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EZCORP, Inc. (NASDAQ:EZPW)

Q1 2010 Earnings Call

January 21, 2010 4:30 p.m. ET

Executives

Joe Rotunda – President, CEO

Brad Wolfe – CFO

Analysts

David Burtzlaff - Stephens, Inc.

Bill Armstrong - CL King & Associates

Liz Pierce - Roth Capital Partners

John Rowan - Sidoti & Company

Isabel Sterk - C.K. Cooper & Company

Ted Hillenmeyer - Northstar Partners

Chuck Raff - Insight Investments

Alan Borchstein - AB Analytical Services

Gary – Hubert Capital

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the EZCORP fiscal year 2010 first quarter earnings release conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mr. Joe Rotunda, President and Chief Executive Officer. Mr. Rotunda, you may begin.

Joe Rotunda

Thank you, [Christine]. Good afternoon, everyone, thank you for joining us today. As previously announced, Dan Tonissen, our CFO retired in December just as planned. With me today is Brad Wolfe, our new Chief Financial Officer. Brad brings over 17 years of financial and operating experience in a variety of industries in both the private and public sectors. Not only does he have an MBA in finance, MIS in marketing from the Kellogg School of Business is also an attorney. We're all pleased to have him as a member of our team and we're excited about the experience and knowledge he brings to the company.

Today we’ll be addressing our first quarter 2010 results. I'll begin with the high level overview of the quarter and a few remarks about each of our business segments. Brad will then provide more detail with the review of our consolidated results. We'll conclude with earnings guidance for the second quarter and increased guidance for the full year before providing an opportunity for questions.

This quarter marks our 30th consecutive quarter of year-on-year earnings growth. That's an outstanding accomplishment, which clearly demonstrates our ability to consistently enhance earnings and provide shareholder value. Coupled with this strong financial performance is an expanding extending worldwide presence with our store growth in Mexico entry into Canada and our strategic affiliations with Albemarle and Bond in UK and Cash Converters in Australia.

Quarter one was an outstanding quarter for EZCORP. Our net income was $25.7 million, a 73% increase over last year. Diluted earnings per share are $0.52 compare to $0.33 last year and they reflect a 57% improvement. Included in these results are the Value Pawn and Pawn Plus acquisitions, which incrementally contributed $5.8 million or about $0.5 earnings improvement over last year.

They were also accretive approximately $0.07 per share, this is after netting the effect of the additional equity we issued in conjunction with those acquisitions. I believe these results continue to demonstrate the value of quality acquisitions as part of our overall strategy of an intense focus on building earning assets.

You should note beginning with the second quarter all the acquired stores will be in the results for both this year and last year's numbers. As you study these first quarter results you also see that they reflect substantial growth generated organically in our core business. In all segments of our business we saw strong loan demand. It appears that our broaden range of loan offerings provides solutions to customer’s cash needs and are found to be more attractive than other available options. Our domestic pawn and EZMONEY segments both delivered exceptionally strong financial performances for our operations in Mexico and Canada grew and made significant strategic progress.

Now let’s take a look by segment. I’ll begin with our domestic pawn operations. In the December quarter, we opened one new EZPAWN shop in Texas. And although it’s still early, we’ve been very pleased with initial results. Shortly after the close of the quarter, we opened one more new store, a Value Pawn store in Florida. These in the first two domestic pawn shop openings and over a decade and we planned to open at least four more in the reminder of this year as we build on our core strengths in this business segments.

The financial results for our U.S. pawn operations are presented in the first column of figures on page five of our release. To note that U.S. pawn had more than $14 million increase in store level operating income, a 61% improvement over last year. That $14 million improvement is inclusive of both same store organic growth and the contribution of last year’s acquisitions. I’ve already pointed out the impact of the acquisitions, so our direct [audio gap] distributed between both [audio gap] general merchandize and the jewelry categories.

Coupled with the strong loan growth is a rising redemption rate, which tells us that the loans are high quality. This I believe demonstrates that our pawn operators are doing a nice job with the loan counter with loan values for our customers. All of this comes together and it generates the pawn service charge revenue stream, which grew by 19% on a same store basis compared to our portfolio growth of 10%. The other side of the pawn equation, the sale of forfeit the (Inaudible) and merchandize purchases. We do that via retail and scrap sales.

Retail sales did show some resiliency in the quarter with modest growth just a little over 1% on a same store basis. Although not as strongest we like this is our first same store sales increase since the same quarter a year ago. This year benefited substantially from the pay out of (Inaudible) sales initiated during our Christmas in July [audio gap] season (Inaudible) program. With retail margins down about a percentage point the last year at 38% our same store retail gross profit dollars was down slightly.

Also on a same store basis, scrapping gross profit dollars increased almost $2 million, which is 32% over last year with margins at 37%. In most cases what we didn’t sell we were able to scrap at almost the same level was the retail margin. Combining all these components, net revenues in U.S. pawn still on a same store basis increased by more than $6 million, a 13% increase.

One of the positive attributes of our pawn proposition is our ability to leverage revenue growth with relatively fixed operating cost. That 13% increase at the net revenue line translates on a same store basis the very impressive 21% increase in operating income. I think we’ll miss if I didn’t point out the operating income margin on line 21 of our combined U.S. pawn operations, which is at 49% that’s an improvement of almost two percentage points over the last year. All in all it was a very strong quarter for the U.S. pawn segment with a 61% increase in operating income to $38 million.

Now let’s take a look at on Mexico pawn segment Empeno Facil. In the last six months, we’ve opened 23 of the 70 total stores with eight openings in this quarter. And we continue to be pleased with the performance of these new stores in Mexico. With the exchange rate approximately the same as this quarter last year, percentage changes based on dollars are also indicative of the performance in local currency.

Our revenue stream grew over last year on a same store basis. Total sales were strong with 23% same store growth. Pawn service charges increased by 4% on a 6% larger ending pawn loan balance. However, merchandized margins decreased to 28% from 39% this quarter last as a result of focused promotions to liquidate aged and damaged merchandize during this period. This effort has been successful and we expect solid gross margins going forward.

Overall net revenues increased $600,000 with operating income down to 300,000 as operating expenses from these new stores grew at a faster pace than revenues as expected. Now for a look at our third segment EZMONEY signature loans and still on page five of the schedules. I think you’ll see that the results in this segment amplified the benefits of adding a boarder selection of loan products while maintaining a relatively fixed expense base of existing stores.

Our total revenues were strong, they grew by $5 million and 15% for the quarter to $40.8 million. Auto title installment loans introduced in the last two years represented three fourth of the growth in this segments total revenues. The EZMONEY segment was almost double its outstanding auto title loans in the last two quarters ending December with the balance in excess of $5 million. This product continues to ramp and contributed $1 million more entities during this quarter than in the prior September quarter. We also expanded auto title loans to an additional 130 stores mid way through the quarter and now offer them in 393 EZMONEY stores.

Installment loans for the other new product and EZMONEY, we didn't add any additional stores this quarter with the outstanding balance did increase 41% over September's ending portfolio as the product continues to insure in 193 stores. Resulted of this product to embedded in the signature loan fee and signature loan bad debt lines on the earnings schedules.

Our core payday loan business also enjoyed healthy growth with the $1.3 million increasing fees. And our bad debt performance was again very good. As a percentage of fees inclusive of all three products, we ran 22% bad debt compared to 26% this quarter last year. Our EZMONEY team has done a consistently good job in managing their settlement.

Put it all together and EZMONEY has more than $5 million in incremental fee revenue and actually lower dollars of bad debt that we have a year ago. It's also no worry to point out that for the first time in ten years we had a significant calendar event. January 1st fell on a Friday. In the EZMONEY segment Fridays in 1st of any month are the largest volume days for both loans due as well loans made renew, because they are paydays. We chose to be closed on Friday, January 1, to allow our associates time away with friends and family. In the anticipation of this unique calendar event, we've focused other efforts on courtesy cost to our customers to facilitate their store visits on Thursday, December 31.

We estimate that this effort and this calendar shift had a net favorable impact of approximately $1.5 in net revenues which we're actually received in December of this year that would have normally as in last year we received in January having not been for the holiday timing. Keeping all that in mind with operating expenses up less than $300,000 our EZMONEY store operating income grew to $15.9 million an increase of more than 50% over last year. And our operating income margin was in excess of 50% up from 40% this quarter last year. So all in all, very strong quarter in EZMONEY with excellent management of bad debt and a robust contribution from new products.

We also opened six more Canadian CASHMAX payday loan stores in the quarter. This brings our total store count in Canada to eight with the oldest store at about 120 days. The initial results remain encouraging and we're quite confident with the upside potential in Canada as we continue with our expansion strategy. It’s an unreserved market with the newly enacted and favorable legislative environment.

Moving across the Atlantic to the United Kingdom the results are continued positive results from our strategic affiliate Albemarle and Bond. As a reminder, A&B is a public company in the UK and trades on London’s AIM Exchange. EZCORP is their largest shareholder with slightly less than 30% ownership and three of their nine Board seats. A&B is a jewelry-only pawnbroker that also offers check cashing and signature loans. During the quarter we recognized $1.3 in pretax contribution from our ownership participation in their earnings. This was a 36% increase from last year.

Having discussed the United States, Mexico, Canada and the United Kingdom now on to Australia. In early November we completed our purchase of new equity in Cash Converters, a public company that trades on both the Australian and London stock exchanges resulting in 30% ownership. Similar to our business Cash Converters is a supplier of financial products and a retailer of previously owned merchandise. They do this primarily as a franchiser and have over 500 owned or franchised locations world wide with significant concentrations in Australia, United Kingdom, Spain, France and South Africa.

Cash Converters plans to use our equity in fusion to continue to repurchase franchise stores and grow its installment loan business. Like A&B, we account for our portion of their earnings on a three month lag to enable us to access their published financial results consequently we have to wait until our second quarter to begin recognizing any income from Cash Converters. We view our relationship with Cash Converters as a strategic affiliate similar to our position with Albemarle and Bond.

Relationship with these strategic partners expand our reach and provides EZCORP many long term opportunities to satisfy a significant worldwide need for access to both cash and credit that’s not satisfied be a traditional banking for other sources of credit.

With that, I’ll now turn the call over to Brad for a deeper look at our consolidated results.

Brad Wolfe

Thanks, Joe. Now, I will give you a little more detail focusing on our consolidated results starting with the consolidated statement of operations for the quarter on Page 3.

Keep in mind that I’m reviewing our consolidated financials while Joe mainly covered our segment financial. Some of the segment metrics he discussed maybe different in similar metrics for our consolidated results.

Total revenues for the quarter increased 43.6.7% to $184.8 million. The acquisition of Value Pawn and Pawn Plus contributed approximately 40 million of incremental revenue. On a same store basis total revenue for the quarter are up approximately 12% overall, but our U.S. pawn operations up 11% and Empeno Facil up 16% both in U.S dollars and in constant currency and EZMONEY of 14%.

Merchandise sale increased 39.5% to 62.5 million offsetting the increase in sales was 2 percentage points decrease in margin from the prior year quarter. Result in a 32% increase in merchandise gross profit to 23.2 million. Same store merchandize sale grew up 1%. Scrap gross profit increased a 117% to approximately 14.1 million, higher gold values, net of higher cost and more volumes generated increase in scrap gross profit. Same quarter we swept about 2.5 million grams of gold jewelry compared to and prior to 1.6 million grams in the prior year quarter.

Compared with prior year quarter proceeds per gram were up approximately 23% to $14.83 while our cost program increased 15% to $9.21. Primarily due increases in gold prices and the price paid to purchase gold. Scrap proceeds included approximately 3000 in liquidated diamonds in the current quarter compared to 150,000 in the prior year quarter. We continue to forward contract our gold scraping and currently have approximately 70% of our estimated march quarter quantities blocked at $1100. In our guidance for the balance of the year we have assumed an average price of approximately $1000 per annum for unlocked quantity.

Pawn service charge revenue increased approximately 14.4 million or 55% to 40.8 million. This is up approximately 18% on a same store basis. Annualized yields on our pawn loan balance were 160% compared 141% for the prior year quarter. The increase was largely due to the addition of higher yield in pawn portfolio and the acquired value pawn stores in Florida.

Signature long contribution increased nearly 13% to 29.9 million this will result of 7% increase in same store loan fee revenue and a 7% increase in same store loan bad debt. Store loan bad debt expense measured as a percentage of same store loan fee revenues decreased to 23% from 26% for the previous year quarter. Same store loan bad debt measured as a percentage of loans originated in the quarter was 4.5% compared to 5.2% in the previous year quarter.

Loan originations for the quarter were up 4% to $184.6 as compared to the previous year quarter. Auto title loans contributed $2.6 million to net revenue, bad debt on auto title loans measured as a percent of auto title loan fee revenue was approximately 15%. Auto title loan bad debt measured as a percentage of loans originated in the quarter was 3%.

Operations expenses, administrative expenses and depreciation and amortization were higher than the prior year quarter, we had also a loss in the sales of asset versus a gain in the prior year quarter. But despite the increased expenses operating income increased $16.9 million to $38.9 million due to increased net revenue.

Value Pawn and Pawn Plus incrementally contributed about $9 million to operating income. Increases and operations expense and depreciation and amortization are primarily due to acquisitions and new store openings. High administrative expense is primarily due to our higher incentive compensation related to our strong performance and investments made in new people to support our growth increasing complexity in international business.

Despite the dollar increase and administrative expense, administrative expenses as a percentage of net revenues decreased two percentage points of 11%. The loss on the sales of assets from the quarter due primarily to the closing of five EZMONEY locations. Operating income margins as a percentage of net revenues improve six percentage points of 34%.

Equity interests in the income of Albemarle & Bond increased 36% to $1.3 million. As Joe already mentioned, we report Cash Converters contribution on a quarter lag basis as we do with Albemarle & Bond, the current quarter's earnings does not reflect the impact of this acquisition.

Despite higher net interest expense and a 35.5% tax provision net income increase 73% to $25.7 million or $0.52 per share. Joe already mentioned, the Value Pawn and Pawn Plus acquisitions contributed incrementally at approximately $5.8 to net income. The two acquisitions therefore considering the impact of additional shares issued were accretive to earnings by approximately $0.07 per share for the quarter.

Now a few comments on the balance sheet on page four of the earnings announcement. We have approximately $17 million of cash on our balance sheet and $32.5 million of debt of the cash balance of approximately $6.1 million is non-operating cash. Our pawn loan balance increased 10% from the prior year to $103.4 million. I think the loan balance grew 8% in the last 12 months to $8.9. Not including this balance were $24.8 of short-term loan and 700,000 installment loan brokered with unaffiliated lenders. These brokered loan balance is about 1% from the prior year.

Our auto title loan balance has grown to $2.1 million not included in this balance are $4.3 million of auto title loans brokered with unaffiliated lender. So the total auto title loan balance including these brokered loans would be $6.4 million. Net inventory is made up largely of forfeited collateral and was at December 31, $63.5 million. This net inventory is after an 8% or $5.8 million valuation allowance for aged absolutely broken or missing inventory.

As of December 31, the percentage of jewelry and general merchandise growth inventories that had been in our inventories for more than 12 months were 22 and 6%. The actual ending inventory per store on line 35 is inclusive of all stores. On a same store basis inventory levels per ending stores decrease to 153,000 at the end of December there's 157,000 a year ago. For the quarter we turned our inventory 3.7 times compared to 3.3 times in the prior year quarter.

Our strategic investments in Albemarle & Bond and Cash Converters are carried on our December balance sheet $90.5 million at December 31, Albemarle & Bond with carried on our balance sheet of $40.9 million. Different market value of our $16.6 million shares of approximately $72 million. At December 31, cash converted was carried on balance of $49.6 million a current market of $108.2 shares is approximately $67.

We end with the quarter with 440 pawn shop location including 70 Mexico location. 280 signature loan locations, including eight Canadian locations. 68 of our U.S. pawn locations and 393 of our U.S. signature loan locations offer auto title loan, so 193 of our U.S. signature loan locations are often (Inaudible) loans.

Now, let me turn the call back over to Joe.

Joe Rotunda

Thanks, Brad. Again all told, it was an excellent quarter for EZCORP. And given the performance in the first quarter and the strong loan balances at December end, we expect the reminder of the year to exceed our initial guidance of $1.65 to $1.69. We’re increasing our expected diluted earnings per share for the entire year to approximately $1.81. This represents an earnings per share improvement of approximately 27%. We expect the second quarter earnings per share to be approximately $0.43 versus the prior year of $0.37.

Keep in mind that we had about $0.02 move into quarter one from quarter two as a result of the calendar shift impact on the EZMONEY segment that I addressed earlier. On a comparable basis adjusting for that $0.02, we expect quarter two to produce improvement in earnings per share of approximately 22%.

That concludes our prepared remarks for today. Brad, if you will read the Safe Harbor, we’ll go on to questions.

Brad Wolfe

This conference call and earnings announcement contains certain forward-looking statements regarding EZCORP’s expected operating and financial performance for future periods. These statements are based on our current expectations. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors that are discussed in our press release and in our annual, quarterly and other reports filed with the Securities and Exchange Commission.

Now, We’ll open the conference call for questions, Kristine, you can open it up for questions now.

Question-and-Answer Session

Operator

(Operator Instructions). The first question comes from David Burtzlaff from Stephens, Inc. Please go ahead.

David Burtzlaff - Stephens, Inc

I have a couple of questions, first on the retail sales side, how much do you think the promotions involve in like the layaway. Do you have any idea of how much that helped and what was their margin on the layaway, the same is or do you have to discount on that?

Brad Wolfe

It’s hard to quantify the exact impact the layaway program had, but we know that the layaway adjustment that we had in this timeframe with the largest at least the numbers that we have that we could find has ever been recorded. So we got quite a benefit. Now some of that also benefits the other months between July and December as a customer would take up their layaway or redeem their layaways that impact as well. So not sure the exact amount, but I would say this with a very marginal same stores sales increased just over a percentage point, I would think that we could attribute the increase that we had in the quarter to that layaway program.

Now as far as the margin on the layaway sales versus the overall margin, the retail trading environment has been more difficult, during the last year and year and half now. And as a result of that we tend to discount more to close the sales in the (Inaudible). With our layaway program we had a 10% down and a 10% discount on the product and the 10% discount in the product is less that our average discount through this period of time. I would say probably the margin on the layaways was at a higher level.

David Burtzlaff - Stephens, Inc

Okay.

Brad Wolfe

Overall retail margin.

David Burtzlaff - Stephens, Inc

Okay. And then on the pawn loan balances, I mean do you think the strengthen from where you have been run in the last couple of quarters, is there any kind of read there, you said you’ve had issues generating a gold balances in jewelry?

Joe Rotunda

On the aged merchandize?

David Burtzlaff - Stephens, Inc

Well, no I’m talking about on the loan balance growth that you had this quarter seems to be a little stronger than it has been in previous quarter on a same store basis.

Joe Rotunda

It has been stronger and the biggest benefit that we received was virtually everything was on all eight cylinders. We had growth in the number of transactions comparable to year ago in both jewelry and general merchandise both them grew during this period. In addition to that the average loan size grew in not just the jewelry category, but the general merchandise category as well. And we would have expected it in jewelry because I think over the last year we have raised our loan values on jewelry four times as the gold markets improved over that period, so we would expect the higher average dollar amount for loan which we didn’t get, that wasn’t just as a result of that. It was also in the general merchandise category as well and coupled with all of that, our redemption rate actually improved during this period of time was very strong.

David Burtzlaff - Stephens, Inc

Okay.

Joe Rotunda

And I think what’s happening to the customer has just responded and isn’t just in the pawn offering, because if you look at our payday loan balances as well, our same store growth, if you include the products a substantially higher in the payday loan segment to signature loan segment, and it was actually in pawn.

David Burtzlaff - Stephens, Inc

And then finally I mean, it’s immaterial now, there is some sales in the EZMONEY operations, is that gold buying?

Brad Wolfe

Yes, we have a small test underway in just three stores in the company and we haven’t moved beyond those three stores yet. We are still looking at how we can increase the scale per store and we want to minimize any type of interference between buying gold in these store and the loan offerings that we have there that are first priority with the customer.

Operator

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

Bill Armstrong - CL King & Associates

Bad debt expense ratio was down pretty substantially how are we able to reduce that?

Joe Rotunda

We have had a pretty consistent rate improvement in bad debt about a year and half, two years and your several factors probably most important factor is on the, it’s the under which we haven’t which we haven’t really speak too much recently. And it’s talking to the customer actually between the due rate, the relationship with established curtsy call with the customers setting appointments waiting to come in on the due date and working with them to be able do that is probably the single digit factor on the front end. But then if the customer defaults we have a central collections we have made considerable investment technology and the group from a predictive dollar to lot of software enhancements that allow us to the information that makes much easier for us to work with customer and also to understand our collectors, our associates those are most predictive and so forth and then couple rewards in incentive programs with those who are able to do the best job. And we have also invested in professional collections management. We have got a really strong leadership team in our collection groups that have made a significant impact over the last several years.

Bill Armstrong - CL King & Associates

Collections have improved and also --?

Joe Rotunda

They have, if you look at this past year, we recall about 25% of fees bad debt as a percent of fees which is within the fraction the best performance we had in our history. This is year is trending better thus far.

Bill Armstrong - CL King & Associates

On turning to pawn operations, retail merchandise gross margin was down, I’m thinking just a little bit is that really just because you had some marked stuff down because retail conditions were slower was there anything? Is there a mix issue, anything else going on there?

Joe Rotunda

It primarily builds a tight trading market that we are in today. To say this, as we look forward and we reflect on where we have been over this last year, fairly comfortable that we cycled this negative impact on our margins as we come into quarter two, quarter three, I’m not saying they are going to improve, but I think that we are going to see that your relations basically flatten out and go away.

Bill Armstrong - CL King & Associates

Okay. And then finally, build scrap margins were up is that pretty much does the result of rising gold prices?

Joe Rotunda

I think it’s our loan values and our locks and if you look at the margin that we have which our cost versus what we're able to sell basically compliment of our cost versus what we are able to sell it as long as we have a rise market we tend to have a very favorable margin performance by that.

Brad Wolfe

Bill I should point out also on this scrap. One other thing that we have done as we had a lot of attention on actually buying gold in stores and we’ve been tracking our purchases as a percentage of loans made and extended and we look at our performance this year with actually buying gold from the customer in our pawn shops, our rate of purchased from our pawn shops our rated purchases versus the loans made that were up substantially has increased about 50% to where it was a year ago. So I should point out the compliment our pawn operators for the job that they've done on that and been able to get the goal for us. And typically when they buy at out rated, at a little lower cost than the cost that we record (Inaudible) collateral.

Operator

The next question comes from Liz Pierce from Roth Capital Partners. Please go ahead.

Liz Pierce - Roth Capital Partners

Would you mind just repeating what you just said on the rate of purchase setting, quite get that?

Joe Rotunda

Let me trap it, when a customer comes into the store with piece of merchandise and they are looking to convert it to cash. Most of the time it is our risk to take out a pawn loan and from the redemption rate we have pretty good job of coming back and redeeming it. Many customers however come in and/or interested in selling the product. We’d much rather buy the product from the customer and loan on it. And if we buy, we have to hold it a couple weeks and then we can monitize it, we can sell it our scrap it, whatever we like, however, if is it a loan we have to hold it for two or three months before we can do anything with that.

So we track our purchases as a present of loans made redeemed actually do it by store in total if you look at the percentage of loan made and redeemed and gold purchases relative to loans made redeeming gold. Our rate of buying the merchandise from the customer is increasing about half again to what it was a year ago. So that if the year ago we were buying our purchase in gold, 8% of the loans we are making this year they are running about 12% and those are fairly directional numbers.

Liz Pierce - Roth Capital Partners

Okay. I kind of missed part of what you said, all right, but that’s fine thanks. I wanted to talk a little bit about Mexico and just try to figure out is this really can’t of a new store drag that you are saying on the expensive given how many of these stores are so new and then maybe you could also share with us a little bit on the gold online stores and what you are saying and then if you have any sense on how we should think about the store rollouts from both Canada and for Mexico by quarter. Thanks.

Joe Rotunda

Okay. Let me see…

Liz Pierce - Roth Capital Partners

Well, talk about Mexico and new store drag may be first.

Joe Rotunda

I’ll start with the new store drive first. At the beginning of the year I pointed out that we expected in Mexico to have drag somewhere in the neighborhood I have made $9.5 million to $1.6 million for the year with that drag we still expected to improve our operating income marginally in the Mexico. Our new store in Mexico will drag and won’t crossover the profitability until about its third quarter of operations some where around month nine or so.

So when you look at the new stores we have today and 23 of them being opened in the last six months. You would expect all 23 of those stores to be creating some level of drag and that’s 23 of a total 70 stores in Mexico and we have the other ones that were opened in the prior quarter so, but provably still not contributing at all at this point. So the drag that we have here is something would be expected.

Now if you look at the ORO store, we talked that you asked about the new concept, the ramp up is right on slightly better than our proforma we are very pleased with it. A good thing about that concepts one of the benefit of it is we’re able to get real estate much easier then with a full line store in Mexico, because it is much easier to find out three or four hundred square foot facility in a very good location than it is four or five thousand square feet’s, we are able to move quicker. It also has a lower initial capital investment and start up loses as well. And it ramps up fairly quickly.

Liz Pierce - Roth Capital Partners

It shouldn’t take nine months I would think then to ramp.

Joe Rotunda

It takes, it does. It’s in that neighborhood of somewhere around month six to nine.

Liz Pierce - Roth Capital Partners

Okay.

Joe Rotunda

With a service some were better and some are quite as good. But it’s in that same neighborhood …

Liz Pierce - Roth Capital Partners

Okay. And what’s the main … ?

Joe Rotunda

That’s volume ramp up that’s associated with it; It is operating expenses, we still have as well.

Liz Pierce - Roth Capital Partners

I’m sorry, about the volume ramp?

Joe Rotunda

Yeah, it’s not as fast because it’s a much more unlimited assortment, it’s only the jewelry.

Liz Pierce - Roth Capital Partners

Right. What is the mix right now of those? How many ORO stores are there?

Joe Rotunda

We’ve been totaled right around a dozen of them. And if you look at the 23 we opened in the last six months, half of them were ORO, so about half, the once opened in the last six month were the concept.

Liz Pierce - Roth Capital Partners

Okay.

Joe Rotunda

And we said in the New Year that we expected to have about 60%…

Liz Pierce - Roth Capital Partners

Right.

Joe Rotunda

-- were in the stores in Mexico as the ORO stores.

Liz Pierce - Roth Capital Partners

Okay.

Joe Rotunda

As far as store openings as we move through the year three, the next three quarters, we expect to have about the same number through this three quarters depending on how leases close and end up with a couple extra or couple more in the last quarter of the year than the prior quarters, but our [plan] right now is pretty leveled.

Liz Pierce - Roth Capital Partners

Because I think, did you change the number from 35 to 45 versus is that lower than we had originally thought?

Joe Rotunda

I think the initial guidance of was 35 to 45 for the year.

Liz Pierce - Roth Capital Partners

Right, that’s CASHMAX, so 40 to 50 you had always been there 40 to 50 for the Mexico, right?

Joe Rotunda

Yes.

Liz Pierce - Roth Capital Partners

That hasn’t changed, okay. So, it’s going to be a little back-end loaded then?

Joe Rotunda

Not a lot, one or two stores, they’ll be pretty flat through the three quarters. Canada will be a little more backend loaded than Mexico.

Liz Pierce - Roth Capital Partners

Okay.

Joe Rotunda

But again, not a long.

Liz Pierce - Roth Capital Partners

Okay. And you’re finding in Canada that there is plenty of real estate opportunities as I would presume more where you are going in and looking at just opportunities on an acquisition basis or de novo?

Joe Rotunda

De novo, the metrics are just so strong on a Greenfield store, cant price (Inaudible) in terms to price out the kind of return you get to do an acquisition. Now something make good economic sense. We would be interested in it if we could make good economic sense for both (Inaudible) and for us.

Liz Pierce - Roth Capital Partners

Okay. And then big picture on kind of on a global, from company wide, how should we be thinking about operations expanse, I mean I think you said that for the rest of year. I mean when do you start of see some little bit more leverage on that?

Joe Rotunda

We’ve had some fairly significant leverage thus far. I think is we what you’ve seen that different is that we’ve had the acquisitions that have [encamped] so you are seeing the incremental expense associated with those over last year when you are looking at the consolidated numbers. But I think you’ll find as we go forward, we’ll continue to have the same type of leverage on a same store basis that I described earlier. As I recall in EZMONEY for instance, we had minimal increase in operating expenses that was about $300,000.

Liz Pierce - Roth Capital Partners

Right, right.

Joe Rotunda

More than five (Inaudible) is in incremental revenues. And much of the incremental expense we are having there as well as in our pawn business relates to the bonus incentive compensation type programs that we have within our store organization.

Liz Pierce - Roth Capital Partners

Okay. So it would be just acquisitions and then bonus, I mean, can you give us sense on which is more?

Joe Rotunda

I am not sure what is you mean this.

Liz Pierce - Roth Capital Partners

I mean, operation on the expense. I mean, is it more fun coming from the acquisitions, you know not being or is it more from that stock compensation (Inaudible)?

Joe Rotunda

In the first quarter if you looking at pawn, the vast majority of the expense increase as a result of having about 76 or 77 incremental stores.

Liz Pierce - Roth Capital Partners

Right.

Joe Rotunda

This year, it wasn’t in last year.

Liz Pierce - Roth Capital Partners

Okay, I got it. May be talk a little bit about offline, I may not be asking it correctly.

Operator

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

John Rowan - Sidoti & Company

Joe, do you think that loan demand was more from existing customers or do think you got a lot more new customers?

Joe Rotunda

It’s probably an influx of additional customers that we’re seeing now, that possibly see the value in the product offerings that we have, if you look the auto title business and see that volume that was generated there, the vast majority of that business, our new customers who haven’t been in our store before and that’s not just in the EZMONEY business it’s also in our pawnshops we have just a little over 60 pawnshops that also offer the auto title loan. In both segments those customer are new to our stores. It’s more difficult to tell that in the pawn and payday loan segments as it relates to those base products. But I think we have seen with the increase in transactions at least a good number of new customers coming into our stores. Due to our portfolio growth, I think will certainly indicate that our portfolios growth.

John Rowan - Sidoti & Company

Okay. The reason I ask is because you obviously stated that the rate of transactions that are purchases versus loan transactions at least in the pawn side is moving up. I want to try to understand if you risk cannibalizing your own customers future ability to take out a loan because you are just buying the item off of them and selling it, or if you have new customers then you can just buy something off of turn around and sell it, and then not really worry about them in the future because when the economy turns around and they are not going to be a customer anymore, I mean can you maybe discuss that a little bit?

Joe Rotunda

If you look at the same store growth in pawn and payday lending, that I think John reflects significant amount new customers or customers coming to us with their products, you look at the redemption rate in pawn with the customers all those customers are redeeming their merchandise at a higher level that would allow them to come back in the future pledge it again and take up loans in the future.

So the strong double-digit pawn growth that you had is certainly sustainable would indicate that it’s sustainable, because the customer continues to redeem the merchandise at a higher level you made it before. The purchases that were making (Inaudible) what would have been in many cases forfeitures before, so were able then to take care of that customer immediately and the scale itself has grown so significantly. I think that much of that has to be from new customers coming in. So is it sustainable right as we look at the growth of our portfolios and the fact that they continue to grow and we think certainly it is. With the payday loan, auto title loan and installment loans as well, you look at the growth that we’ve had over last year and it’s almost 20% growth in portfolio and the redemption rate of the customer is at higher level then it has been in the past as well. So it just seems that the customers coming in and satisfying our obligations, satisfying your need for cash I would think become part of our consumer base as we go forward.

John Rowan - Sidoti & Company

Okay. And as we go into the March quarter, obviously a typical cash inflow season for you guys, you are still running a fairly low debt level, you are obviously haven’t announced any type of acquisition, what’s going to be use of cash here and when do you guys consider a dividend or buying back stock in lieu of continuing to make acquisitions?

Joe Rotunda

Obviously our history shows that we haven’t done it. But we consider it frequently, we talk about it frequently, but our first focus is on investing in earning assets and having the liquidity to be able to take advantage of opportunistic deals when they become available. We focused on growing the portfolios, we continue to do that the cash converter acquisition we were in a position, we are able to do that for cash do if very quickly get it done. You heard the appreciation we have already had in our ownership with Cash Converters and we haven’t been able to record any portion of their income yet in our income statement. We will continue to focus on that, we will continue also to consider and talk about these other uses of cash that you are bringing up.

John Rowan - Sidoti & Company

Okay, and hedging, are you still hedging?

Joe Rotunda

We are locking, we locked our gold forward about three months and we continue to do that we’re locked through the month of March and I think Brad talked about a lock at $1100 an ounce and about 70% of our expected volume.

John Rowan - Sidoti & Company

Okay and just one last question. You may have said it earlier, I apologize, but what is the gold price assumption in the guidance?

Joe Rotunda

It’s $1100 for 70% of the proceeds in the March quarter everything else is at a $1000 an ounce.

Operator

Your next question comes from Isabel Sterk from C.K. Cooper & Company. Please go ahead.

Isabel Sterk - C.K. Cooper & Company

First question, could you get an update on the Florida and Vegas operations those are pretty big negative impact last quarter and I want to see if you are seeing any improvements in these markets now.

Joe Rotunda

Yes we seen improvement in the metrics of the business including the operative income from those markets they are still not growing at the same rate of our other markets and I think that the whole macro economic environment it just those two markets much more dramatic the many place else we operate in United States, but the good news is we are building portfolio and we are improvements in the metrics and both of this market places.

Isabel Sterk from C.K. Cooper & Company

Okay, so wasn’t it negative the last quarter then, okay. The other thing too is without the incremental benefit from acquisitions going forward where do you expect the upside operating income will come from because I think you mentioned last quarter too that you still expect some upside from the acquired stores.

Joe Rotunda

Well, I point out in the March ending quarter when we did the acquisition of Value Pawn which is a very large acquisition in very short period of time we completely change the store operating system and number of other process that they had in place and most dramatic was being able to do the loan in our stores and getting used in this system that completely different and how they do every portion of the transaction if disruptive business for period of time I think this quarter this March we are in now provide us an opportunity to improve (Inaudible) the transition that they went through that period even beyond that if you look at our entire business when we look at were our portfolios are compared to a year ago.

I think that you’ll there is a substantial opportunity for improvement organically and just because of the magnitude of increase in the loan portfolios in our pawn business as well as our EZMONEY, payday loan, auto title loan businesses. Double digit and all of those and as long as we are able to continue to show good quality with redemption rate in pawn and the level of bad debt and the EZMONEY segment you will see substantial increases I think in our net revenue strength and with relatively fixed expenses that you seen and our pawn operation same store and EZMONEY merged with same store now we are able to generate substantial improvements and operating income.

So I think you will see that now as we continue to go forward that’s embedded in our forecast. And as the example I used with pawn in the quarter with a significant increase at the net revenue line how much more dramatic in excess of 20% and 13%, 21% at the operating income line because we are able to maintain relatively fixed expenses.

Isabel Sterk from C.K. Cooper & Company

Last question and this may be a follow-up question. In the EZMONEY stores are you seeing an increase in loan in addition to the new loans?

Joe Rotunda

I don’t think there has been anything significant each quarter we follow either (Inaudible). You see we disclose our fees from new loans and then fees from extended renewed loans. As I recall this last quarter we actually saw, I believe compared to a year ago, a slight decrease in the renewal rate compared to new loans. And it’s less than three times by the way, I think just about two times. We basically have two extensions for each renewal, I think it went down fractionally this last quarter compared to year ago.

Operator

The next question comes from Ted Hillenmeyer from Northstar Partners. Please go ahead.

Ted Hillenmeyer - Northstar Partners

The balance sheet is that reflect on the acquisitions there any other payment be made in your announce for Cash Converters and our acquisitions from before?

Joe Rotunda

It’s a fully reflective of all the activity we had there are no further commitments that I can think of and no earn outs (inaudible).

Ted Hillenmeyer - Northstar Partners

Okay. I think I missed it, what was the same store sales growth for payday?

Joe Rotunda

It was $5 million on a (Inaudible) 14% on total revenue on EZMONEY. Get a new product is 14%, right with new product.

Ted Hillenmeyer - Northstar Partners

New products being auto title and is that included in there?

Joe Rotunda

(Inaudible)

Ted Hillenmeyer - Northstar Partners

Okay. So when I see signature loans up 7% to get me to 14% it’s because of the dues from the new product?

Joe Rotunda

That’s correct, although that has stronger loans in it not auto title

Ted Hillenmeyer - Northstar Partners

Okay, and of the 7% do you know what portion of that came from opening the stores opening in Canada?

Joe Rotunda

It would be minimal. We opened two store it was in the third week of September and then in the first we opened another six stores there are very low and we didn’t close a couple store also in the EZMONEY sector in that same timeframe, so I don’t think there is any favorable impact from that.

Ted Hillenmeyer - Northstar Partners

It’s nice to see growth back in payday, do you attribute that to just greater demand or competitors closing shop?

Joe Rotunda

We have had it fairly consistently across the systems and the unemployment hasn’t changed I mean the numbers there are still (Inaudible) I’m not sure there is going to be any real change in the near term. But we look at our business through this entire period in payday lending, we managed I think just of our every quarter, if not every quarter through the last six or eight quarter they have same store increase over last year in our payday segment. So we have been fortunate or we – we have some very loyal customers

Ted Hillenmeyer - Northstar Partners

I think you had newer stores there for a period, but you didn’t open that many stores and that’s continued here so …

Joe Rotunda

That’s right, two years now, two and half.

Ted Hillenmeyer - Northstar Partners

Just a check on the gold assumptions you said, 70% of its hedged just for this coming quarter correct? Or is it not for the --

Joe Rotunda

We don’t technically hedge, it’s a forward lock.

Ted Hillenmeyer - Northstar Partners

Right, but just for the quarters, it’s not for the year?

Joe Rotunda

Correct, correct

Ted Hillenmeyer - Northstar Partners

Okay. Do you have an updated estimate of what percentage of revenue or EBIT, EBITDA, operating income would come from pawn versus payday?

Joe Rotunda

If you look at this quarter on the schedule that we put out with the segments, you give a percentage of payday EZMONEY operation and store operated income that the total consolidated store operating income overall 29% payday if you look at year ago directly below it that schedule is 30% so it’s down one percentage point to a year ago.

Ted Hillenmeyer - Northstar Partners

Will it not be higher though, was this past quarter not the bigger pawn quarter. And the coming quarter is bigger payday quarter?

Joe Rotunda

This payday quarter actually our balances fall as the customer has an influx of cash with their tax refunds, there are strong cash flow, but remember we moved out of this quarter end of the first quarter with the calendar shift some of our activities got a $1.5 in net fees but I don’t think that you will see a higher portion there. That quarter have really strong sale, very strong sale I believe in our pawn operation, again as a result with the tax refund, may not be strong increases to a year ago, but proportionally it’s just a magnitude, it’s very significant.

Ted Hillenmeyer - Northstar Partners

Okay. Can you just provide a regulatory update, I don’t remember where Wisconsin is and one of you have any comments nationally?

Joe Rotunda

Very hard to predict any kind of activity from regulatory perspective, but if you look at there are few states that will be the legislatures will be reconvening soon and where there has been activity in the past and we have been fortunate thus far with three states that I think there’ll be some activity risk and activity carry over in the past. Colorado has been quite, it’s quite this past year and if you recall few years ago we had a lot of activity but it’s all subsided.

Majority has several bills that I think have been introduced just kind of assume or one of the bills was to prohibit soliciting payday loans at nursing homes, and I’m not sure where they are going to go, but there doesn’t seem to be a lot of momentum with those in Missouri but you never know. And then Wisconsin is where there has been some activity there was even a 36% ATR bill that was introduced but there has been a number of bills there that are now in the study group a committee that’s looking at them and will be coming back I am sure with some recommendations but nothing has happened there at this point and time.

That’s the activity in the states that we are in on a national level I think everyone has been watching what’s going on and it is hard to predict, house pass the CFPA I think everybody is aware of that lot of concern of what would happen for that once it reach the Senate. The tenure hasn’t moved at all there and centered at (Inaudible) is talking about potentially stepping down or running for reelection there is lot of talk about different things going on with that bill in the Senate there always other noise nationally with the election in Massachusetts, healthcare bills lot of attention to pick banks, so don’t know where all that’s going, but it seems at least right now the CFPA has basically been stopped at least this point and certainly moving forward, certainly as high as it was before.

Operator

The next question comes from Chuck Raff from Insight Investments. Please go ahead.

Chuck Raff - Insight Investments

Sorry if I missed this, did you talk about how many stores you have planned to add in Canada?

Joe Rotunda

Yes, it’s up to 45 is there.

Chuck Raff - Insight Investments

I am sorry, 45?

Joe Rotunda

45, yes, sir.

Chuck Raff - Insight Investments

How should we be thinking about the equity of line for this year, can you give us feel for where you expect that to be now with Cash Converters?

Joe Rotunda

You mean our bank syndication?

Chuck Raff - Insight Investments

In your earnings estimate of $1.81, can you tell us approximately how much the equity line is going to be? The equity income line?

Joe Rotunda

The income from A&B and Cash Converters?

Chuck Raff - Insight Investments

Yes.

Joe Rotunda

Combined, we won’t be able to really forecast well, Albemarle and Bond until they do a public announcement of their half yearly results, which they should be doing this quarter, late February early March.

Chuck Raff - Insight Investments

You must have assumed something for the two together to come up with you $1.81, I am just trying to get at what you estimated the number to be for the year?

Joe Rotunda

Here about 10% year-on-year growth in our estimates, correct so we get the actual results and then we just on about a quarter lag.

Chuck Raff - Insight Investments

Okay, so the 10% for Albemarle and plus Cash Converters all right?

Joe Rotunda

Cash Converters would be new and we basically looked at what they did before at their performance year ago and the only 30% of maybe, I don’t have the number in mind its probably between $0.05 and $0.06 share at that’s for it’s 30% of their earnings with last were about just over $16 million Australian we convert that U.S. dollars tax effected about an additional 10% or so use the capital and then your earnings per share may interrupt that range I think.

Chuck Raff - Insight Investments

Okay one another little surprise and there is a tax rate for quarter should we expect that to stay here for the year?

Joe Rotunda

Yes, 35.50%.

Chuck Raff - Insight Investments

Okay and the previous caller was talking about pawn payday loans (inaudible) and understand that 71.29% on a store operating income for the past quarter and do you expect that to stay there for the year or should we expect that to move much if we look at the fiscal year how should we be thinking about that split.

Joe Rotunda

Most of that’s going to depend on the auto title loan ran it still very new its in a 393 or so of our payday loan stores within over 60 of our pawn shops. The product is only a couple of quarters all and you can see the results and they’ve been very strong. (inaudible) payday loans products the accelerative growth is that which we expect as it continue to ramp will help payday lending significantly. But in addition we are growing (inaudible) very strongly because (inaudible) a double-digit portfolio growth over a year ago. So and this past quarter benefited significantly from the shift a quarter 2 quarter 1 its right. I don’t have the metrics worked out the balance of the year split between the two I think you are going to see pawn growth total as we look forward even with the payday loan volumes improving.

Operator

The next question comes from Alan Borchstein from AB Analytical Services. Please go ahead.

Alan Borchstein - AB Analytical Services

I’ve been listening your call I think this is the fixed streamline and this is (inaudible) this was the best effort yet so the things are going well. I have just a few questions for you first of all I just wonder if there is any sort of change in the seasonality given were we are in the economy and if may be there is a more benefit to the fourth quarter leading out the shift you talked about and you talk that through a past with the stimulus (inaudible) of things like that there can be (inaudible) charges to your historical patterns is there any reason to think that the struggles with access to credit and the demand for loan cost retail (inaudible) your first quarter (inaudible) normal.

Joe Rotunda

(inaudible) any thing that you need to this quarter that probably has been therefore a number of quarters that (inaudible) now.

Alan Borchstein - AB Analytical Services

Well, Christmas as you know big spending time I guess?

Joe Rotunda

All that the seasonality year-on-year there is nothing unique in this quarter. That I think what I have change that we look the last year past year we would looking at prior year that has stimulus checks in the number of (inaudible) that were unique this year there is nothing I can think more (inaudible) anything a year ago.

Alan Borchstein - AB Analytical Services

Okay and the second thing I want to ask was you guys are obviously do a lot of things some of the unique some of them are I'm just wondering what’s your view of competitive landscape outside (inaudible) implementing in terms of do you expect the competitors to copy you or they copy in terms of I you know I know everybody next (inaudible) in terms of senator the auto title loans some of the new things that you are doing just wondering your view on that.

Joe Rotunda

I think everyone in the industry has a number of common element that they pursue but the other one that they find much more attractive with their – business models and (inaudible) if you look at one of our peers they are they were the first in the Mexico they’ve done a wonderful job with expanding in Mexico and that’s been their focus- look at another able way from the store front idea long business really gone into the internet or to satisfy their consumers new per cash, we haven’t elected to do that. I think all of us look at one in another and try to figure with working the best and what we can adapt and I think every one in our industrial upon any industry was still with product anything that they find it working some where else.

Alan Borchstein - AB Analytical Services

This specifically auto title in Canada or two probably traded peers – as markets?

Joe Rotunda

I believe one on the internet by – is that the other one is. But although modern line product with the lenders, but I’m sure looking to enter in Canada facts on (Inaudible) there well.

Alan Borchstein - AB Analytical Services

My last question is I know you guys have been building your management team over the last few years , with our cost – couple additions recently given the increase scale I can say breadth of your business are you comfortable with where you are, so we expect to see more hiring in kind of talk about where you are in the management team process?

Joe Rotunda

If you look over the last two years we have made some substantial addition to our executive team in functional areas and in operation. We just have – not quite a year ago present in the pawn Americas we yet the position of president of payday lending for period of time, we just added a chief operating officer at new position in the company brought in the very experiencing your executive, will the chief executive had a company that did about each $100 millions a year I bring with their volume. We have taken our functional areas, we have got expertise, people in charge of this function came from bigger companies they joined us, because they see the opportunity to be part of our group, part of our business as the huge appetite to grow just United States or – and will continue to upgrade us, as we need to – our business is almost more complex in the year (Inaudible).

Operator

The next question comes from Gary from Hubert Capital. Please go ahead.

Gary – Hubert Capital

Can you first quantify with the start up cost or any other losses on the Canadian payday operation and whether they’re in the payday segment or is there administrate of expenses of lined

Joe Rotunda

All they dragged from the Canadian operations is embedded in the number of – on the schedule for EZMONEY we anticipate this year, that we will have about and then able to main two or main three in – from that operations this year he cost of getting the store opened in Canada is some where in the $50 to $60,000 metrics for a store CapEx to get it open they turn profitable sometime between March 9 and 12, return on invest the capital in that model somewhere in the mid thirties and third year

Gary – Hubert Capital

Okay but do you know – what it actually cost to you in the quarters in terms of P&L impact?

Joe Rotunda

This quarter…

Gary – Hubert Capital

$400,000 is this the few 100,000

Joe Rotunda

Due to 300,000 somewhere in that range that is the cost of new organization from work again people try and get the stores open (Inaudible).

Gary – Hubert Capital

In terms of auto title business I mean seems like this is a very profitable product for you guys and its very leverage able on your visiting footprint I’m wondering if you have it all quantified, what sort of targets you might have for this business I mean based on where we are today the – loans were about 6% of the total fees at EZMONEY need to this business generate a quarter of the season at EZMONEY with in two to three years?

Joe Rotunda

Much like quantified that grand number of course in the (inaudible) much of defense on what happen with the business line as well as any other new products could introduce go forward, of the stores that we have operating auto title loans today and the issue money segment we are doing on average about two or three or four in that range of auto title loans first two per week. Now some of those towards well has been going (inaudible) five or six months in that time frame. It is still early on, we haven’t fully understood or appreciated but the true upside is we are very happy with joining as far and we take have significant potential and we are looking forward to continue advance ramp up with their products. But I could the specific I think you are asking at this point.

Gary – Hubert Capital

May be just like a try the society different way of the stores that you put the product in first can you give us sense of what percentage of the fees of those stores are coming from auto title is suppose to payday for once that are the most mature that this product?

Joe Rotunda

I am not at this point I would not be comfortable variety that information.

Gary – Hubert Capital

Okay, two other things in terms of cash converters you would mention I guess earlier on the because of the reline in terms of reporting their income on your P&L that you didn’t reporting coming in the quarter but do you record essentially your cost carrier against that in other word you have paid 49 million whatever interest expense you have against that runs with the P&L in the quarter?

Joe Rotunda

Yes, that’s enter to the P&L.

Gary – Hubert Capital

Okay, so that sort of (inaudible) at this quarter and that and next quarter obviously you have four quarters for income from cash converters is that right?

Joe Rotunda

Actually be two months because I think we closed on November step I believe and so three months liable we only pickup two months November 5th and number 31st.

Gary – Hubert Capital

Okay, and then just my last question, it zero way that you can sort of quantify the benefit as you got this quarter from the price of gold, obviously it this meaningful period is there some way that you can quantify that from me?

Joe Rotunda

It will be extremely difficult to do that, because effect so many elements for investments and we do loan because of the higher loan value because of the adjustments we made based on the market value. The loan more some generate on service charges as we shown that. The sales that we have typically have a higher retail price because the higher cost of the goods in the merchandise profits with the market going up you have look at our (inaudible) any some items, its very difficult to do. It’s significant.

Gary – Hubert Capital

Is that the main when you look the number such reported this quarter what is your obviously great earnings numbers and you giving guidance, for the second quarter, which are do not as great. The difference between the percentage change in your EPS and just reported the first quarter versus which respecting to report. In the second quarter the slower rate of growth in the second quarter would you say that the majority of that difference is because of the price of gold and the fact that there is no, assumption for an increasing price in your guidance or just something else?

Joe Rotunda

If you really (inaudible) in our earnings quarter we just finished take at the acquisitions, you adjust for was a $0.02 adverse impact on earnings this quarterly year ago with the kind of concentration payment (inaudible) auction program and few everything on a same store earnings where in mid 20s as far as earnings improvement on a same store basis as you look at quarter one. When you look at the balance for the year we are pretty much and that the same ballpark as well note mid 20.

Gary – Hubert Capital

Okay.

Joe Rotunda

With over year ago. So, its..

Gary – Hubert Capital

Got it, okay. Its $0.07 accretion as you got in the first quarter year-over-year that’s you want get in the second quarter, just from the annualizing?

Joe Rotunda

The $0.02 from a year ago on the base, yes.

Operator

Gentlemen, at this time there are no additional questions. Please go ahead with any concluding comments.

Joe Rotunda

Okay. Thank you all for your time in attention today, we really appreciate it. Excited about the strong start in the New Year. We are looking forward to continue in the momentum, as we go through this year and talk to again next quarter. Thank you.

Operator

Thank you for participating in the EZCORP fiscal year 2010 first quarter earnings release conference call. This concludes the conference for today. You may now disconnect at this time.

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