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"The second quarter was another good quarter for us," said QC Chairman and Chief Executive Officer Don Early. "Our customers have adjusted to the struggling economy by borrowing less and taking care of outstanding debts. In such a cycle, key factors to success include superior customer service, disciplined cost management and efficient operations.
"Throughout the first half of 2009, we have focused on these key factors, which have fueled the strong performance to date," Early said. "With this sound foundation, we will be prepared to seize the opportunities that arise when the economy begins to improve and our customers adjust their approach to credit."
Highlights for the second quarter included:
-- Income from continuing operations of $4.5 million, or $0.25 per diluted share, compared to $2.3 million, or $0.13 per diluted share, in second quarter 2008;
-- Revenues of $52.0 million compared to $52.3 million in second quarter 2008;
-- A loss ratio of 22.6% for the current quarter, down from 26.9% in last year's second quarter; and
-- Adjusted EBITDA, which is income from continuing operations before interest, taxes, depreciation, amortization, charges related to stock options and restricted stock awards, and non-cash gains or losses associated with property disposition, of $10.5 million, a 32.9% improvement over prior year's second quarter.
Highlights for the six months ended June 30, 2009, included:
-- Income from continuing operations of $11.0 million, or $0.61 per diluted share, compared to $7.8 million, or $0.42 per diluted share, in the same 2008 period;
-- A 2.0% increase in revenues to $107.1 million compared to $105.0 million in the same 2008 period;
-- A 7.9% improvement in gross profit over prior year's six month period; and
-- Adjusted EBITDA of $24.9 million versus $20.9 million during the first six months of 2008.
The three months and six months ended June 30, 2009 and 2008, include discontinued operations relating to branches that were closed during each period, partly due to changes in payday loan laws that effectively preclude the product as offered.
For the three months and six months ended June 30, 2009 and 2008, schedules reconciling adjustments to net income pursuant to generally accepted accounting principles (GAAP), and adjusted EBITDA to income from continuing operations, are provided below. The results for the three months and six months ended June 30, 2008, include ballot referendum expenditures in Arizona and Ohio of approximately $609,000 and $826,000, respectively, that were not deductible for income tax purposes. QC believes that it is useful to management and investors to analyze results after adjusting for these items to provide a more comparable basis for evaluating QC's operating results and financial performance over time. See the reconciliation tables for additional information.
** Second Quarter **
Revenues decreased slightly quarter-to-quarter, primarily due to reduced payday loan volumes, substantially offset by higher automotive loan volumes (due to an increase in the number of locations). QC originated approximately $277.9 million of payday loans during second quarter 2009, a 10.1% decrease from the $309.2 million during second quarter 2008. This decline is partially attributable to reduced payday volume in Virginia, where the company introduced an open-end credit product in late 2008. During late second quarter 2009, the company re-introduced the payday loan product in Virginia and discontinued the open-end product offering. Installment and automotive loan volumes totaled $10.2 million for second quarter 2009 versus $8.4 million in prior year's second quarter.
Revenues for comparable branches (those branches that were open for the 15 months since March 31, 2008) decreased 5.5%, or $2.8 million, to $48.3 million during the three months ended June 30, 2009. This decrease reflects reduced customer demand across most states.
Branch operating costs, exclusive of loan losses, decreased to $22.8 million during the three months ended June 30, 2009, compared to $23.1 million in the same 2008 quarter. The decrease was attributable to a reduction in overtime compensation and occupancy costs, partially offset by higher cost of sales associated with the company's automotive sales locations.
During the three months ended June 30, 2009, the company reported a $2.4 million reduction in loan losses to $11.7 million compared to $14.1 million in the same 2008 period. The loss ratio for the current quarter totaled 22.6% compared to 26.9% in second quarter 2008. Fewer returned items and a better collection rate on those returns produced the improvement period-to-period. This improvement was partially offset by a higher allowance associated with the company's open-end credit product in Virginia and the developing automotive sales and finance business. The loss ratio at comparable branches declined to 23.0% during second quarter 2009 compared to 28.2% in prior year's second quarter.
QC's branch gross profit in second quarter 2009 was $17.5 million, a 15.9% increase over prior year's quarter. Gross profit for comparable branches during second quarter 2009 increased $1.8 million to $17.4 million, with the improvement resulting from stronger results in the majority of states. Aggregate results from newer branches, the automotive sales locations and closed branches were essentially breakeven during the quarter.
Regional and corporate expenses declined to $8.6 million during the three months ended June 30, 2009 from $9.4 million in second quarter 2008 ($8.8 million, exclusive of ballot referendum costs in 2008). This decline resulted from cost management efforts throughout the organization.
Net interest expense decreased to $811,000 in the current quarter compared to $1.0 million in second quarter 2008 as a result of lower average debt balances and reduced interest rates.
"We expect to continue to focus on the details in our core lending operations," noted QC President and Chief Operating Officer Darrin Andersen. "Our objective is to maximize profitability at each of our branches. Each branch will work to that objective, whether it is achieved through revenue growth, reduced loan losses, lower operating costs, or some combination of these.
"Our five automotive sales locations continue to improve. With the recent addition of a service center to the mix, we are positioned to streamline our acquisition-to-lot process, which will enable our customer service sales force to focus on matching customers with the right automobile."
** Six Months Ended June 30 **
The company's revenues grew $2.1 million, or 2.0%, to $107.1 million during the six months ended June 30, 2009, versus 2008 as a result of an increase in automobile loan sales, partially offset by reduced payday loan volume.
Revenues for comparable branches (those branches that were open for the 18 months since December 31, 2007) decreased 4.2% to $97.9 million during the six months ended June 30, 2009 for the same reasons as noted in the quarterly discussion.
Branch operating costs, exclusive of loan losses, increased 2.6% to $47.3 million, primarily as a result of higher cost of sales for automobile purchases, partially offset by reduced salaries and benefits as noted in the quarterly discussion. Comparable branches averaged approximately $12,500 per month in operating expenses during 2009 compared to $13,100 per month in prior year.
During the six months ended June 30, 2009, the company reported loan losses of $20.4 million compared to $22.5 million for the same period in 2008. The company's loss ratio improved to 19.0% during the six months ended June 30, 2009, (versus 21.4% in the same 2008 period) for the same reasons noted in the quarterly discussion. The company sold approximately $552,000 of older debt during the first half of 2009 compared to $243,000 in last year's first half.
Branch gross profit increased 7.9% to $39.4 million in 2009 from $36.5 million. Gross profit for comparable branches during 2009 increased by 4.6% to $38.4 million. This increase reflects improvements in most states, partially offset by reduced gross profit in Virginia as the company transitioned to the open-end credit product, and then back to the payday product.
Exclusive of the 2008 referendum expenditures, regional and corporate expenses decreased approximately $1.0 million to $18.0 million during the six months ended June 30, 2009. This decline reflects reduced governmental affairs and public education expenditures period-to-period.
Net interest expense declined approximately $350,000 during the first half of 2009 compared to the first half of 2008 due to lower average debt balances and interest rates throughout 2009.
-DIVIDEND DECLARATION -
QC's Board of Directors declared a regular quarterly dividend of $0.05 per common share, payable September 1, 2009, to stockholders of record as of August 18, 2009.
-BUSINESS OUTLOOK -
"As we look to the second half of 2009, we do not see dramatic changes in the economic landscape that will alter the trends we have seen over the last few quarters with respect to revenues and loan losses," Early said. "We continue to emphasize to our field management and employees the importance of focusing on our core competencies - making short-term loans, providing superior customer service and collecting in a professional, friendly manner.
"On a daily basis, there are new and different reports as to developments in consumer credit. Our company is actively involved in monitoring, evaluating, managing, discussing and supporting the various components of this dynamic and complex issue. We believe that consumers benefit from having access to a variety of competitive credit sources, including the products we offer. And when given the choice, customers have overwhelmingly demonstrated their desire for our products based on a reasoned consideration of available alternatives.
"With an efficient branch network focused on maximizing profit, a strong and flexible balance sheet, and a proven history of success in all types of economic cycles, we are well-positioned to manage the various opportunities and challenges that are sure to arise."
About QC Holdings, Inc.
Headquartered in Overland Park, Kansas, QC Holdings, Inc. is a leading provider of short-term loans in the United States, operating 557 branches in 24 states at June 30, 2009. With more than 25 years of operating experience in the retail consumer finance industry, the company entered the short-term loan market in 1992 and, since 1998, has grown from 48 branches to 557 branches through a combination of de novo branches and acquisitions. During fiscal 2008, the company advanced nearly $1.4 billion to customers and reported total revenues of $227.7 million.
Forward Looking Statement Disclaimer: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the company's current expectations and are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those forward-looking statements. These risks include (1) changes in laws or regulations or governmental interpretations of existing laws and regulations governing consumer protection or payday lending practices, (2) litigation or regulatory action directed towards us or the payday loan industry, (3) volatility in our earnings, primarily as a result of fluctuations in loan loss experience and the rate of growth in, or closures of, branches, (4) risks associated with the leverage of the company, (5) negative media reports and public perception of the payday loan industry and the impact on federal and state legislatures and federal and state regulators, (6) changes in our key management personnel, and (7) the other risks detailed under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission. QC will not update any forward-looking statements made in this press release to reflect future events or developments.
QC Holdings, Inc.
Consolidated Statements of Income
(in
thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June June
30, 30,
2008 2009 2008 2009
Revenues
Payday loan fees $ 43,112 $ 38,474 $ 85,600 $ 77,749
Other 9,182 13,541 19,426 29,323
Total revenues 52,294 52,015 105,026 107,072
Branch expenses
Salaries and benefits 11,820 11,321 23,326 22,981
Provision for losses 14,084 11,746 22,458 20,353
Occupancy 6,470 6,030 12,754 12,273
Depreciation and amortization 1,077 1,035 2,162 2,066
Other 3,741 4,420 7,820 9,953
Total branch expenses 37,192 34,552 68,520 67,626
Branch gross profit 15,102 17,463 36,506 39,446
Regional expenses 3,309 3,382 6,752 6,846
Corporate expenses 6,126 5,225 13,031 11,176
Depreciation and amortization 688 827 1,364 1,560
Interest expense, net 1,010 811 2,208 1,858
Other expense, net 241 18 319 153
Income from continuing operations 3,728 7,200 12,832 17,853
before income taxes
Provision for income taxes 1,433 2,726 5,012 6,886
Income from continuing operations 2,295 4,474 7,820 10,967
Loss from discontinued operations, net of (800 ) (217 ) (931 ) (953 )
income tax
Net income $ 1,495 $ 4,257 $ 6,889 $ 10,014
Earnings (loss) per share:
Basic
Continuing operations $ 0.13 $ 0.25 $ 0.42 $ 0.61
Discontinued operations (0.05 ) (0.01 ) (0.05 ) (0.05 )
Net income $ 0.08 $ 0.24 $ 0.37 $ 0.56
Diluted
Continuing operations $ 0.13 $ 0.25 $ 0.42 $ 0.61
Discontinued operations (0.05 ) (0.01 ) (0.05 ) (0.05 )
Net income $ 0.08 $ 0.24 $ 0.37 $ 0.56
Weighted average number of common
shares
outstanding:
Basic 17,739 17,459 18,232 17,465
Diluted 17,939 17,634 18,406 17,581
Non-GAAP Reconciliations
Consolidated Statements of
Income
(in thousands, except per share amounts)
(Unaudited)
The company analyzes historical results after adjusting for
certain items. With respect to the results for the three months
ended
June 30, 2008, the company believes that
excluding the 2008 referendum expenditures is useful to management
and investors
because it provides a more comparable
basis for evaluating the company's operating results and financial
performance over
time. Internally, these adjusted
results are used to evaluate the performance of the company.
Three Months Ended Three Months Ended
June June
30, 2008 30, 2009
GAAP Non-GAAP Adjusted GAAP Non-GAAP Adjusted
Adjustments Adjustments
(a) (b)
Revenues
Payday loan fees $ 43,112 $ - $ 43,112 $ 38,474 $ - $ 38,474
Other 9,182 - 9,182 13,541 - 13,541
Total revenues 52,294 - 52,294 52,015 - 52,015
Branch expenses
Salaries and benefits 11,820 - 11,820 11,321 - 11,321
Provision for losses 14,084 - 14,084 11,746 - 11,746
Occupancy 6,470 - 6,470 6,030 - 6,030
Depreciation and amortization 1,077 - 1,077 1,035 - 1,035
Other 3,741 - 3,741 4,420 - 4,420
Total branch expenses 37,192 - 37,192 34,552 - 34,552
Branch gross profit 15,102 - 15,102 17,463 - 17,463
Regional expenses 3,309 - 3,309 3,383 - 3,383
Corporate expenses 6,126 (609 ) 5,517 5,225 - 5,225
Depreciation and amortization 689 - 689 827 - 827
Interest expense, net 1,009 - 1,009 810 - 810
Other expense, net 241 - 241 18 - 18
Income from continuing operations 3,728 609 4,337 7,200 - 7,200
before income taxes
Provision for income taxes 1,433 - 1,433 2,726 - 2,726
Income from continuing operations 2,295 609 2,904 4,474 - 4,474
Discontinued operations (800 ) - (800 ) (217 ) - (217 )
Net income $ 1,495 $ 609 $ 2,104 $ 4,257 $ - $ 4,257
Earnings (loss) per share:
Basic: Continuing operations $ 0.13 $ 0.03 $ 0.16 $ 0.25 $ - $ 0.25
Discontinued operations (0.05 ) - (0.05 ) (0.01 ) - (0.01 )
Net income $ 0.08 $ 0.03 $ 0.11 $ 0.24 $ - $ 0.24
Diluted: Continuing operations $ 0.13 $ 0.03 $ 0.16 $ 0.25 $ - $ 0.25
Discontinued operations (0.05 ) - (0.05 ) (0.01 ) - (0.01 )
Net income $ 0.08 $ 0.03 $ 0.11 $ 0.24 $ - $ 0.24
(a) These adjustments reflect the non-tax deductible 2008
referendum expenditures during the second quarter.
(b) There were no adjustments for the three months ended June 30,
2009.
Non-GAAP Reconciliations
Consolidated Statements of
Income
(in thousands, except per share amounts)
(Unaudited)
The company analyzes historical results after adjusting for
certain items. With respect to the results for the six months ended
June
30, 2008, the company believes that excluding the 2008 referendum
expenditures is useful to management and investors
because
it provides a more comparable basis for evaluating the company's
operating results and financial performance over
time.
Internally, these adjusted results are used to evaluate the
performance of the company.
Six Months Ended Six Months Ended
June June
30, 2008 30, 2009
GAAP Non-GAAP Adjusted GAAP Non-GAAP Adjusted
Adjustments Adjustments
(a) (b)
Revenues
Payday loan fees $ 85,600 $ - $ 85,600 $ 77,749 $ - $ 77,749
Other 19,426 - 19,426 29,323 - 29,323
Total revenues 105,026 - 105,026 107,072 - 107,072
Branch expenses
Salaries and benefits 23,326 - 23,326 22,981 - 22,981
Provision for losses 22,458 - 22,458 20,353 - 20,353
Occupancy 12,754 - 12,754 12,273 - 12,273
Depreciation and amortization 2,162 - 2,162 2,066 - 2,066
Other 7,820 - 7,820 9,953 - 9,953
Total branch expenses 68,520 - 68,520 67,626 - 67,626
Branch gross profit 36,506 - 36,506 39,446 - 39,446
Regional expenses 6,752 - 6,752 6,846 - 6,846
Corporate expenses 13,031 (826 ) 12,205 11,176 - 11,176
Depreciation and amortization 1,364 - 1,364 1,560 - 1,560
Interest expense, net 2,208 - 2,208 1,858 - 1,858
Other expense, net 319 - 319 153 - 153
Income from continuing operations 12,832 826 13,658 17,853 - 17,853
before income taxes
Provision for income taxes 5,012 - 5,012 6,886 - 6,886
Income from continuing operations 7,820 826 8,646 10,967 - 10,967
Discontinued operations (931 ) - (931 ) (953 ) - (953 )
Net income $ 6,889 $ 826 $ 7,715 $ 10,014 $ - $ 10,014
Earnings (loss) per share:
Basic: Continuing operations $ 0.42 $ 0.05 $ 0.47 $ 0.61 $ - $ 0.61
Discontinued operations (0.05 ) - (0.05 ) (0.05 ) - (0.05 )
Net income $ 0.37 $ 0.05 $ 0.42 $ 0.56 $ - $ 0.56
Diluted: Continuing operations $ 0.42 $ 0.04 $ 0.46 $ 0.61 $ - $ 0.61
Discontinued operations (0.05 ) - (0.05 ) (0.05 ) - (0.05 )
Net income $ 0.37 $ 0.04 $ 0.41 $ 0.56 $ - $ 0.56
(a) These adjustments reflect the non-tax deductible 2008
referendum expenditures during the six months ended June 30, 2008.
(b) There were no adjustments for the six months ended June 30,
2009.
Non-GAAP Reconciliations
Adjusted EBITDA
(in
thousands)
(Unaudited)
QC reports adjusted EBITDA (income from continuing operations
before interest, taxes, depreciation,
amortization,
charges related to stock options and restricted stock awards, and
non-cash gains or losses
associated with property
disposition) as a financial measure that is not defined by U.S.
generally accepted
accounting principles ("GAAP"). QC
believes that adjusted EBITDA is a useful performance metric for
our
investors and is a measure of operating and
financial performance that is commonly reported and widely
used
by financial and industry analysts, investors and other interested
parties because it eliminates
significant non-cash
charges to earnings. It is important to note that non-GAAP
measures, such as adjusted
EBITDA, should not be
considered as alternative indicators of financial performance
compared to net
income or other financial statement
data presented in the company's consolidated financial statements
prepared
pursuant to GAAP. Non-GAAP measures should be evaluated in
conjunction with, and are not a
substitute for, GAAP
financial measures. The following table provides a reconciliation
of income from
continuing operations to adjusted
EBITDA:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2009 2008 2009
Income from continuing operations $ 2,295 $ 4,474 $ 7,820 $ 10,967
Provision for income taxes 1,433 2,726 5,012 6,886
Depreciation and amortization 1,765 1,862 3,526 3,626
Interest expense 1,017 814 2,239 1,866
Non-cash losses on property 241 18 319 153
dispositions
Stock option and restricted stock 508 638 1,189 1,445
expense
Ballot referendum initiative 609 826
expenditures (a)
Adjusted EBITDA $ 7,868 $ 10,532 $ 20,931 $ 24,943
(a) To provide a more comparable basis for evaluation,
for the three months and six months ended June 30,
2008,
the adjusted EBITDA computation excludes the 2008 referendum
expenditures, as discussed in detail in
the footnotes
to the Non-GAAP Reconciliations on the previous pages.
QC Holdings, Inc.
Consolidated Balance Sheets
(in
thousands)
December 31, June 30,
2008 2009
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 17,314 $ 13,481
Loans receivable, less allowance for losses of $6,648 at 73,711 69,637
December
31, 2008, and $9,470 at June 30, 2009
Prepaid expenses and other current assets 6,485 9,179
Total current assets 97,510 92,297
Property and equipment, net 23,664 20,751
Goodwill 16,144 16,491
Other assets, net 5,724 6,277
Total assets $ 143,042 $ 135,816
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 298 $ 323
Accrued expenses and other liabilities 12,275 10,674
Deferred revenue 4,802 4,004
Income taxes payable 1,112 1,106
Debt due within one year 33,143 22,500
Total current liabilities 51,630 38,607
Non-current liabilities 4,386 4,501
Long-term debt 37,607 34,607
Total liabilities 93,623 77,715
Commitments and contingencies
Stockholders' equity 49,419 58,101
Total liabilities and stockholders' equity $ 143,042 $ 135,816
QC Holdings, Inc.
Selected Statistical and
Operating Data
(in thousands, except Branch Data,
Average Loan, Average Term and Average Fee)
Three Months Ended Six Months Ended
June June
30, 30,
2008 2009 2008 2009
Unaudited Unaudited
Short-term Lending Branch Data:
Number of branches, beginning of period 597 563 596 585
De novo branches opened 4 6 1
Acquired branches 1
Branches closed (4 ) (6 ) (6 ) (29 )
Number of branches, end of period 597 557 597 557
Short-term Lending Comparable
Branch Data:
Total number of comparable branches 548 548 544 544
Comparable branch revenue $ 51,144 $ 48,346 $ 102,234 $ 97,870
Percentage change (5.5 %) (4.2 %)
Comparable branch net revenues $ 36,738 $ 37,248 $ 79,452 $ 79,124
Percentage change 1.3 % (0.5 %)
Operating Data - Short-term Loans:
Loan volume $ 309,170 $ 277,913 $ 605,449 $ 551,050
Average loan (principal plus fee) 369.13 367.67 369.77 368.53
Average fee 53.37 53.34 53.51 53.32
Operating Data - Installment Loans:
Loan volume $ 7,997 $ 7,665 $ 13,677 $ 14,056
Average loan (principal) 528.91 497.72 524.87 500.83
Average term (days) 190 184 189 190
Operating Data - Automotive Loans:
Loan volume $ 439 $ 2,545 $ 811 $ 6,387
Average loan (principal) 7,706 8,628 7,798 8,725
Average term (months) 33 30 33 31
Locations, end of period 2 5 2 5
QC Holdings, Inc.
Selected Statistical and
Operating Data
(in thousands)
Three Months Ended Six Months Ended
June June
30, 30,
2008 2009 2008 2009
Unaudited Unaudited
Other Revenues:
Installment loan interest and fees $ 4,285 $ 4,221 $ 8,890 $ 8,698
Automotive sales and interest 578 3,247 1,179 7,626
Open-end credit fees 1,760 3,429
Credit services fees 1,414 1,490 2,817 3,083
Other 2,905 2,823 6,540 6,487
Total $ 9,182 $ 13,541 $ 19,426 $ 29,323
Loss Data:
Provision for losses, continuing
operations:
Charged-off to expense $ 23,377 $ 19,188 $ 46,410 $ 39,861
Recoveries (10,652 ) (9,172 ) (23,620 ) (22,044 )
Adjustment to provision for losses 1,359 1,730 (332 ) 2,536
based on evaluation of
outstanding
receivables
Total provision for losses $ 14,084 $ 11,746 $ 22,458 $ 20,353
Provision for losses as a 26.9 % 22.6 % 21.4 % 19.0 %
percentage of revenues
Provision for losses as a 4.2 % 3.9 % 3.5 % 3.4 %
percentage of loan volume (all
products)
SOURCE: QC Holdings, Inc.
QC Holdings, Inc. Investor Relations Contact: Douglas E. Nickerson, 913-234-5154 Chief Financial Officer or Media Contact: Tom Linafelt, 913-234-5237 Director - Corporate Communications
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