OVERLAND PARK, Kan., Nov. 5, 2015 (GLOBE NEWSWIRE) -- QC Holdings, Inc. (NASDAQ:QCCO) reported a loss from continuing operations of $1.5 million and revenues of $34.5 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2015, loss from continuing operations totaled $1.4 million and revenues were $101.0 million. The three months and nine months ended September 30, 2015 include $1.5 million (approximately $900,000 net of income taxes) in accrued costs associated with a tentative settlement of an outstanding legal matter.
For the three months and nine months ended September 30, 2014, income from continuing operations totaled $325,000 and $3.7 million, respectively, and revenues were $39.4 million and $113.9 million, respectively.
The three months and nine months ended September 30, 2014 include discontinued operations relating to branches that were closed during each period. Schedules reconciling adjusted EBITDA to income from continuing operations for the three months and nine months ended September 30, 2015 and 2014 are provided below.
** Third Quarter **
Revenues declined $4.9 million, or 12.4%, quarter-to-quarter due to lower interest and fees from the company's consumer loan products, indicative of competitive pressures as customers explore alternative loan products and distribution channels.
Branch operating costs, exclusive of loan losses, totaled $17.2 million during the three months ended September 30, 2015, down approximately $248,000 from prior year's third quarter, primarily due to reduced compensation.
Loan losses decreased $2.1 million during the three months ended September 30, 2015, totaling $10.5 million versus $12.6 million in prior year's quarter. The loss ratio of 30.5% was lower than the 31.9% in third quarter 2014, indicative of improvements at the branch level through a lower rate of charge-offs as a percentage of revenue and a better collection rate.
Regional and corporate expenses totaled $7.8 million during the three months ended September 30, 2015 compared to $6.4 million in prior year's third quarter. As noted above, the current period includes $1.5 million in accrued costs associated with a tentative settlement of an outstanding legal matter.
Other expense decreased to $418,000 during third quarter 2015 from $1.6 million during third quarter 2014. This decrease is attributable to a $1.0 million write-off of capitalized software costs and a charge of $291,000 to reduce the carrying amount of two properties held for sale to estimated fair value during prior year's third quarter.
** Nine Months Ended September 30 **
The company's revenues decreased $12.9 million, or 11.3%, to $101.0 million during the nine months ended September 30, 2015 for the same reasons noted in the quarterly discussion above.
Branch operating costs, exclusive of loan losses, were approximately $345,000 lower than the same 2014 period. Declines in compensation were partially offset by higher marketing costs.
During the nine months ended September 30, 2015, the company reported loan losses of $29.2 million compared to $32.7 million during the nine months ended September 30, 2014. The company's loss ratio of 28.9% was essentially unchanged from prior year.
Regional and corporate expenses totaled $21.2 million during the nine months ended September 30, 2015 compared to $20.5 million in 2014. The third quarter 2015 charge of $1.5 million in connection with the legal matter was partially offset by reduced overall professional fees.
About QC Holdings, Inc.
Headquartered in Overland Park, Kansas, QC Holdings, Inc. is a leading provider of consumer loans in the United States and Canada. In the United States, QC offers various products, including single-pay, installment and title loans, check cashing, debit cards and money transfer services, through 396 branches in 22 states at September 30, 2015. In Canada, the company, through its subsidiary Direct Credit Holdings Inc., is engaged in short-term, consumer Internet lending in various provinces. During fiscal 2014, the company advanced nearly $750 million to customers and reported total revenues of $153 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 short-term lending practices, (2) uncertainties relating to the interpretation, application and promulgation of regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the impact of proposed rulemaking by the Consumer Financial Protection Bureau (CFPB), (3) ballot referendum initiatives by industry opponents to cap the rates and fees that can be charged to customers, (4) uncertainties related to the examination process by the CFPB and indirect rulemaking through the examination process, (5) litigation or regulatory action directed towards us or the short-term consumer loan industry, (6) volatility in our earnings, primarily as a result of fluctuations in loan loss experience and closures of branches, (7) risks associated with our dependence on cash management banking services and the Automated Clearing House for loan collections, (8) negative media reports and public perception of the short-term consumer loan industry and the impact on federal and state legislatures and federal and state regulators, (9) changes in our key management personnel, (10) risks associated with owning and managing non-U.S. businesses, and (11) the other risks detailed under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014 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.
(Financial and Statistical Information Follows)
| QC Holdings, Inc. | ||||
| Consolidated Statements of Operations | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2015 | 2014 | 2015 | |
| Revenues | ||||
| Consumer loan interest and fees | $36,868 | $32,220 | $106,229 | $94,173 |
| Other | 2,510 | 2,259 | 7,630 | 6,809 |
| Total revenues | 39,378 | 34,479 | 113,859 | 100,982 |
| Operating expenses | ||||
| Salaries and benefits | 8,616 | 8,131 | 24,680 | 23,798 |
| Provision for losses | 12,565 | 10,525 | 32,655 | 29,207 |
| Occupancy | 4,525 | 4,693 | 13,442 | 13,686 |
| Depreciation and amortization | 437 | 340 | 1,370 | 1,141 |
| Other | 3,861 | 4,027 | 10,777 | 11,298 |
| Total operating expenses | 30,004 | 27,716 | 82,924 | 79,130 |
| Gross profit | 9,374 | 6,763 | 30,935 | 21,852 |
| Regional expenses | 1,993 | 2,003 | 6,420 | 6,061 |
| Corporate expenses | 4,407 | 5,784 | 14,095 | 15,160 |
| Depreciation and amortization | 502 | 178 | 1,455 | 557 |
| Interest expense | 364 | 223 | 1,106 | 659 |
| Other expense, net | 1,628 | 418 | 1,687 | 875 |
| Income (loss) from continuing operations before income taxes | 480 | (1,843) | 6,172 | (1,460) |
| Provision (benefit) for income taxes | 155 | (350) | 2,450 | (72) |
| Income (loss) from continuing operations | 325 | (1,493) | 3,722 | (1,388) |
| Gain (loss) from discontinued operations, net of income tax | (99) | 143 | ||
| Net income (loss) | $226 | $(1,493) | $3,865 | $(1,388) |
| Earnings (loss) per share: | ||||
| Basic | ||||
| Continuing operations | $0.02 | $(0.09) | $0.21 | $(0.08) |
| Discontinued operations | (0.01) | 0.01 | ||
| Net income (loss) | $0.01 | $(0.09) | $0.22 | $(0.08) |
| Diluted | ||||
| Continuing operations | $0.02 | $(0.09) | $0.21 | $(0.08) |
| Discontinued operations | (0.01) | 0.01 | ||
| Net income (loss) | $0.01 | $(0.09) | $0.22 | $(0.08) |
| Weighted average number of common shares outstanding: | ||||
| Basic | 17,511 | 17,333 | 17,486 | 17,360 |
| Diluted | 17,568 | 17,333 | 17,492 | 17,360 |
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 performance 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. The three months and nine months ended September 30, 2015 include an additional adjustment to EBITDA related to the accrued costs associated with the tentative settlement of a legal matter, which will be a cash expense if the settlement is completed as presently contemplated. 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 September 30, |
Nine Months Ended September 30, |
|||
| 2014 | 2015 | 2014 | 2015 | |
| Income (loss) from continuing operations | $325 | $(1,493) | $3,722 | $(1,388) |
| Provision (benefit) for income taxes | 155 | (350) | 2,450 | (72) |
| Depreciation and amortization | 939 | 518 | 2,825 | 1,698 |
| Interest expense | 364 | 223 | 1,106 | 659 |
| Accrued costs for tentative settlement of legal matter | 1,500 | 1,500 | ||
| Non-cash items related to property dispositions and foreign currency effects | 1,628 | 418 | 1,687 | 875 |
| Stock option and restricted stock expense | 120 | 457 | 44 | |
| Adjusted EBITDA | $3,531 | $816 | $12,247 | $3,316 |
| QC Holdings, Inc. | ||
| Consolidated Balance Sheets | ||
| (in thousands) | ||
|
December 31, 2014 |
September 30, 2015 |
|
| ASSETS | (Unaudited) | |
| Current assets | ||
| Cash and cash equivalents | $14,220 | $12,823 |
| Restricted cash | 950 | 950 |
| Loans receivable, less allowance for losses of $6,794 at December 31, 2014 and $6,436 at September 30, 2015 | 55,744 | 49,802 |
| Assets held for sale | 2,110 | 934 |
| Prepaid expenses and other current assets | 4,718 | 5,329 |
| Total current assets | 77,742 | 69,838 |
| Non-current loans receivable, less allowance for losses of $2,133 at December 31, 2014 and $1,807 at September 30, 2015 | 5,603 | 3,684 |
| Property and equipment, net | 5,013 | 4,099 |
| Intangible assets, net | 835 | 656 |
| Other assets, net | 12,306 | 11,561 |
| Total assets | $101,499 | $89,838 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Accounts payable | $638 | $739 |
| Accrued expenses and other liabilities | 6,692 | 7,671 |
| Deferred revenue | 2,917 | 2,511 |
| Revolving credit facility | 12,000 | 3,000 |
| Debt due within one year | 3,518 | |
| Total current liabilities | 22,247 | 17,439 |
| Non-current liabilities | 5,482 | 4,747 |
| Long-term debt | 3,415 | |
| Total liabilities | 31,144 | 22,186 |
| Commitments and contingencies | ||
| Stockholders' equity | 70,355 | 67,652 |
| Total liabilities and stockholders' equity | $101,499 | $89,838 |
| QC Holdings, Inc. | ||||
| Selected Statistical and Operating Data | ||||
| (in thousands, except Average Loan, Average Term and Average Fee) | ||||
| (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2015 | 2014 | 2015 | |
| Operating Data – Single-Pay Loans: | ||||
| Loan volume | $173,062 | $156,536 | $499,573 | $446,394 |
| Average loan (principal plus fee) | 383.12 | 381.51 | 386.02 | 382.94 |
| Average fee | 58.63 | 58.58 | 59.18 | 58.81 |
| Operating Data – Installment Loans: | ||||
| Loan volume | $14,798 | $12,492 | $40,151 | $32,154 |
| Average loan (principal) | 782.89 | 742.71 | 765.73 | 736.35 |
| Average term (days) | 260 | 230 | 255 | 234 |
| Revenues: | ||||
| Single-pay loan fees | $25,567 | $22,961 | $74,183 | $66,151 |
| Installment loan interest and fees | 10,020 | 7,878 | 28,494 | 23,982 |
| Open-end credit fees | 1,206 | 1,317 | 3,309 | 3,845 |
| Title loan fees | 75 | 64 | 243 | 195 |
| Consumer loan interest and fees | 36,868 | 32,220 | 106,229 | 94,173 |
| Credit services fees | 1,292 | 1,094 | 3,795 | 3,205 |
| Check cashing fees | 597 | 517 | 1,977 | 1,725 |
| Other fees | 621 | 648 | 1,858 | 1,879 |
| Other revenues | 2,510 | 2,259 | 7,630 | 6,809 |
| Total | $39,378 | $34,479 | $113,859 | $100,982 |
| Loss Data: | ||||
| Provision for losses, continuing operations: | ||||
| Charged-off to expense | $20,819 | $17,654 | $58,586 | $50,876 |
| Recoveries | (8,070) | (7,036) | (24,290) | (20,816) |
| Adjustment to provision for losses based on evaluation of outstanding receivables | (184) | (93) | (1,641) | (853) |
| Total provision for losses | $12,565 | $10,525 | $32,655 | $29,207 |
| Provision for losses as a percentage of revenues | 31.9% | 30.5% | 28.7% | 28.9% |
| Provision for losses as a percentage of loan volume (all products) | 6.4% | 5.9% | 5.8% | 5.8% |