EZCORP Inc (EZPW) 2012 Q1 法說會逐字稿

Welcome to the EZCORP fiscal 2012 first-quarter earnings release conference call. My name is Christine, and I will be your operator for today's conference. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note today's conference is being recorded. I will now turn the call over to Stephen Stamp. You may begin.

Thank you, Christine, and good afternoon, everyone. This call will address our first-quarter fiscal 2012 results. We issued a press release earlier today that is available on our website, www.ezcorp.com. I'd like to remind everyone that this conference call will contain certain forward-looking statements, including statements about our expected financial and operating performance in future periods. These statements are based on our current expectations. Actual results in future periods may differ materially from current expectations due to a number of risks, uncertainties, and other factors, which are discussed in our press release and in our filings with the Securities and Exchange Commission. On the call with me today is Paul Rothamel, our President and Chief Executive Officer. Paul will make a few opening remarks and talk about some of our strategic initiatives. I will then cover our results for the first fiscal quarter before we open the lines for Q&A. I'll now turn the call over to Paul.

Thank you, Stephen. Good afternoon, everyone. Thanks for joining us today. The first quarter was a good quarter for our Company and provided a solid start to our new fiscal year. Our net income for the quarter was $39.4 million, up 14% from a year ago on a non-GAAP basis. And on a GAAP basis, our net income grew 43%. This performance was in line with our expectations as we made planned investments in talents and technology to support our short- and long-term growth. We did experience some headwinds as US retail sales over the holiday period were soft and gold prices fell inside the quarter. We were able to offset this with our double-digit revenue growth, margin expansion, and expense controls inside our base business.

US Pawn, which remains the backbone of our Company saw total year-over-year revenue growth of 15%. This top-line growth combined with expense management drove a 17% increase in US Pawn's store operating income to $57.9 million, and a 15-basis-point margin improvement for the quarter. Pawn loans outstanding, the engine that drives our pawn business, grew by 19% year over year. Empeno Facil, our fastest growing business, delivered another outstanding quarter with a 56% increase in revenues and store operating income of $6.2 million. That's a 160% increase on the prior-year quarter. Our team in Mexico continues to do an outstanding job of delivering both rapid store count growth and significant earnings growth. Our underlying economic fundamentals remain strong and bode well for our future Mexico plans.

Our EZMONEY segment, which includes our US Financial Service stores, our Canadian stores, as well as our UK online lending business, had mixed results in the quarter. The UK online lending business was successfully launched and is performing as expected in its early days. Our Canadian team exceeded our expectations in both conversion activity and financial performance. Both of these businesses look to be future growth drivers for EZCORP. In the US, declining volumes in Texas resulted in a 1% decrease in total revenue for the segment overall, and a 13% decrease in store-level operating income. As a mature business, we expect US financial services to grow modestly, but generate high returns on capital and cash flow for us to deploy in growth opportunities.

At this point, I'd like to take a few minutes to talk about our progress in some of our other key strategic initiatives. Beginning with our storefront expansion in the US, we continue to execute against our market growth strategy during the quarter, adding a total of 24 stores through acquisition, 7 Cash Converters stores in Virginia and Pennsylvania, 2 stores in South Florida and 15 stores in Texas. As you may know, Virginia and Pennsylvania are new states for us and bring a total number of states our US pawn division services to 18.

Empeno Facil also continued to execute on its market growth strategy in Mexico. During the quarter, we added a total of 14 greenfield stores. This brings the total number of stores in Mexico to 192, which represents a 45% increase over the prior year. We now operate in 17 of 31 states, and plan on expanding to additional 3 states this fiscal year. Our expectation is that we become the number one or number two provider in each of the states where we operate. In the near term, we will continue our focus on expanding in Mexico City, the state of Mexico, and new states to the south and east. Ultimately, we believe Empeno Facil has the potential to be similar in scale as our US pawn business is today.

Moving on to Canada, during the quarter, we converted eight of our Cashmax stores to the Cash Converters brand and acquired one additional franchise store. At December 31, 24 of our 65 Company-owned stores in Canada were operating under the Cash Converters brand. Including the 12 franchise stores, this brand is represented in 5 of the 10 Canadian provinces. At this point, we're very happy with the performance of the Canadian operation against our financial models, having had a strong holiday season. We're also on track to open approximately 10 new greenfield stores in Canada this fiscal year.

We're very excited about our investment in Crediamigo, which we announced earlier today. We have for a while now been looking for opportunities to accelerate our growth in Latin America generally, and diversify our business in Mexico specifically. We have signed a definitive agreement to acquire a 60% stake in Crediamigo for $38.7 million, plus $12 million of additional paid in capital, alongside $8 million that will be contributed by minority shareholders. The sellers may receive additional earnout payments over the next two years based on net income targets in 2012 and 2013. Crediamigo is a specialty consumer finance company that provides payroll deduction loans in Mexico. In fact, they are one of the top three largest and fastest growing such businesses in Mexico.

The Company enters into agreements with various employers and markets non-collateralized loans to their employees. Interest and principal payments are collected through payroll deductions. At this point, Crediamigo has around 170 agreements signed, mostly with government agencies, and has access to around 3.5 million employees. The business model differs from the US non-collateralized model in that loans tend to be for longer periods, up to 4 years, and 28 months on average. And while bad debt is relatively low, APRs are also lower resulting in lower net yields. Crediamigo has a strong management team and Board of Directors. We're looking forward to working with them to drive further growth in their core business and explore opportunities to add product and channels to market, utilizing our combined footprint in Mexico. I will now turn the call back to Stephen to talk about the first-quarter financials in more detail.

Thanks, Paul. I'll begin with our largest segment, US Pawn. As Paul referenced, total revenues grew by 15% in the quarter, including same-store revenue growth of 2%. This was driven primarily by a 7% same-store increase in pawn service charges, offset by a 1% decrease in same-store merchandise sales. Same-store scrap sales remained flat with the prior-year quarter. While total sales were softer than expected, margins remained strong. Coupled with the increase in pawn service charges, net revenue grew 16% over the prior-year quarter and drove a store-level operating income improvement of 17% to $57.9 million, with a slight improvement in operating income margins. Close attention to loan values and gold buying policy allowed us to maintain our scrap sales margins on slightly less volume, despite the fact that gold prices fell inside the quarter for the first time in recent memory.

Our second segment, Empeno Facil, grew total revenues 56% in the quarter, underpinned by same-store growth of 15%. In this case, driven by same-store increases in merchandise sales and pawn service charges of 32% and 21% respectively. Although same-store scrap sales were down 21%, a 12-percentage-point increase in margin meant scrap gross profit increased 53% in the quarter. Merchandise sales margins of 52% benefit from a one-time pickup due to a change in inventory reserve estimate. Empeno Facil recorded store-level operating income of $6.2 million, an increase of 160% over the prior-year quarter. At constant exchange rates, the increase was 186%.

I'd like to spend a minute talking about how gold impacted the quarter on a consolidated basis. In a rising gold market, such as we've enjoyed in recent years, forward sales have provided downside protection, but usually resulted in an opportunity cost for us. In December, we changed our policy and executed a series of zero-cost collars. These have the effect of providing downside protection to lower floor, while allowing the Company to participate in upside, subject to a ceiling. During the quarter, the average market price of gold increased 23% over the prior-year quarter. However, the market price fell 7% inside the quarter, with a drop in the month of December of 13%. In prior quarters, that would have mattered less, since we tended to forward sell anticipated scrap gold. For the quarter on a consolidated basis, we realized a 19% increase in proceeds per gram, offset by a 19% increase in cost per gram on a 9% decrease in volume. We also benefited from an increase of $1 million in diamond proceeds, as compared with the prior-year quarter. The $1.1 million realized and unrealized, or mark-to-market benefit of the collars are included in other income, and not in scrap sales within the segment results. All in, taking the scrap sales proceeds, plus the benefit of the collars, our realized proceeds per gram increased 21%.

Increases in both jewelry and general merchandise drove the pawn loan balance at December 31 to $150 million, up 21% from the prior year. On a same-store basis, pawn loan balances increased 9% over the prior year. Breaking that down by segment, we saw a 19% increase in total loan balance in the US, or 9% on a same-store basis. And in Mexico, we saw a 42% increase in total loan balances, or 5% on a same-store basis. In constant currency, loan balances in Mexico grew 61% in total, and 19% on a same-store basis. In total, another strong quarter of pawn loan growth in both Mexico and the US.

Our third segment, EZMONEY, reported a 1% decrease in total revenues and a 2% decrease in same-store revenues. This was driven primarily by a 2% decrease in same-store signature loan fees, due almost exclusively to competitive pressures in Texas. Included in the signature loan fees are the revenues from our installment loan product, which continue to mature nicely in the quarter. Installment loan fees grew 77% over the prior-year quarter, albeit on a relatively small base. Total bad debt as a percentage of fees remained flat at 24%, compared with both the prior-year quarter, as well as our fourth quarter of 2011. Store-level operating income decreased 13% to $15.5 million for the quarter, with operating income margin of 46%, compared with 51% in the prior-year quarter. Added together, the three segments produced store-level operating income for the quarter of $79.5 million, and a blended margin of 52%, relatively flat with the prior-year quarter. This contributed to a 9% increase on a non-GAAP basis in our consolidated operating income to $54.8 million.

Now, moving down the P&L, the pre-tax contribution from unconsolidated affiliates increased $0.8 million to $4.2 million this quarter. Strategic affiliates, which included Cash Converters and Albemarle & Bond represent the 10% of total net income for the quarter.

And now onto the balance sheet. We ended the quarter with $22.9 million cash on hand and debt outstanding at December 31 of $40.5 million. Total earning assets, which we define as pawn loans, signature loans, auto title loans, and inventory on our balance sheet, combined with CSO loans not on our balance sheet, totaled $296 million at December 31, up from $250 million a year ago, an increase of 19%. Lastly, after [teaching] investments in Cash Converters and Albemarle & Bond are carried on the balance sheet at $118 million. Collectively, their market value at December 31 was $153 million, representing an unrecognized gain of $35 million.

Before we open the lines for questions, I would like to take this opportunity to reiterate our full-year fiscal 2012 guidance range of $3.05 to $3.10 per share, which represents an increase of approximately 20% over fiscal 2011 on a non-GAAP basis. On a GAAP basis, the increase is 27%. And with that, Christine, we are ready for questions.

(Operator Instructions) The first question comes from Liz Pierce from Roth Capital Partners. Please go ahead.

Stephen, I wonder if you could just run through the gold again. I think I was trying to write, and maybe didn't get -- absorb all of it, what exactly you did.

Hi, Liz. So we changed our policy during the quarter, such that we had already forward locked October and November's gold. And we changed the policy in December, and decided not to forward lock but instead to put in place zero cost collars. And by that I mean we purchased a put for a premium, and we sold a call for exactly the same premium. And that had the effect of putting a collar around the gold price, such that if the gold price went below the floor, we were paid by the counter-party. If the gold price went above the ceiling, we paid the counter-party. What actually happened in the month of December was the price decreased 13%, went below the floor, and we ended up picking up $1.1 million of income. But because we didn't have FAS-133 treatment, we booked it to other income rather than to scrap proceeds.

So that was my next -- I just want to verify, that's the $1.1 million down below?

That is correct.

Got it. And what is the FAS-133 treatment? What does that say?

That's the guidance to hedging. It's very hard to get perfect hedging, and therefore, you have to mark-to-market your derivatives at month end. So the $1.1 million is mark-to-market.

When we actually look at the segment results, because the scrap margin was lower than I had anticipated, that's why? Because you had to pull that out?

That is correct.

Got it. Is this a strategy that you think you'll continue with, or what?

Yes.

What's your outlook and what's your strategy? What are you doing for gold for the next couple quarters?

Right. So if we had had this in place back for the last several quarters in a rising gold market, we would have benefited from this strategy handsomely, because we can participate in the upside, which of course you can't do when you are forward locking. Now, of course Murphy's Law is -- the very month that we chose to do it, the gold price actually went south.

Right.

We did get a benefit, but it wasn't the full benefit that we would've achieved had we forward locked. So the answer is yes, we do intend to run with this, at least for the next few quarters.

Okay. All right. And then maybe could you address what the -- your comments about Texas' competitive landscape looks like? Maybe a little bit of weakness, more so than I expected on the volume side, in the EZMONEY money side, largely to Texas?

Right. Liz, this is Paul. I'll take that one. So we had significant storefront expansion in Texas. Just a number of units, frankly, CSO locations is exploded frankly, over the last couple of years, along with obviously the online lending presence in Texas. And that's been a challenge for us. So we're not adding locations in Texas today. We won't be online lending in the US until later this fiscal year. So that's a challenge. We've taken several steps to offset that. We did see some improvement in our loan balances in the back half of the quarter. And we told you about the third quarter last year, we expected that business to be choppy for us and it has been.

Now, having said that, we still grew the EZMONEY business by about 9%, the operating income by about 9% last year. And as we said earlier on the call, we expect that we would grow it this year, but probably something slightly less than that. So we are expecting low- to mid-single digit growth in that business this year.

Okay, low to mid-single. Okay. And since we're on the topic of the EZMONEY side, have you guys had a chance to look over any of Cordray's comments from today in Birmingham and the manual that has been put out?

Yes. We have, obviously we've got our folks working on all that. All I can tell you is we're active at the municipal level, the state level, and the federal level. Frankly, he seemed even in his comments today, which is encouraging. But we all know there's work to do in educating legislatures, activists, about the value that we provide in the marketplace. If in fact there's a focus on improving bad behavior in the industry, believe me, we're right there with them. We believe in disclosure, and we believe in elevating transparencies to the customer, making it easier and better and giving them more choices. We're all for it. If that's where we land, then, believe me, we'll be there.

All right. And from what I remember, you're already in-line with the CFSA best practices, which it looks like a focus is on rollovers, and you guys already manage that.

Yes. That's correct.

Okay. And then Stephen, just real quickly, tax rate we should be thinking about for the rest of the year? It was a little bit lower than I anticipated.

Yes, 34.2% is our current thinking.

Okay. All right. I can get back in or speak you guys later if I have ay more questions. Thanks, and good luck for the rest of the year.

The next question comes from Kyle Joseph from JMP Securities. Please go ahead.

So to follow up on Liz's Texas question, in 2012 have you seen any effect on borrower behavior as a result of the new laws which went into effect this year?

No. We have not.

Okay. And then going back to the acquisition you guys announced today, is that included in your fiscal 2012 guidance?

Yes, it is, Kyle.

Okay. And then can you give us any more details on the transaction on the multiple you guys paid or trailing 12-month revenues for the Company?

I don't really comment about this, Kyle. We've shied away from that for obvious reasons. It sets a bit of a floor for the next deal. If you don't mind, we prefer to do that. What we can tell you is that this deal, like all our other deals will be accretive, and it does satisfy our own return on invested capital criteria, which I think we've spelled out before.

Okay, and then you mentioned the yields were a little lower on their loans. Can you disclose what the average yield on the Crediamigo loan would be?

Lower than what you're used to seeing in the United States.

Okay. Thank you. Thanks for answering my questions.

I don't want to be difficult, but bear in mind this is a high volume, high growth business. And to some extent, although the yields are lower, that's how we get to meet the hurdle rates.

The next question comes from John Rowan from Sidoti & Company. Please go ahead.

Looking at the US pawn segment, obviously, revenues are up 2% on a same-store basis. The pawn loan balance is up 9% on a same-store basis. Was there a change in the demand throughout the quarter, maybe backend loaded, where we're going to see some type of catch-up in the revenue on a same-store basis relative to the loan portfolio size?

Well, I'll call out two issues to you, John. The same-store revenue that you referenced, in this quarter particularly, we have heavier preponderance on sales, due to the Christmas season. And sales were, as we expected, frankly, were very tepid in the United States. We saw that in all the reporting, segment reporting afterwards from major retailers. And it was held through for us. Just a couple things on that line, we were up 3% comp as an example in GM, and we were down about 13% in jewelry in the quarter. Now, we did see improvements as the quarter went on in our sales, but small. We were negative 3% -- excuse me, negative 4%, I believe, in October, flat in November and plus 1% in December. So we did see some improvement in the trend. But those are not great numbers.

So we're conservative in our forward views there, and the other issue related to loan balances being up 9% on a same-store basis, and PSC being up 7% on a same-store basis is a yield discussion, and we've seen some movement in our -- that our lower yielding states are growing faster, which makes sense because they're newer to us. And also in Texas, our average loan size has moved up. And as you know, there's a threshold in Texas where the yield comes down a bit. So those are all factors inside of those revenue numbers.

You don't have the same-store growth for the pawn service charge though, right? I didn't see it in the press release.

It is 7%

It is 7%? Okay. Stephen, going back to your comment, obviously the acquisition is included in guidance. And you said it meets your return on invested guidelines. I don't think I've ever heard you tell me that before, so I was wondering if you could maybe go over that so I can maybe get some idea of how much of what's included in your guidance is coming out of that acquisition?

Yes. I'm not sure you will from about what I'm about to tell you, but the hurdle rate is a 20% return on invested capital, year three. That's a post-tax target. So when I was telling you about the growth, so this thing is on a nice trajectory. So in year three, we are comfortable we will be able to hit that target.

Okay, so I can't figure out what the guidance is then for year one.

Not exactly, no.

Okay. Fair enough. And then maybe just going back, elaborate maybe a little bit -- I hate to beat a dead horse, about the competition in Texas, maybe give us a little bit more idea of where it's coming from?

We're seeing it on the auto title products mostly, and it has some impact on our signature loans. But primarily it's all the title lenders from the bricks-and-mortar side and then it's online. And that's where it's coming from.

All right. Thank you.

The next question comes from Bill Armstrong from CL King & Associates. Please go ahead.

Getting back to the guidance, so if Crediamigo is going to be accretive, and your guidance is unchanged, does that imply that absent this acquisition, your guidance would have gone down?

No.

We gave a range, Bill, remember?

This deal is at a definitive agreement stage, and we expected it to close in the quarter, but it ain't closed. And we've also said we've made investments in short- and long-term technology and talent, and we're transitioning the Company. We've talked about that. So we think that 20% plus, 19% to 21% net income growth year-over-year, along with positioning the Company for longer-term growth is a pretty nice story.

Okay. In Mexico, the gross margin on scrap jewelry, I think as you mentioned in your opening comments, was up very significantly year-over-year. Is that because of these collars, or was there something else going on? And what margins should we be thinking about on scrap jewelry going forward? Should we be thinking about 30% plus going forward?

The Mexican gold buying market is pretty intensely competitive, Bill. And so, and we have chosen in some large respects not to get involved in that particular dogfight. So we have been fairly selective about what we buy and how much we pay for it. What we did in the quarter was we forsook volume in terms of margin. We actually grew the gross profits, notwithstanding the top-line was off materially. It had nothing to do with the collars.

I see. Okay. That's all I have. Thank you.

The next question comes from Bill Carcache from Nomura Securities. Please go ahead.

So following up on the last point that you made, Stephen, about margin improvement in Mexico, that improvement was a lot better than what we were looking for. And they move meaningfully closer to the margins for your US pawn business. Can you talk about -- you talked about some of the drivers, but can you talk about the sustainability going forward, given your Mexican expansion plans of those margins?

I think 20% to 25% is the target range, Bill, for Mexican scrap.

Okay. And for the Mexico operating margins as a whole? What should we be looking for there?

That is going to take a while to even out, because Mexico is on such a growth trajectory. We've got brand-new stores. You've got stores maturing, but almost no mature stores. So I think once we get a mature base, like we have in the US, a substantial mature base, I don't see any reason why Mexico won't be as profitable, if not more profitable than the US, I'd imagine.

Right, but so when we look at this quarter's results, we see 50.8% for Empeno Facil for 11% versus 35.8%, so that 50.8% as we look forward, you're saying that that won't be sustained near that level?

That's not sustainable. No.

Right. Okay. And if I could follow-up on some questions relating to the deal announcement, can you give us a sense of what kind of margins this business generates?

As I said to Kyle, I'd rather not get into the specific economics around the model. I think we're just going to complicate things too much. The yield is significantly lower than you see, for example, in US Payday, but the growth rates are significantly higher.

Okay, fair enough. Can you give us a sense, at least from a ballpark perspective, of the relative profitability versus pawn?

This is Paul. We have said publicly that Mexico, meaning Empeno Facil, has a -- the size of our business, historically, about two years ago, it generated roughly $4 million, $4.3 million of operating income. Last year, it generated I believe $10.7 million of operating income, and we've said publicly we expect it to deliver over $20 million this year. So our Mexico pawn business is on a trajectory. It's in an inflection point and on a trajectory to continue to grow at those kind of rates. Okay? This business, part of the reason that we bought 60%, didn't buy the entire business is because we've got a strong team down there, a strong Board. They know the space, and this business is going to grow rapidly, just like our other business. When we look for synergies, they won't be expense synergies. These are two fast-moving businesses. I would venture to say, that the Crediamigo businesses could generate, in not this year obviously, because we're only on a half-year convention, but could in out years be half as important to us as our pawn business.

Okay. Thank you. That's extremely helpful. On the topic that has come up a couple times about this transaction having been included in the guidance, can you say whether the guidance includes future deals that haven't been announced yet? Or I guess, is there any further -- are there any further transactions that are contemplated in the existing guidance that we haven't heard about yet?

Let's just talk from a strategic standpoint for a minute. We have Canada and online lending, which we launched a division in a group at the beginning of the year, actually fourth quarter of last year. The amount of new stores in Mexico, the amount of new stores in Canada are all drag. So we manage accretion and drag all day long. Okay? So we believe, and we touched on the headwinds, there's gold headwinds that we haven't dealt with, we haven't seen in recent memory, talked about comp sales being a little soft, and our Texas business being a little soft. We also have proven investments that we've made. We began our market strategy in the United States, rolling out markets, and that's been very successful. Those are the accretion pieces.

So I would expect that -- you should expect we will continue to do those type of activities, but that we may, as a management team, make a decision to drag faster on our UK lending, or might drag faster in Canada by adding more stores, because we know in the long-term, that's the best investment. So we give annual guidance; we don't give quarterly guidance. If we see a need to move that guidance, we'll move that guidance. But we're going to continue forward with our strategies. We believe 20% growth year-over-year is pretty healthy net income while we're adding -- diversifying our business geographically, channel-wise, and consumer-wise.

That's helpful. Thank you. And my final question, if I may, there's been some -- on a different topic -- there's been some press coverage of online pawn lenders competing with traditional brick-and-mortar locations. Can you talk about whether you're seeing anything there, and can you share your views on what kind of growth you expect from online pawn over time, and whether you might have any interest in entering that space at some point?

Online pawn--.

Is it just too small to even be on the radar screen at this point?

Yes. Everything is on our radar right now, but it is a small piece today. We've seen it. We've talked to many of them, frankly, in the marketplace both domestically and internationally. And we haven't seen anybody getting a whole lot of traction on the pawn side. Like anything else, it can and probably will at some point. We've said -- we're lending online in the UK now for the first time. We will lend online in the United States this fiscal year. And we're working on other line and e-commerce opportunities. That's the best way I can answer that for you.

The next question comes from John Hecht from JMP Securities. Please go ahead.

I apologize if I missed some of your prepared remarks. I'm in an airport. A couple questions. Number one, it sounds like you discussed Texas and maybe its slowing of growth in EZMONEY side of Texas because of saturation issues. I'm wondering if you can comment on trends outside of Texas. If you saw -- I guess comment on trends outside of Texas?

Sure. Again, we stated publicly that our intention all along was to grow the consolidated net income of the Company in -- outside of not only of Texas, but outside the United States as well. So obviously, we're putting resources, time and energy and technologies into those places, while we continue to manage that very mature business in Texas. The money -- the financial services side of our business outside of Texas is actually very healthy. In Wisconsin and Colorado, as an example, both of those states are doing very well, where they were struggling a year ago because of the regulatory changes. So we're seeing growth in our loan balances outside of Texas. We're certainly seeing growth in our loan balance in Canada as well. And that's another reason we're headed off to the UK today. So we're very happy with those parts of the growth story in our financial services business.

And given that you were seeing unemployment rates drop, and generally speaking at least from the factors we get out of the government, higher levels of just overall economic activity, outside of Texas, would you say you're seeing improved loan demand, or is it just consistent with historical results?

No. We would be seeing improved loan demand.

Okay. And the second question is -- and I know you don't want to talk too much about the details of the acquisition, but just from what I read about it, I understand the yields are lower, but it also just appears based on the mechanics of the loan that there also might be lower credit risk? Is that an accurate statement, or how should I think about credit risk with the Mexican acquisition today?

Yes. So the bad debt, if that's what you mean by credit risk, is substantially lower. But it's not underwritten by the employer. The reason it's lower is that the bulk of the employees to whom we lend -- who Crediamigo lends, excuse me, is our employees of government agencies, and therefore in stable employment.

Okay. And final question, I don't know if you made prepared remarks about this, but just given some of your book remarks about the focus on the e-commerce and Internet segment last quarter, have there been any strategic initiatives that are worth talking about in that endeavor?

Not really. I touched on it in the prepared comments, John, that we did launch online in the UK, and it's very early days, but we're happy with what's occurred there. There's no major surprises, so we're happy with that. The other part of that portion, and so we said we're going to lend online, that's up and running. We're still on pace to get up and running in the United States this year. On our change card, we are -- we had the most profitable quarter we've had last quarter. That moved from the main part of our executive group over into our e-commerce division. So they've taken it, tweaked it, made some changes. We're rolling that in the early feedback of the customers, really pretty positive. So stickiness is good. Profitability per card is good and getting better every day.

So we said that would be accretive this year. It is going to be accretive this year. And we also said -- we said it would be accretive, we're using it as a tool to really drive some consumer loyalty in the space, not just by the way -- on the financial service side but also on the pawn side. And so we're still very excited about that. And we're very excited to have that division full-time working on those pieces.

Okay. Wonderful. Thanks very much for the color, guys.

There's time for one final question. Today's last question comes from Bob Ramsey from FBR Capital Markets. Please go ahead.

I was just curious, maybe if you could talk a little bit about the CFPB, and have you all already had the opportunity to sit down with members of the CFPB, I assume you have, and what issues they are focused on, and what your thoughts are about the Bureau now that Cordray is at the head?

I did touch on that earlier a little bit. We have not had the opportunity to sit down with them. And they're literally in Birmingham today, as was mentioned earlier. And we've seen, as I said, we've seen the comments. We've got our government relations folks on it, along with the associations. We're working this hard. We all know Cordray was the AG in Ohio when, basically, the betting industry was extremely negatively affected. His posture today seems to be much measured and down the middle, so we'll see. But we're actively working it.

As we said before, they're focused on transparency to the consumer but also recognizing that the consumer needs access to credit. Well then, we'll be right there with them. But I think it's early, very early in the process. And we'll see where they go after Alabama.

Okay. And then if I could have one more, you all mentioned that Crediamigo is a much higher growth business. I'm curious if you can quantify that in any way. What is the growth potential, or maybe what has historical growth been in that business in loan balances?

So it is a high-growth business. They've shown that already. And I mentioned [signs] in relationship to our Empeno Facil business, as well. And I'm not sure how else to describe it to you. We are -- I'll just -- maybe I can lay it out for you this way. I said Mexico is on from $4 million to $11 million and headed to $20 million plus in essentially two years. That's the Empeno Facil business. That growth will continue. We said this would be about half that size, and at that growth, probably a similar growth rate. And by the way, to give you another perspective, Canada last year was a drag. This year will be a slight drag, and then we expect Canada to actually mirror very closely the growth rates that we're seeing in Mexico. And that's our Cash Converters business. That gives you some perspective on where Crediamigo fits in the size of the prize.

Okay. But it should be accretive, rather than a drag initially, right? And then it will grow, you're saying, at a similar pace to Empeno Facil?

Yes. It will be accretive, and it will grow much more rapidly than our base businesses in the US.

That concludes the EZCORP fiscal 2012 first-quarter earnings release conference call. Thank you for your participation in the conference today. You may all disconnect at this time.