Exhibit 99.1
QC Holdings, Inc. Reports 36% Increase in First Quarter Earnings
Exclusive of Branch Closing Costs, Net Income Improved 108%;
Board Declares 10 Cent Dividend
OVERLAND PARK, Kan.--(BUSINESS WIRE)--May 3, 2007--QC Holdings, Inc.
(NASDAQ: QCCO) today announced results for the first quarter ended March 31,
2007. Highlights for the quarter included (compared to prior year's first
quarter):
-- a 26.3% increase in revenues to $48.5 million;
-- a 36.0% increase in net income to $3.4 million;
-- $0.17 per diluted share vs. $0.12 per diluted share in first quarter
2006;
-- $0.26 per diluted share, exclusive of branch closing costs and charges
for 39 branches (see discussion below);
-- a 78% improvement in adjusted EBITDA, which is earnings before
interest, taxes, depreciation, amortization and charges related to
stock options and restricted stock awards (and branch closing costs
and charges for 39 branches during first quarter 2007), to $11.2
million;
-- a 10 cent dividend payable on May 31, 2007 to stockholders of record
as of May 15, 2007.
"Accelerating revenues from our newer branches fueled our strong first
quarter 2007 results," said QC Chairman and Chief Executive Officer Don Early.
"Revenues from our 2005 group of branches improved 66% to $9.4 million for the
quarter versus $5.7 million last year. In addition, robust customer demand
helped drive solid quarter-to-quarter increases in revenues from our seasoned
branches.
"Our focus on superior branch performance through operational excellence
continues to pay off - branch gross profit improved more than 50%, or $6
million, after consideration of the branch closing costs. Our field management
and branch personnel have done an excellent job of reproducing the successes
experienced during last year's third and fourth quarters."
First quarter 2007 results include approximately $3.0 million ($1.8
million, or $0.09 per diluted share, after-tax) in costs and charges associated
with the closing of 39 branches, including $1.5 million for termination of
operating leases and related occupancy costs, $1.5 million for the disposition
of property and $40,000 for write-offs of deposits. QC believes that it is
useful to management and investors to analyze results after adjusting for these
items that are not ongoing or are non-operational in nature to provide a more
comparable basis for evaluating QC's operating results and financial performance
over time. Excluding these branch closing costs, net income for the three months
ended March 31, 2007 totaled $5.2 million, or $0.26 per diluted share, which
more than doubled net income from prior year's first quarter. Detailed
reconciliations of non-GAAP financial measures are provided in tables below.
The company reported a $10.1 million increase in revenue during first
quarter 2007, improving to $48.5 million from $38.4 million in prior year's
first quarter, primarily as a result of higher payday loan volumes due to
increases in the number of branches, the number of customer transactions and
average loan size. QC originated approximately $279.1 million of payday loans
during first quarter 2007, which was an increase of 20% over the $231.7 million
during first quarter 2006. The average loan (including fee) totaled $362.81
versus $360.06 during the three months ended March 31, 2006. Average fees per
loan declined from $52.84 in first quarter 2006 to $52.30 in the current quarter
due to legislative and regulatory changes affecting rates and to a decline in
the fee rate as loan volumes increase in newer branches located in states that
have lower fee structures, partially offset by a higher average loan size.
Revenues for comparable branches (defined as those branches that were open
for all of the two periods being compared, which means the 15 months since
December 31, 2005) increased 16.2%, or $6.0 million, to $43.1 million during the
three months ended March 31, 2007. This increase is primarily attributable to
the acceleration of revenues associated with the 2005 group of branches and to
growth in the installment loan product in Illinois. First quarter 2007 revenues
also include approximately $4.8 million from branches added during 2006,
including the 51 South Carolina branches acquired in December 2006.
Branch operating expenses (i.e., non-loss costs) increased to $24.8 million
from $20.9 million in prior year's first quarter. Exclusive of the branch
closing costs and charges discussed above, operating expenses totaled $23.3
million, which is an 11% increase over first quarter 2006. This increase was
entirely due to newer branches as operating expenses at comparable branches
declined slightly quarter-to-quarter. Branch-level salaries and benefits
increased to $11.9 million in first quarter 2007 from $10.7 million in prior
year's quarter, primarily as a result of a 7% increase in field personnel at
newer branches. Occupancy costs increased over prior year due to $1.5 million in
branch closing costs as discussed above and to a higher average number of
branches quarter-to-quarter.
QC's losses increased to $6.5 million during the three months ended March
31, 2007 from $5.2 million in first quarter 2006. The loss ratio, however,
declined to 13.3% in the current quarter versus 13.6% in prior year's first
quarter. The improvement reflects the benefit of the sale of older debt for
approximately $1.0 million during March 2007. Comparable branches totaled $6.6
million in transaction losses during the first quarter, while branches added
during 2006 totaled approximately $1.1 million. QC's charge-offs as a percentage
of revenue declined to 43.4% during 2007 from 43.7% during first quarter 2006
and the recovery rate (collections, including debt sales, as a percentage of
charge-offs) was 63.5% compared to 64.5% in prior year's quarter.
Branch gross profit improved $4.9 million from $12.3 million in first
quarter 2006 to $17.2 million in the current quarter ($18.7 million, exclusive
of branch closing costs and charges). Gross profit for comparable branches
during the three months ended March 31, 2007 grew 35.6% to $17.9 million from
$13.2 million in prior year's first quarter, with the growth resulting from
stronger results in the majority of states. The branches added during 2006
reported gross profit of $875,000, the majority of which is from the 51 South
Carolina acquired branches. The aggregate of net losses associated with closed
branches, partially offset by profits from the QC corporate collection
department and other avenues, totaled approximately $1.6 million.
Regional and corporate expenses increased $1.4 million during the three
months ended March 31, 2007, to $9.4 million from $8.0 million in first quarter
2006. The expense increase is attributable to approximately $750,000 in
advertising and public awareness expenditures during the three months ended
March 31, 2007, equity award compensation, and salaries associated with a 10%
increase in home office and regional personnel quarter-to-quarter.
"Entering 2007, we stressed to our field management and branch personnel
our desire to drive revenues while managing losses and operating expenses,"
noted QC President and Chief Operating Officer Darrin Andersen. "Revenues at
branches added prior to 2005 experienced a 7% increase in revenues and a 14%
increase in gross profit quarter-to-quarter. This improvement, together with the
dramatic gains made by the 2005 branches, provides a great starting point for
the rest of 2007."
- DIVIDEND DECLARATION -
QC's Board of Directors declared a quarterly cash dividend of 10 cents per
common share. The dividend is payable May 31, 2007, to stockholders of record as
of May 15, 2007.
- BUSINESS OUTLOOK -
"Another quarter of strong customer demand for the payday loan product
bodes well for the remainder of 2007," Early said. "With our footprint of nearly
600 branches across 25 states, we are located where our customers live and work.
"The 51 South Carolina branches we added in December 2006 are performing
well and have been substantially integrated as of quarter-end. The closing of
non-performing branches during first quarter 2007 eliminated ongoing problems
and will save approximately $1 million throughout the remainder of the year.
"Our financial position has never been stronger as we evaluate the spectrum
of opportunities in the payday and retail financial services industry. We look
forward to building on the momentum generated during the last several quarters
and capitalizing on the potential of our maturing branch base."
QC will present its financial results for the three months ended March 31,
2007 in a conference call on May 3, at 2:00 p.m. EDT. Stockholders and other
interested parties are invited to listen online at www.qcholdings.com or dial
(800) 659-2032, passcode 44700779. The accompanying slides to the presentation
will be available on the QC Web site prior to the conference call on May 3. A
replay of the audio portion of the presentation will be available online until
the close of business on June 3, 2007. The replay can also be accessed by
telephone until May 10, 2007, at (888) 286-8010, code 19714777. QC Holdings,
Inc.
About QC Holdings, Inc.
Headquartered in Overland Park, Kansas, QC Holdings, Inc. is a leading
provider of payday loans in the United States, operating 588 branches in 25
states at March 31, 2007. With more than 22 years of operating experience in the
retail consumer finance industry, the company entered the payday loan market in
1992 and, since 1998, has grown from 48 branches to 588 branches through a
combination of de novo branches and acquisitions. During fiscal 2006, the
company advanced approximately $1.1 billion to customers through payday loans
and reported total revenues of $172.3 million.
Forward Looking Statement Disclaimer: This press release and the conference
call referenced above contain 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 revenue growth in branches, (4) negative media
reports and public perception of the payday loan industry and the impact on
federal and state legislatures and federal and state regulators, (5) changes in
our key management personnel, (6) integration risks and costs associated with
contemplated and completed acquisitions, 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, 2006 filed with the Securities and Exchange Commission. QC will not
update any forward-looking statements made in this press release or the
conference call referenced above to reflect future events or developments.
(Financial and Statistical Information Follows)
QC Holdings, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
-------------------
March 31,
-------------------
2006 2007
--------- ---------
Revenues
Payday loan fees $ 33,687 $ 41,580
Other 4,745 6,939
--------- ---------
Total revenues 38,432 48,519
--------- ---------
Branch expenses
Salaries and benefits 10,712 11,877
Provision for losses 5,243 6,475
Occupancy 5,338 7,916
Depreciation and amortization 1,261 1,227
Other 3,544 3,822
--------- ---------
Total branch expenses 26,098 31,317
--------- ---------
Branch gross profit 12,334 17,202
Regional expenses 3,073 3,006
Corporate expenses 4,875 6,415
Depreciation and amortization 306 496
Interest expense (income), net (95) 115
Other expense, net 48 1,542
--------- ---------
Income before income taxes 4,127 5,628
Provision for income taxes 1,634 2,246
--------- ---------
Net income $ 2,493 $ 3,382
========= =========
Earnings per share:
Basic $ 0.12 $ 0.17
Diluted $ 0.12 $ 0.17
Weighted average number of common shares
outstanding:
Basic 20,479 19,539
Diluted 21,302 20,153
Non-GAAP Reconciliations
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
The Company analyzes historical results after adjusting for certain
items. The Company believes that excluding the various costs and
charges associated with 39 branch closings during first quarter 2007
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 March 31, 2006
---------------------------------
Non-GAAP
Adjustments
GAAP (a) Adjusted
----------- ------------ --------
Revenues
Payday loan fees $33,687 $- $33,687
Other 4,745 - 4,745
----------- ------------ --------
Total revenues 38,432 - 38,432
----------- ------------ --------
Branch expenses
Salaries and benefits 10,712 - 10,712
Provision for losses 5,243 - 5,243
Occupancy 5,338 - 5,338
Depreciation and amortization 1,261 - 1,261
Other 3,544 - 3,544
----------- ------------ --------
Total branch expenses 26,098 - 26,098
----------- ------------ --------
Branch gross profit 12,334 - 12,334
Regional expenses 3,073 - 3,073
Corporate expenses 4,875 - 4,875
Depreciation and amortization 306 - 306
Interest expense (income), net (95) - (95)
Other expense, net 48 - 48
----------- ------------ --------
Income before income taxes 4,127 - 4,127
Provision for income taxes 1,634 - 1,634
----------- ------------ --------
Net income $2,493 $- $2,493
=========== ============ ========
Earnings per share:
Basic $0.12 $- $0.12
Diluted $0.12 $- $0.12
Three Months Ended March 31, 2007
----------------------------------
Non-GAAP
Adjustments
GAAP (b) Adjusted
----------- ------------ ---------
Revenues
Payday loan fees $41,580 $- $41,580
Other 6,939 - 6,939
----------- ------------ ---------
Total revenues 48,519 - 48,519
----------- ------------ ---------
Branch expenses
Salaries and benefits 11,877 - 11,877
Provision for losses 6,475 - 6,475
Occupancy 7,916 (1,456) 6,460
Depreciation and amortization 1,227 - 1,227
Other 3,822 (40) 3,782
----------- ------------ ---------
Total branch expenses 31,317 (1,496) 29,821
----------- ------------ ---------
Branch gross profit 17,202 1,496 18,698
Regional expenses 3,006 - 3,006
Corporate expenses 6,415 - 6,415
Depreciation and amortization 496 - 496
Interest expense (income), net 115 - 115
Other expense, net 1,542 (1,451) 91
----------- ------------ ---------
Income before income taxes 5,628 2,947 8,575
Provision for income taxes 2,246 1,149 3,395
----------- ------------ ---------
Net income $3,382 $1,798 $5,180
=========== ============ =========
Earnings per share:
Basic $0.17 $0.09 $0.26
Diluted $0.17 $0.09 $0.26
(a) There were no adjustments related to the operations during the
three months ended March 31, 2006.
(b) These adjustments reflect the elimination of the costs and charges
associated with the closing of 39 branches during first quarter 2007,
including $1.5 million for termination of operating leases and
related occupancy costs, $1.5 million for the disposition of property
and $40,000 for write-offs of deposits.
Non-GAAP Reconciliations
Adjusted EBITDA
(in thousands)
(Unaudited)
QC reports adjusted EBITDA (earnings before interest, taxes,
depreciation, amortization and charges related to stock options and
restricted stock awards), 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 net income to adjusted EBITDA:
Three Months Ended
----------------------
March 31,
----------------------
2006 2007
----------- ----------
Net income $ 2,493 $ 3,382
Provision for income taxes 1,634 2,246
Depreciation and amortization 1,567 1,723
Interest expense 72 183
Stock option and restricted stock expense 500 679
Branch closing costs and charges (a) - 2,947
----------- ----------
Adjusted EBITDA $ 6,266 $ 11,160
=========== ==========
(a) For 2007, the adjusted EBITDA computation includes the costs
associated with 39 branch closings to provide a more comparable basis
for evaluation.
QC Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
December 31, March 31,
2006 2007
------------ ------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 23,446 $ 23,022
Loans receivable, less allowance for losses
of $2,982 at December 31, 2006 and $1,770
at March 31, 2007 66,018 54,627
Prepaid expenses and other current assets 3,028 3,581
------------ ------------
Total current assets 92,492 81,230
Property and equipment, net 31,311 29,250
Goodwill 14,492 15,326
Other assets, net 4,652 4,752
------------ ------------
Total assets $ 142,947 $ 130,558
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 909 $ 867
Accrued expenses and other liabilities 10,876 10,989
Deferred revenue 4,558 4,266
Income taxes payable 531 3,096
Debt due within one year 16,300
Deferred income taxes 1,742 961
------------ ------------
Total current liabilities 34,916 20,179
Non-current liabilities 598 658
Deferred income taxes 2,645 1,865
------------ ------------
Total liabilities 38,159 22,702
Commitments and contingencies
Stockholders' equity 104,788 107,856
------------ ------------
Total liabilities and stockholders'
equity $ 142,947 $ 130,558
============ ============
QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands, except Branch Data, Average Loan and Average Fee)
Three Months Ended
-------------------
March 31,
-------------------
2006 2007
--------- ---------
Unaudited
Branch Data:
Number of branches, beginning of period 532 613
De novo branches opened 18 12
Acquired branches 8
Branches closed (1) (45)
--------- ---------
Number of branches, end of period 549 588
========= =========
- ----------------------------------------------------------------------
Comparable Branch Data:
Total number of comparable branches 486 486
Comparable branch revenues $ 37,093 $ 43,121
Percentage change 16.2%
Comparable branch net revenues $ 32,027 $ 36,561
Percentage change 14.4%
- ----------------------------------------------------------------------
Operating Data - Payday Loans:
Loan volume $231,698 $279,052
Average loan (principal plus fee) 360.06 362.81
Average fee 52.84 52.30
- ----------------------------------------------------------------------
Loss Data:
Allowance for loan losses:
Balance, beginning of period $ 1,705 $ 2,982
Adjustment to provision for losses based on
evaluation of outstanding receivables (a) (656) (1,212)
--------- ---------
Balance, period end $ 1,049 $ 1,770
========= =========
Provision for losses:
Charged-off to expense $ 16,780 $ 21,046
Recoveries (10,822) (13,369)
Adjustment to provision for losses based on
evaluation of outstanding receivables (a) (715) (1,202)
--------- ---------
Total provision for losses $ 5,243 $ 6,475
========= =========
Provision for losses as a percentage of
revenues 13.6% 13.3%
Provision for losses as a percentage of loan
volume (all products) 2.2% 2.3%
(a) Amounts differ due to the inclusion of changes in the credit
services organization liability in the provision for losses table.
CONTACT: QC Holdings, Inc.
Investor Relations:
Douglas E. Nickerson, 913-234-5154
Chief Financial Officer
or
Media:
Tom Linafelt, 913-234-5237
Director - Corporate Communications