QC Holdings, Inc. (QCCO)

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QC Holdings Inc. (QCCO)

Q4 2008 Earnings Call

February 12, 2009 2:00 pm ET


Don Early – Chairman, Chief Executive Officer

Darrin J. Andersen – President, Chief Operating Officer

Douglas E. Nickerson – Chief Financial Officer


David Burtzlaff – Stephens Inc.

Beth Adams – Kaufman Brothers

Mike Smith – Kansas City Capital

[Mitchard Brockbinder] – Wachovia Securities



Good afternoon ladies and gentlemen and welcome to the fourth quarter 2008 QC Holdings, Incorporated earnings conference call. My name is [Michal] and I will be your coordinator for today. This presentation 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 among others, changes in laws or regulations governing consumer protection or payday lending practices, litigation or regulatory action directed toward volatility in our earnings, the increased leverage of the company as a result of the $48.5 million special cash dividend in December 2007 and the other risks detailed under item 1A, Risk Factors in our 2007 Form 10-K.

QC will not update any forward-looking statements made in this presentation or in the conference call accompanying this presentation. Also, if you would like to follow along with the slide presentation, please access the QC Holdings website at QCHoldings.com and go to the investment center page of the website.

(Operator instructions). I would now like to turn this presentation over to your host for today’s call, Mr. Don Early, Chairman and CEO. Please proceed, sir.

Don Early

Good afternoon and welcome to our fourth quarter earnings conference call. Thanks for your interest in QC. I’m joined on today’s call by our President, Darrin Andersen and by our Chief Financial Officer, Doug Nickerson.

We are generally pleased with our fourth quarter and full year performance. Given historic lows in consumer confidence and retail spending combined with increasing unemployment, our comparable branches performed well.

Our fourth quarter revenue growth was just over 8% quarter-to-quarter while our gross profit from comparable branches grew 5.4%. For the full year, our 7.6% increase in revenue and 7.7% increase in gross profit reflects excellent performance and management. These results again signal the strength of our business, resilient consumer demand for our products and the excellent job of our field managers have done in balancing revenue growth and loan losses.

Our Board of Directors is pleased to announce a quarterly dividend of $0.05 per share. The economic turmoil does not eliminate the need for short-term credit. We will continue delivering excellent value to shareholders, customers and our employees.

Thanks again for your interest in QC. I would like now to turn the call over to our President, Darrin Andersen.

Darrin J. Andersen

Welcome again to everyone on the call. I’m pleased to report our fourth quarter and full year 2008 results. Today I’ll review our financial and operational highlights for the quarter and the full year along with a brief preview with what we expect in 2009. Then I’ll turn it over to Doug for more financial detail before opening the call up for questions. This will be our last earnings conference call for a year, which I’ll discuss in a few minutes.

As Don indicated, we are generally pleased with the performance of our core operations in the challenging economic environment. Our revenue increased 8% to $61.1 million compared to $56.6 million in the fourth quarter 2007.

Importantly, gross profit from our core operations for comparable branches was up 5.4% and income from continued operations was $4 million or $0.22 per diluted share. Excluding expenses associated with our one time referendum efforts, income from continuing operations was $4.3 million or $0.24 per diluted share.

On slide five, a few notable facts about our fourth quarter operations. Our adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, was up 25% quarter-to-quarter to $11.1 million and as Don announced, our Board of Directors declared a regular quarterly dividend to shareholders of $0.05 per share.

Finally, our installment and automobile loan revenues totaled $12.4 million up from $8.8 million in the fourth quarter 2007. We are pleased with the progress we have made in developing these products and with the reception they have gotten from our customers.

Our installment loan business has grown in New Mexico and Illinois, and our testing of these high dollar longer term loans in Montana is encouraging as well. Our Autostart brand, Buy Here Pay Here automotive operations are also growing rapidly. Last month we acquired two lots and have established our self as one of the premier Buy Here Pay Here dealerships in the Kansas City area.

Two thousand eight revenue improvements were largely attributable to the growth in our installment loans and automotive op sales and financing. Our overall annual growth of about 8% was within our expected range. The demand for our products showed resiliency during the economic upheaval and generally gloomy economic times. Still the government stimulus checks distributed in the mid-year negatively impacted us by reducing demand for short-term credit.

Our loan losses were up slightly quarter-to-quarter from last year and higher than our typical fourth quarter, but within our expectations given the impact of the overall economy that continued to decline throughout 2008.

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