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DFC Global Beats Q2 Earnings, Guides Low

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DFC Global Corp. reported operating net earnings of 20 cents per share for the fiscal second-quarter 2014 (ending Dec 31, 2013) that beat the Zacks Consensus Estimate by a penny. Results, however, plunged 64% year over year.

Adjusting for one-time items, DFC Global’s net income of 6 cents plummeted 87% year over year.

Decrease in commodity price of gold continued regulatory transition in the United Kingdom and increasing weakness in the value of the Canadian dollar adversely impacted the reported quarter’s performance.

Quarterly Operational Update

Total revenue of DFC Global for the quarter declined 9.4% to $262.3 million from the prior-year quarter. Lower consumer lending revenues (down 10.6% year over year), check cashing fees (down 7.6%), purchased gold sales (down 33.7%) and money transfer fees (down 8%) induced the overall downfall. Results also lagged the Zacks Consensus Estimate of $270 million.

Operating expenses escalated 7.5% year over year to $207.9 million. The increase was due to higher salaries and benefits, provision for loan losses, occupancy costs, advertising, and maintenance and repairs.

Increase in operating expenses compounded with decline in revenues pulling down the operating income by 45.3% year over year to $54.4 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $39.6 million, down 48.7% year over year.

Share Repurchase Update

During the quarter, DFC Global bought back 0.728 million shares at an average share price of $11.77 exhausting its 5.0 million common shares authorization. However, the board approved another 5.0 million share repurchase authorization. As on Dec 31, 2013, the company is left with 3.8 million shares under its authorization.

Financial Position

DFC Global exited the quarter with cash and cash equivalents of $196.2 million, up 8.6% from the fiscal 2013-end level.

Total assets of DFC Global slid 0.8% year over year to $1.72 billion as of Dec 31, 2013.

Long-term debt increased 3.7% from fiscal 2013-end to $975 million as of Dec 31, 2013.

As of Dec 31, 2013, DFC Global had drawn $30.7 million from its $180 million global revolving credit facility. The company had also drawn £1.8 million of its £2.5 million credit facilities in the U.K., and SEK 25.0 million and EUR 6.8 million of its respective SEK 115.0 million and EUR 10.8 million credit facilities in Scandinavia.

2014 Guidance Lowered

DFC Global lowered its EBITDA guidance to $170–$200 million from $200.0–$240.0 million guided earlier. The revised guidance accounts for slower-than-expected transition in the United Kingdom to certain regulatory requirements, unfavorable trends in Canadian dollar with respect to the U.S. dollar and decline in gold commodity prices.

Operating earnings expectation was trimmed to 35–80 cents per share from 65 cents–$1.27 per share for fiscal 2014, considering a 38% effective tax rate.

Performance of Other Financial Service Companies

American Express Co. (AXP - Free Report) , also known as AmEx, reported its fourth-quarter 2013 operating earnings per share (EPS) of $1.21. While the result missed the Zacks Consensus Estimate of $1.26, it remarkably surpassed the year-ago quarter’s earnings of 56 cents a share.

Discover Financial Services (DFS - Free Report) reported fourth-quarter earnings per share of $1.23, which exceeded the Zacks Consensus Estimate of $1.17 per share. EPS also improved 16% from the year-ago quarter’s number of $1.06.

CapitalSource Inc. reported fourth-quarter 2013 earnings of 29 cents per share, which exceeded the Zacks Consensus Estimate by 70.6%. EPS also surged 81% year over year.

Zacks Rank

DFC Global currently carries a Zacks Rank #3 (Hold).

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