Cash Store Financial releases first quarter financial results

EDMONTON, Feb. 3, 2014 /CNW/ - The Cash Store Financial Services Inc. ("Cash Store Financial" or "the Company") (TSX: CSF; NYSE: CSFS) today released financial results for the three months ended December 31, 2013.  Summary financial tables are included with this release.

Results conference call and webcast details

Tuesday, February 4, 2014 at 9:00 a.m. EST (7:00 a.m. MST).
1-888-231-8191 ID #38529606.
http://cnw.ca/B8g29

A replay of the conference call will be available until February 11, 2014, by dialing toll-free 1-855-859-2056 and providing the conference ID #38529606.

Selected financial information for the three months ended December 31, 2013:

• Loan fees were $36.9 million compared to $39.5 million in the fourth quarter and $38.0 million in the same quarter last year.
  
  
• Loan volume was $196.8 million compared to $199.8 million in the fourth quarter and $203.5 million in the same quarter last year.
  
  
• Total revenue was $45.2 million compared to $48.3 million in the fourth quarter and $49.5 million in the same quarter last year.
  
  
• Same branch revenue was $83,000 compared to $105,000 in the fourth quarter and $91,000 in the same quarter last year.
  
  
• Sales expenses were $27.6 million compared to $28.1 million in the fourth quarter and $26.8 million in the same quarter last year.
  
  
• Adjusted EBITDA was $4.2 million, up from $2.5 million in the fourth quarter and down from $9.2 million in the same quarter last year.
  
  
• Diluted loss per share of $0.43 compared to a loss of $1.29 in the fourth quarter and as loss of $0.10 in the same quarter last year.

"The first quarter marked the kick off of our strategic and tactical plan," said Gordon Reykdal, CEO. "For the remainder of the fiscal year we remain focused on improving our overall financial results through revenue growth and corporate expense reductions. The success of these initiatives, combined with our recent improvements in branch operating margins, will be instrumental in the Company's return to profitable growth."

"We are also focused on ensuring the Company's compliance with new regulatory requirements in Ontario which, effective February 15, 2014, will require that the Company have licenses pursuant to the Payday Loans Act. These licenses will again enable the Company to offer payday loans in Ontario."

On December 12, 2013, the Company filed its annual report for the year ended September 30, 2013 on Form 20-F with the SEC. The Form 20-F, including the audited financial statements included therein, is available at http://www.csfinancial.ca. Hard copies of the audited financial statements are available free of charge on request by calling [phone] or writing to:

Attn: Investor Inquiries
The Cash Store Financial Services Inc.
15511-123 Avenue
Edmonton, Alberta, Canada, T5V 0C3

About Cash Store Financial

Cash Store Financial is the only lender and broker of short-term advances and provider of other financial services in Canada that is listed on the Toronto Stock Exchange (TSX: CSF). Cash Store Financial also trades on the New York Stock Exchange (NYSE: CSFS). Cash Store Financial operates 509 branches across Canada under the banners "Cash Store Financial", "Instaloans" and "The Title Store". Cash Store Financial also operates 26 branches in the United Kingdom.

Cash Store Financial and Instaloans primarily act as lenders and brokers to facilitate short-term advances and provide other financial services to income-earning consumers who may not be able to obtain them from traditional banks. Cash Store Financial also provides a private-label debit card (the "Freedom" card) and a prepaid credit card (the "Freedom MasterCard") as well as other financial services, including bank accounts.

Cash Store Financial employs approximately 1,850 associates and is headquartered in Edmonton, Alberta.

Cash Store Financial is a Canadian corporation that is not affiliated with Cottonwood Financial Ltd. or the outlets Cottonwood Financial Ltd. operates in the United States under the name "Cash Store."  Cash Store Financial does not do business under the name "Cash Store" in the United States and does not own or provide any consumer lending services in the United States.

Forward-Looking Information
In order to help investors understand the Company's current results and future prospects, this new release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and United States federal securities legislation. Management refers to these types of statements collectively, as "forward-looking information". Forward-looking information includes, but is not limited to: information with respect to our objectives, strategies, operations and financial results, competition; initiatives to grow revenue or reduce retention payments and other costs and the quotation from Mr. Reykdal, CEO.

Forward-looking information can generally be identified by the use of words such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases. They may also be identified by statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved".

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied. These risks and uncertainties may include (but are not limited to) changes in economic and political conditions, legislative or regulatory developments, technological developments, third party arrangements, competition, litigation, market conditions, the availability of alternative transactions, shareholder, legal, regulatory and court approvals and third party consents and other factors described under the heading "Risks and Uncertainties" in our annual MD&A filed on www.sedar.com and  under the heading "Risk Factors" in our annual report on Form 20-F filed with the SEC in the United States. 

Management has attempted to identify the important factors that could cause actual results to differ materially from those contained in forward-looking information, but other factors unknown to us at the time of writing could cause results to vary. There can be no assurance that forward-looking information will prove to be accurate. Actual results could differ materially. Management cautions readers not to place undue reliance on forward-looking information. Unless required by law, the Company does not undertake to update any forward-looking information.

Non GAAP Measures
Throughout this news release, terms that are not specifically defined under U.S. GAAP are referenced and used. These non-U.S. GAAP measures may not be comparable to similar measures presented by other companies. These non-U.S. GAAP measures are presented because the Company believes that they provide investors with additional insight into the Company's financial results. The non-U.S. GAAP measures mentioned in this news release, along with the way in which management calculates them, are defined below.

• Same Branch Revenue is used to explain changes in total revenue by comparing the average revenue for a particular group of branches in a current period to that same particular group of branches in a prior period, excluding income from centralized collections. Average revenue is defined as revenue for the period divided by the number of branches.
  
  
• EBITDA and Adjusted EBITDA are used as a measure of cash income. EBITDA is calculated as net income (loss) and comprehensive income (loss) before interest expense, income tax expense, depreciation of property and equipment and amortization of intangible assets. Based on EBITDA, the effects of other items and/or non-cash expenses are removed to calculate Adjusted EBITDA. Please refer to the section entitled "EBITDA and Adjusted EBITDA Reconciliation" for a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) and comprehensive income (loss).
  
  The interest component of retention payments line item presented on the Adjusted EBITDA reconciliation is intended to help investors to determine the Company's EBITDA under a scenario where funds provided by third-party lenders to lend to consumers were considered to be debt financing to the Company. The amount is calculated based on the total funds provided by third-party lenders multiplied by a rate of 17.5% per annum.
  
  
• Working Capital is calculated as current assets less current liabilities.

Selected First Quarter Information

				Three Months Ended
($000s, except for per share amounts, number of loans and branch count)				Dec 31, 2012				Dec 31, 2013					% Change
Consolidated Results
No. of branches		Canada		511				510					—	%
		United Kingdom		25				27					8	%
				536				537					0	%
Loan volume		Direct		$	180,599			$	113,363				(37)	%
		Brokered		22,864				83,413					265	%
				203,463				196,776					(3)	%
Revenue
Loan fees				$	38,018			$	36,861				(3)	%
Other income				11,485				8,385					(27)	%
				49,503				45,246					(9)	%
Sales expenses
Salaries and benefits				14,462				15,167					5	%
Rent				4,434				4,473					1	%
Selling, general and administrative				4,969				4,879					(2)	%
Advertising and promotion				1,369				1,537					12	%
Depreciation of property and equipment				1,560				1,583					1	%
				26,794				27,639					3	%
Provision for credit losses				9,254				5,499					(41)	%
Retention payments				1,769				4,365					147	%
Corporate expenses				6,745				8,375					24	%
Interest expense				4,603				4,787					4	%
Other depreciation and amortization				2,172				2,126					(2)	%
Income before income taxes				$	(1,834)			$	(7,545)				311	%
Net income (loss) and comprehensive income (loss)				(1,702)				(7,470)					339	%
EBITDA				6,501				951					(85)	%
Adjusted EBITDA				9,152				4,165					(54)	%
Weighted average number of shares outstanding		- basic		17,542				17,572					1	%
		- diluted		17,542				17,572					1	%
Basic earnings (loss) per share				$	(0.10)			(0.43)					330	%
Diluted earnings (loss) per share				(0.10)				(0.43)					330	%
Consolidated Balance Sheet Information
Working capital				59,886				42,385					(29)	%
Total assets				203,390				176,255					(13)	%
Total long-term financial liabilities				129,754				142,882					10	%
Total long-term liabilities				137,233				149,005					9	%

Summary of Quarterly Results

				2012												2013																2014
($000's, except for per share amounts and branch figures)				Q2				Q3				Q4				Q1				Q2				Q3				Q4				Q1
Consolidated Results
No. of branches		Canada		569				529				511				511				513				510				510				510
		United Kingdom		25				25				25				25				25				27				27				27
				594				554				536				536				538				537				537				537
Loan volume		Direct		$	120,487			$	188,485			$	195,027			$	180,599			$	127,050			$	113,244			$	119,534			$	113,363
		Brokered		70,543				11,376				12,183				22,864				59,272				78,958				80,277				83,413
				191,030				199,861				207,210				203,463				186,322				192,202				199,811				196,776
Revenue
Loan fees				$	30,545			$	36,204			$	38,353			$	38,018			$	37,268			$	37,657			$	39,487			$	36,861
Other income				11,544				12,454				12,464				11,485				9,389				8,671				8,790				8,385
				42,089				48,658				50,817				49,503				46,657				46,328				48,277				45,246
Sales expenses
Salaries and benefits				17,672				16,493				14,921				14,462				14,325				14,902				14,964				15,167
Rent				4,911				4,719				4,548				4,434				4,457				4,343				4,998				4,473
Selling, general and administrative				6,406				5,725				4,971				4,969				5,076				5,733				4,671				4,879
Advertising and promotion				1,063				1,212				1,215				1,369				1,437				1,693				1,808				1,537
Depreciation of property and equipment				1,785				1,675				1,607				1,560				1,568				1,589				1,649				1,583
				31,837				29,824				27,262				26,794				26,863				28,260				28,090				27,639
				10,252				18,834				23,555				22,709				19,794				18,068				20,187				17,607
Provision for credit losses				10,798				10,104				9,434				9,254				7,289				7,587				12,477				5,499
Retention payments				2,271				554				586				1,769				1,665				2,444				5,781				4,365
Corporate expenses				6,626				5,394				5,706				6,745				9,247				8,602				13,548				8,375
Interest expense				3,068				4,536				4,566				4,603				4,644				4,660				4,676				4,787
Branch closures costs				—				908				666				—				—				24				99
Impairment of property and equipment				3,017				—				408				—				—				522				714				—
Expense to settle  pre-existing relationships with third-party lenders				36,820				—				—				—				—				—				—				—
Other depreciation and amortization				1,503				1,770				2,117				2,172				1,994				2,796				2,349				2,126
Net income (loss) before income taxes				(53,851)				(4,432)				72				(1,834)				(5,045)				(8,567)				(19,457)				(7,545)
Taxes				(12,691)				(861)				(177)				(132)				(765)				(1,673)				2,850				(75)
Net income (loss) and comprehensive income (loss)				$	(41,160)			$	(3,571)			$	249			$	(1,702)			$	(4,280)			$	(6,894)			$	(22,307)			$	(7,470)
EBITDA				(47,495)				3,549				8,362				6,501				3,161				478				(10,783)				951
Adjusted EBITDA				721				5,516				10,066				9,152				6,681				4,673				2,494				4,165
Basic earnings (loss) per share				$	(2.36)			$	(0.20)			$	0.01			$	(0.10)			$	(0.24)			$	(0.39)			$	(1.29)			$	(0.43)
Diluted earnings (loss) per share				$	(2.36)			$	(0.20)			$	0.01			$	(0.10)			$	(0.24)			$	(0.39)			$	(1.29)			$	(0.43)

EBITDA and Adjusted EBITDA Reconciliation

				2012									2013												2014
				Q2			Q3			Q4			Q1			Q2			Q3			Q4			Q1
Consolidated Results
	Net income (loss) and comprehensive income (loss)			(41,160)			(3,571)			249			(1,702)			(4,280)			(6,894)			(22,307)			(7,470)
	Interest expense and other interest			3,068			4,536			4,566			4,603			4,644			4,660			4,676			4,787
	Income tax			(12,691)			(861)			(177)			(132)			(765)			(1,673)			2,850			(75)
	Depreciation of property and equipment and amortization of intangible assets			3,288			3,445			3,724			3,732			3,562			4,385			3,998			3,709
	EBITDA			(47,495)			3,549			8,362			6,501			3,161			478			(10,783)			951
	Adjustments:
	Stock-based compensation			193			189			158			145			119			99			76			423
	Expense to settle pre-existing relationships with third-party lenders			36,820			—			—			—			—			—			—			—
	Impact of change in estimation methodology and other one-time additions to the provision for credit losses			3,091			—			—			—			—			—			5,218			—
	Branch closures costs			—			908			666			—			—			24			99
	Impairment of property and equipment			3,017			—			408			—			—			522			714			—
	Revenue impact related to transitioning to a direct lending model			3,210			316			—			—			—			—			—			—
	Expenses related to restatements of previously issued financial statements			—			—			—			904			125			589			—			—
	Expenses related to the special investigation			—			—			—			—			1,666			326			—			—
	Impairment of January 31, 2012 acquired loan portfolio			—			—			—			—			—			1,010			—			—
	Provision on aged receivables from a vendor			—			—			—			—			—			—			4,807			—
	Employee Severance Costs			—			—			—			—			—			—			466			75
	Regulatory penalties and compliance orders			—			—			—			—			—			—			—			873
	Effective interest component of retention payments			1,885			554			472.316			1,602			1,610			1,625			1,897			1,843
	Adjusted EBITDA			721			5,516			10,066			9,152			6,681			4,673			2,494			4,165

 

SOURCE: The Cash Store Financial Services Inc.

For further information, please contact:

Gordon Reykdal, CEO, at 780-408-5118, or
Craig Warnock, CFO, at 780-732-5683