EZCORP Inc. Reports Operating Results (10-Q)
Ezcorp Inc. has a market cap of $1.45 billion; its shares were traded at around $30.83 with a P/E ratio of 12.7 and P/S ratio of 1.9. Ezcorp Inc. had an annual average earning growth of 25.6% over the past 10 years. GuruFocus rated Ezcorp Inc. the business predictability rank of 3.5-star.
Highlight of Business Operations:We earn pawn service charge revenues on our pawn lending. While allowable service charges vary by state and loan size, a majority of our U.S. pawn loans earn 20% per month. Our average U.S. pawn loan amount typically ranges between $120 and $130 but varies depending on the valuation of each item pawned. The total U.S. loan term ranges between 60 and 120 days, consisting of the primary term and grace period. In Mexico, pawn service charges range from 15% to 21% per month including applicable taxes, with the majority of loans earning 21%. The total Mexico pawn loan term is 40 days, consisting of the primary term and grace period. Individual loans are made in Mexican pesos and vary depending on the valuation of each item pawned, but typically equate to between $50 and $75 U.S. dollars.
In connection with our credit services, the unaffiliated lenders offer customers two types of signature loans. In all stores offering signature loan credit services, customers can obtain payday loans, with principal amounts up to $1,500 but averaging about $510. Terms of these loans are generally less than 30 days, averaging about 16 days, with due dates corresponding with the customers next payday. We typically earn a fee of 21.75% of the loan amount for our credit services offered in connection with payday loans. In 286 of the U.S. financial services stores offering credit services, customers can obtain longer-term unsecured installment loans from the unaffiliated lenders. The installment loans offered in connection with our credit services typically carry terms of about five months with ten equal installment payments due on customers paydays. Installment loan principal amounts range from $1,525 to $3,000, but average about $2,045. With each semi-monthly or bi-weekly installment payment, we earn a fee of 10% of the initial loan amount. At June 30, 2011, payday loans comprised 94% of the balance of signature loans brokered through our credit services, and installment loans comprised the remaining 6%.
In the fiscal year ended September 30, 2010, we acquired sixteen pawn stores located in the Chicago metropolitan area, Central and South Florida, Corpus Christi, Texas and Las Vegas, Nevada for approximately $21.8 million in cash. In the quarter ended December 31, 2010 we acquired three pawn stores located in the Chicago metropolitan area and one located in Marietta, Georgia for approximately $13.7 million in cash. In the quarter ended March 31, 2011, we acquired five pawn stores located in Central and South Florida for approximately $17.8 million in cash. In the current quarter we acquired 23 stores located in Florida, Iowa, Wisconsin, Utah and the Chicago metropolitan area for approximately $31.6 million in cash. All stores were acquired as part of our continuing strategy to acquire domestic pawn stores to enhance and diversify our earnings. The results of all acquired stores have been consolidated with our results since their acquisition. In the current quarter we also acquired for approximately $1.7 million the trademark and licensing rights of Cash Converters in Canada, including rights to receive fees from 13 stores operated by franchisees in Canada.
Included in the current year-to-date period results is a pre-tax administrative expense charge of $10.9 million related to the October 2010 retirement of our former Chief Executive Officer, including $3.4 million attributable to a cash payment and $7.5 million attributable to the vesting of restricted stock. The current year-to-date period income tax expense reflects a $3.8 million tax benefit related to this charge.
In the current quarter, consolidated total revenues increased 17%, or $29.6 million to $203.2 million, compared to the prior year quarter. Same store total revenues increased 7%, with the remainder of the increase coming from new and acquired stores. The overall increase in total consolidated revenues was comprised primarily of an $18.3 million increase in merchandise and jewelry scrapping sales, an $8.9 million increase in pawn service charges, and a $1.9 million increase in signature loan fees.
Empeño Fácil segment contributed $1.2 million greater store operating income compared to the prior year quarter, primarily as the result of a $2.1 million increase in pawn service charges and a $1.5 million increase in gross profit on merchandise and jewelry scrapping sales, partially offset by higher operating expenses at new stores. Our EZMONEY Operations segment contributed $0.2 million less store operating income, primarily from higher operating expenses. After a $0.8 million increase in administrative expenses, a $0.9 million increase in depreciation and amortization and a $0.5 million decrease in loss on disposal of assets, consolidated operating income improved $8.2 million to $37.0 million. After a $0.4 million increase in net interest expense, a $1.2 million increase in our equity in the net income of unconsolidated affiliates and a $2.5 million increase in income taxes and other smaller items, our consolidated net income improved 33% to $26.5 million from $20.0 million in the prior year quarter.
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