DLLR Dfc Global Corp (MM)

DFC Global Corp. (DLLR) reported operating earnings of 53 cents per share for fiscal third quarter 2012, ending March 31, a penny ahead of the Zacks Consensus Estimate but much higher than 43 cents earned in the year-ago quarter.

The operating results exclude non-cash mark-to-market valuation gain on debt and legacy cross-currency interest rate swap agreements, partially offset by costs related to acquisitions.

Including these charges, GAAP net income was 70 cents per share in the reported quarter, compared with 41 cents in the prior-year quarter.

DFC Global continues to deliver strong numbers on the heels of solid performance at its core business units. Successful diversification of products and geographic expansions aided the performance.

Operational Update

Total revenue for the quarter jumped 36.5% year over year to $270 million, slipping the Zacks Consensus Estimate of $272 million. Higher consumer lending revenue (shooting 62% year over year) and purchased gold sales revenue (surging 51% year over year) largely aided the upside.

Additionally, pawn service fees and sales catapulted 26% year over year to $21 million, and money transfer fees improved 27% o $9.4 million. However, check cashing revenue declined 3.8% to $35.3 million from the year-ago quarter.

Operating expenses shot up 44.7% year over year to $174.7 million, primarily attributable to higher salaries and benefits, provision for loan losses, cost of goods sold of purchased gold, occupancy costs and advertising cost.

DFC Global’s operating profit improved 23.6% year over year to $95.3 million.

The company also notched adjusted EBITDA of $76.7 million in the reported quarter, up 30% year over year.

Evaluation of Capital and Balance Sheet

At the end of March 31, 2012, the debt structure of DFC Global consisted of $230.0 million of senior convertible notes due 2017, $44.8 million of U.S. senior convertible notes due 2027 and $120.0 million of U.S. senior convertible notes due 2028.

In addition, DFC Global has $600.0 million of senior unsecured notes which are not due until December 2016.

As of March 31, 2012, DFC Global had drawn $41.8 million of its $235.0 million global revolving credit facility. The company had drawn £5.3 million of its £7.0 million credit facility in the United Kingdom, and had drawn SEK 250.3 million and EUR 16.1 million of its respective SEK 325.0 million and EUR 18.8 million credit facilities in Scandinavia, to fund pawn pledge books in the U.K. and Scandinavia.

Revised Outlook

DFC Global tightened the adjusted EBITDA guidance to a range of $303-$306 million from the prior guidance of $300-$305 million.

The company also revised the operating earnings band upwards to $2.08–$2.11 per share from $2.05–$2.10 per share earlier.

These revisions came on the back solid performances by global business operations as well as favorable trends in currency exchange rates.

Peer Comparison

MoneyGram International Inc. (MGI), which competes with DFC Global, reported first-quarter 2012 earnings per share of 22 cents, a couple of cents higher than the Zacks Consensus Estimate. However, the reported earnings soared from the year-ago quarter’s loss of 21 cents a share.

Top line for the quarter was $318.1 million, up 8.2% from the year-ago period and exceeded the Zacks Consensus Estimate of $315 million.

Zacks Rank

We maintain our Neutral recommendation on DFC Global. The quantitative Zacks #2 Rank (short-term Hold rating) for the company indicates slight boost on the shares over the near term.

 
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