QC Holdings Inc. Reports Operating Results (10-Q)
Qc Holdings Inc. has a market cap of $68.95 million; its shares were traded at around $4.01 with a P/E ratio of 4.89 and P/S ratio of 0.31. The dividend yield of Qc Holdings Inc. stocks is 4.99%. Qc Holdings Inc. had an annual average earning growth of 20.2% over the past 5 years.QCCO is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: We derive our revenues primarily by providing short-term consumer loans, known as payday loans, which represented approximately 70.7% of our total revenues for the nine months ended September 30, 2010. We earn fees for various other financial services, such as installment loans, credit services, check cashing services, title loans, money transfers and money orders. We operated 537 short-term lending branches in 24 states at September 30, 2010. In all but one of these states, Texas, we fund our payday loans directly to the customer and receive a fee. Fees charged to customers vary from state to state, generally ranging from $15 to $20 per $100 borrowed, and in most cases, are limited by state law.
In Texas, through one of our subsidiaries, we operate as a credit service organization (CSO) on behalf of consumers in accordance with Texas laws. We charge the consumer a CSO fee for arranging for an unrelated third-party to make a loan to the consumer and for providing related services to the consumer, including a guarantee of the consumers obligation to the third-party lender. In Illinois, New Mexico, Montana and Utah, we offer longer-term installment loan products, which are amortizing loans generally over four to twelve months with principal amounts ranging between $300 and $1,000.
The payday loan industry has followed, and continues to be significantly affected by, payday lending legislation and regulation in the various states and on a national level. We actively monitor and evaluate legislative and regulatory initiatives in each of the states and nationally, and are closely involved with the efforts of the CFSA. To the extent that states enact legislation or regulations that negatively impacts payday lending, whether through preclusion, fee reduction, loan caps or other measures, our business has been adversely affected in the past and could be further adversely affected in the future. Over the past several years a few states have enacted interest rate caps from 28% to 36% per annum on payday lending. A 36% per annum interest rate translates to approximately $1.38 per $100 loaned, which effectively precludes us from offering payday loans in those states.
During 2009, payday loan-related legislation that severely restricts customer access to payday loans was passed in South Carolina, Washington, Virginia and Kentucky. These law changes are adversely affecting our revenues and operating income during 2010. The results for the first nine months of 2010 from the states in which we have experienced law changes have been more negative than we expected, with revenue declines and loss rates exceeding our forecasts. For the nine months ended September 30, 2010, revenues and gross profit from South Carolina, Washington, Virginia and Kentucky declined by $14.2 million and $9.5 million, respectively, from prior years comparable period. In Arizona, the existing payday lending law expired on June 30, 2010. We are currently offering title loans to our Arizona customers. However, our customers in Arizona have not embraced this product as they did the payday loan product. For the three months ended September 30, 2010, revenues and gross profit from our Arizona branches declined by $3.3 million and $2.7 million, respectively, from the same period in the prior year. Absent other changes in payday lending laws or dramatic fluctuations in the broader economy and markets, we expect the net impact of these challenges in 2010 to reduce revenues by $23 million to $25 million and to reduce branch gross profit by $16 million to $18 million during the year ended December 31, 2010 compared to 2009.
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