Reality Check: Professor Falsely Claims Payday Lending Is Not Wildly Profitable

February 2, 2016

RHETORIC: Professor Falsely Claims Payday Lending Is Not Wildly Profitable

Op-Ed by Steve Bradley, Associate Professor of Management and Entrepreneurship at Baylor University: “Critics Often Contend That Payday Lending Is Wildly Profitable, but It’s Not.”

Steve Bradley, an Associate Professor of Management and Entrepreneurship at Baylor University wrote in an op-ed, “Critics often contend payday lending is wildly profitable, but it’s not; the average profit margin of payday lenders is similar to that for other businesses.” [Waco Tribune: “Steve Bradley, Guest Columnist: Loosening Restrictions On Traditional Banks Is Sure Start To Reforming Payday Lending Practices”, 2/2/16]

REALITY: Payday Lenders Recently Reported Raking in Massive Profits, and Rewarding Shareholders with Huge Dividends and Share Repurchases

First Cash Financial Reported That They Made $132 Million in FY2015.

“Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain non-recurring charges) for fiscal 2015 totaled $132.2 million, which equaled the prior year adjusted EBITDA on a constant currency basis. Net income was $60.7 million for fiscal 2015. A reconciliation of adjusted EBITDA to net income is provided elsewhere in this release.” [First Cash Financial Press Release, 1/28/16]

• First Cash Financial Initiated a 50 Cent Per Share Dividend. “The Board of Directors has approved the initiation of a cash dividend payment at an annual rate of $0.50 per share to be paid out quarterly.” [First Cash Financial Press Release, 1/28/16]

Cash America Reported That They Made Over $113 Million in FY2015.

Cash America reported that their adjusted EBITDA for 2015 was $113,392,000. [Cash America Press Release, 1/28/16]

• Cash America Has Repurchased Over 4 Million Shares at an Average Price of $25.87 As of the End of 2015. “On October 29, 2015, the Company announced that its Board of Directors approved a three million share repurchase authorization to commence at the conclusion of an existing four million share repurchase authorization that was approved in January 2015. The Company began repurchasing shares in the open market under the October 2015 repurchase authorization in December 2015. Under these share repurchase authorizations, the Company repurchased 757,700 shares during the fourth quarter of 2015. These repurchased shares represented approximately 2.8% of the diluted shares as of the end of the third quarter of 2015. Through the year ended December31, 2015, the Company repurchased 4,015,866 shares at an average price of $25.87 per share under the repurchase authorizations representing approximately 13.7% of the diluted shares as of December 31, 2014. The Company ended the fourth quarter with $23.2 million in cash and $252.9 million available under its $280 million line of credit.” [Cash America Press Release, 1/28/16]

• Cash America Increased Their Dividend by 60%. “In a separate release today, the Company announced that its Board of Directors, at a regularly scheduled quarterly meeting, increased the Company’s cash dividend amount to $0.08 (8 cents) per share on common stock outstanding. The newly declared dividend represents a 60% increase in the Company’s previous quarterly dividend of $0.05 (5 cents) per share. The dividend will be paid at the close of business on February 24, 2016, to shareholders of record on February 10, 2016.” [Cash America Press Release, 1/28/16]

World Acceptance Corporation Reported Making Over $91 Million from April 1, 2015 to December 31, 2015.

World Acceptance Corporation reported income before taxes of $91,632,000 for the nine months ended December 31st, 2015. [World Acceptance Corporation Press Release, 1/28/16]

• World Acceptance Corporation Repurchased 1.4 Million Shares in 2015. “The Company did not repurchase any shares in the third quarter of fiscal 2016. However, the Company benefited from the 1.4 million shares repurchased during fiscal 2015. The prior year repurchases resulted in a reduction in the Company’s weighted average diluted shares outstanding of 7.5% when comparing the two nine month periods. Excluding unvested restricted shares, there were 8.7 million shares outstanding as of December 31, 2015.” [World Acceptance Corporation Press Release, 1/28/16]