Dollar Financial Beats Estimates – Analyst Blog

Dollar Financial Corporation’s (DLLR) fiscal third quarter (ended March 31, 2009) operating earnings came in at 40 cents per share, ahead of the Zacks Consensus Estimate of 34 cents. The company had recorded identical operating earnings in the year-ago quarter.

 

Pro forma earnings for the quarter exclude $28.7 million of one-time charges, primarily related to reserves for class action litigation settlements in Canada, unrealized gain on Dollar Financial’s debt and cross currency interest rate swap agreements, and loss on store closings.

 

On a GAAP basis, Dollar Financial reported a net loss of 51 cents per share, compared with earnings of 24 cents in the prior-year quarter.

 

Results for the quarter benefited primarily from increased revenues as a result of improvements in all revenue sources except check cashing. However, higher operating expenses were the downside. Dollar Financial’s global business units continued to deliver strong earnings growth and cash flow during the reported quarter.

 

The company remains on track on its expansion and diversification strategy. In April 2010, the company announced its acquisition of the fourth largest pawnbroking business in the United Kingdom.

 

Total revenue for the quarter increased 33.2% year over year to $157.3 million. Consumer lending revenue increased 35.4% year over year to $78.1 million but check cashing revenue decreased marginally to $37.2 million.

 

Operating expenses for the reported quarter increased 20.4% year over year to $93.4 million. Salaries and benefits increased 15.8% year over year to $39.9 million.

 

Operating margin increased 57.6% year over year to $63.9 million. The increase was driven by Dollar Financial’s strong organic revenue growth, supported by improved store operating efficiency implemented throughout the company’s global store base.

 

The loan loss provision as a percentage of gross consumer-lending revenue improved to 13.1% from 17.8% in the prior-year quarter. This improvement reflects Dollar Financial’s conservative approach of extending consumer credit in the midst of a weakened economy. Provision for loan losses was almost flat compared with the year-ago quarter at $10.2 million.

 

 

Concurrent with the earnings release, the company has provided its revised guidance for fiscal 2010. The company now expects to finish fiscal year 2010 (ended June 30, 2010) at the top end of its previously stated guidance range of $1.80 to $2.00 per share.

 

Dollar Financial now anticipates operating earnings of $1.95 to $2.00 per share, excluding one-time charges, the non-cash impact of adopting ASC 470-20, the non-cash amortization associated with the cross-currency interest rate swap agreements and non-cash unrealized foreign exchange gains and losses. Adjusted EBITDA is expected between $178.0 million and $183.0 million.

 

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.