Dollar Financial Beats – Analyst Blog

Dollar Financial Corporation’s (DLLR) fiscal second quarter (ended December 30, 2009) earnings came in at 60 cents per share, substantially ahead of the Zacks Consensus Estimate of 45 cents. This also compares favorably with the earnings of 54 cents in the year-ago quarter.

 

Pro forma earnings for the quarter exclude $10.2 million of net one-time charges related to Dollar Financial’s refinancing activities, mark-to-market gains on the its term loans and intercompany debt, and other non-recurring charges incurred during the quarter.

On a GAAP basis, net income was 29 cents per share, compared to 40 cents in the prior-year quarter. Results for the quarter benefited primarily as a result of an increased focus on improving efficiency and reducing cost structure. Also, all of Dollar Financial’s global business units continued to deliver strong earnings growth and cash flow during the reported quarter.

 

Total revenue for the quarter decreased 13.5% year-over-year to $132.2 million. Consumer lending revenue decreased 18.4% year-over-year to $70.0 million but Check cashing revenue increased 8.0% year-over-year to $41.6 million.
The loan loss provision as a percentage of gross consumer-lending revenue improved to 14.8% from 21.3% in the prior-year quarter.

 

This improvement reflects Dollar Financial’s conservative approach of extending consumer credit in the midst of the weakened economy, as well as the continuing implementation of proprietary credit scoring models for the company’s global loan products. Provision for loan losses increased 17.7% year-over-year to $14.9 million.


Outlook

 

For fiscal 2010, Dollar Financial anticipates earnings of $1.80 to $2.00 per share, excluding one-time charges and the impact of adopting FSP APB14-1. Also, Dollar Financial expects to start deploying the approximately $200.0 million of excess cash it presently holds on its balance sheet in opportunities, which will further enhance earnings per share.

 

We remain concerned about the risks related to Dollar Financial’s tax strategies, extremely fragmented nature of business and international dependence. However, a solid liquidity position, exposure to a somewhat recession-proof sector and cost containment measures will drive future growth.