 18%, with the increase attributable to improvement in bad debt expense.
• Net income was up 8% to $28.5 million, a company record for the third fiscal quarter, and diluted earnings per share were $0.56, up 6%.
• Combined loan balances (pawn and consumer loans, including CSO) at quarter-end were $250.0 million, up 43%, and reflected growth in all segments. Cash and cash equivalents at quarter-end were $51.8 million, with debt of $206.9 million (including Crediamigo third party debt of $92.2 million, all of which is non-recourse to EZCORP).
• Administrative expense of $22.7 million includes an $8.3 million increase over last year, $4.9 million of which result from the consolidation of Crediamigo and Cash Genie, which are not store-based operations.   With the exception of sales commissions, the majority of their cost base is included in administrative expenses.  The remainder includes the company's continued investment in growth and profitability initiatives.
• Income tax expense for the quarter was 30% of income before income taxes, compared with 35% last year, as the company's effective tax rate for the year was reduced from 35% to 33.5%, reflecting the success and growth of the company's business in areas outside the United States.
• The company continued to deliver strong return on average equity of 20% for the trailing twelve months.

Strategic Acquisitions

• Crediamigo recorded total revenues of $10.8 million and bad debt as a percentage of fees of 6.1%, which produced net revenues of $10.2 million.  During the quarter, Crediamigo refinanced a portion of its $92.2 million of third party debt at a lower rate of interest.  This refinancing led to a one-time reduction in interest expense of $2.8 million during the third quarter due to accelerated amortization of debt premium associated with the refinanced debt.  The lower interest rate will result in reduced interest expense going forward.  When combined with business results and reduced by taxes and the noncontrolling interest, the net income attributable to EZCORP was $1.8 million for the quarter.  Crediamigo is continuing to refinance other portions of its debt at lower interest rates, which will further enhance future profitability.
• On April 14, the company acquired 72% of the shares in Artiste Holding Limited, which provides online loans in the U.K. under the name "Cash Genie." Cash Genie is one of the top 10 largest online lenders in the U.K.  The company expects that Cash Genie will be accretive to earnings within its first year following acquisition.

Company Outlook

The Company expects that, as a result of continuation of recent gold and jewelry trends, earnings for the full year will be at the lower end of its previously announced guidance range of $2.85 to $2.95 per share.

Commenting on the quarter's results, EZCORP's President and Chief Executive Officer, Paul Rothamel, said "I am pleased with our financial performance this year and the overall trajectory of our business as we continue to transition EZCORP to a multi-national provider of instant cash solutions to a growing marketplace.  Our investments in new stores, new products and new businesses continue to improve our ability to serve the sophisticated consumer.  We expect these high-return investments, funded with our conservative capital structure and balance sheet, will provide very strong shareholder value for years to come."

About EZCORP

EZCORP is a leading provider of instant cash solutions for consumers.  Through 1,250 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 name "Crediamigo"), a leading provider of payroll deduction loans in Mexico, and in Artiste Holding Limited (doing business under the name "Cash Genie"), a leading provider of online loans in the U.K.  The company also has significant investments in Albemarle & Bond Holdings PLC (ABM.L), one of the U.K.'s largest pawnbroking businesses with over 170 full-line stores offering pawnbroking, jewelry retailing, gold buying and financial services; and in Cash Converters International Limited (CCV.L and CCV.ASX), which franchises and operates a worldwide network of over 600 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. A ctual 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.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company has provided non-GAAP net income and non-GAAP earnings per share for the nine months ended June 30, 2011.  The only difference between the presented non-GAAP measures and the most closely comparable GAAP measures is the exclusion of a one-time charge related to the retirement of the Company's former Chief Executive Officer and the related tax benefit included in the quarter ended December 31, 2010.  The Company's management uses these non-GAAP financial measures to understand its financial performance from period to period.  Management does not believe that the excluded one-time charge is reflective of underlying operating performance.  The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the corresponding GAAP measures, but rather are provided to facilitate an enhanced understanding of the Company's actual and expected performance and to enable more meaningful period-to-period comparisons.  A reconciliation of the non-GAAP financial measures to the most closely comparable GAAP financial measures is provided in the accompanying financial schedules.

EZCORP Investor Relations
(512) 314-2220
[email protected]
www.ezcorp.com

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.

SOURCE EZCORP, Inc.