QC Holdings, Inc. (QCCO)

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QC Holdings, Inc. (QCCO)

Q1 2008 Earnings Call Transcript

May 1, 2008 2:00 pm ET


Don Early – Chairman and CEO

Darrin Andersen – President and COO

Doug Nickerson – CFO


Dennis Telzrow – Stephens, Inc.

Henry Coffey – Ferris, Baker Watts

Daniel O'Sullivan – Utendahl Capital Partners



Good day, ladies and gentlemen, and welcome to the first quarter 2008 QC Holdings, Inc. earnings conference call. My name is Erica and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator instructions)

This presentation contains forward-looking statements within the meaning of 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 other changes in law or regulations governing consumer protection or payday lending practices. Litigation or regulatory action directed towards volatility in our earnings, the increased leverage of the company as a result of a $48.5 million special cash dividend in December 2007 and other risks detailed under Item 1A Risk Factors in our 2007 Form 10-K.

QC will not update any forward-looking statements made in the presentation or on 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 then click on the microphone webcast icon on the homepage, which will direct you to the slides.

I will now like to turn the presentation over to your host for today's call Mr. Don Early, Chairman and CEO. You may proceed, sir.

Don Early

Thank you. Good afternoon and welcome to our first quarter earnings conference call; thanks for your interest in QC. I am joining today by our President, Darrin Andersen and our Chief Financial Officer, Doug Nickerson. Each of them will provide more detail regarding our financial operational performance. We are pleased with our first quarter results including our 12.2% quarter-to-quarter revenue increase and our $0.29 per share earnings. We are also pleased to provide a $0.05 dividend to our shareholders and who have repurchased close to 1 million shares of our own stock.

These results serve as a testament to the strength of our business and the excellent job of field managers have done in balancing revenue growth and loan losses. We will continue to take advantage of acquisitions and consolidations, local branch openings and other growth opportunities. We are well positioned to continue delivering value to shareholders, customers, and employees. Thanks again for your interest in QC and I now would like to turn the call over Darrin Andersen. Darrin?

Darrin Andersen

Thanks, Don. Welcome again to everyone on the call and thanks again for your interest in QC Holdings. Today, I will review our first quarter financial and operational highlights before turning the call over to Doug for a more detailed review of our financial results. Then we will open the call up for questions.

As Don mentioned, we are pleased to report first quarter revenue increased by 12.2% quarter-to-quarter to $54.4 million with comparable branch revenue up 10.6%. These revenue increases demonstrate continued strong demand for our products and a healthy balance of growth among our newer and more established branches.

Branch gross profit increased a healthy 13.4% and solid earnings of $0.29 per diluted share up from $0.26 per diluted share in the first quarter of 2007. We are especially pleased to have generated these results in a challenging economic environment that included softening retail sales declining consumer confidence and turmoil in the credit and debt markets.

Operationally, our performance was solid. Underscoring, the strong consumer demand for short-term credit, our loan volume continues to increase with loan originations up 9.1% over the first quarter 2007. Our average loan size, including our fee increased slightly to $371.32 and our average fee also increased slightly to $53.62.

Our losses were up to $9.1 million and $7.5 million, and our loss ratio was up to 16.8% from 15.4% in the first quarter of 2007. While these levels are within both historical ranges and our range of expectation we are seeing the impact of larger economic downturn in our collections and returns. Our returns were up from 43% to 45% of revenue quarter-to-quarter and our collections were down from 59% to 55% of returns quarter-to-quarter.

We know our customers have been impacted by the economic downturn in rising crisis at the gas pump and the grocery store. We are confident customers will continue to meet short-term small dollar credit, as they deal with these and other financial challenges. Regarding regulatory issues, activity in state legislatures as expected has been busy but consistent with our explained in prior years.

Media coverage of our industry, both positive and negative has increased as various parties comment on our industry in print broadcast and a growing number of websites. 26 states remain in session included Illinois, Ohio, and California three of the 11 states would build that would impact our business while reducing the consumer credit options.

Notably for us the Kansas and Missouri legislatures will adjourn May 9th. Virginia's new law will impact the industry but not consumer demand for short-term credit. In Ohio the bill that would prohibit payday-lending passed the house yesterday and will move onto the Senate. As you know this is a dynamic process and we intent to work to it.

Read the rest of this transcript for free on seekingalpha.com