Shares of Cash Store Financial Services (CSFS) Fall on Q1 Guidance and Comments on Short Seller Allegations

The Cash Store Financial Services Inc. (NYSE: CSFS) provides the following preliminary guidance on estimated financial results for the three months ended December 31, 2011. Our financial results for the three months ended December 31, 2011, have not yet been finalized and are subject to change. Further, the Company's auditors have not reviewed the estimated financial results included in the press release.

All figures are expressed in Canadian dollars. The Company added 11 new branches, all in the United Kingdom, during the quarter ended December 31, 2011.

For the three months ended December 31, 2011:

• Revenue is estimated to have been in the range of $45.0 - $46.0 million, down from $47.2 million for the quarter ended September 30, 2011, and down from $47.7 million for the same period in the prior year.
  
• Loan fees are estimated to have been in the range of $32.0 - $33.0 million down from $33.6 million for the quarter ended September 30, 2011, and down from $36.3 million for the same period in the prior year.
  
• Other revenue is estimated to have been in the range of $12.0 - $13.0 million, down from $13.6 million for the quarter ended September 30, 2011, and up from $11.4 million for the same period in the prior year.
  
• Loan volumes are estimated to have been in the range of $198.0 - $200.0 million, down from $201.7 million for the quarter ended September 30, 2011, and down from $216.3 million for the same period in the prior year.

In addition, Adjusted EBITDA (a non-GAAP measure defined below) for the three months ended December 31, 2011 is estimated to have been between $9.0 million and $10.0 million, compared to $11.3 million for the quarter ended September 30, 2011 and $13.0 million for the same period in the prior year. The sequential decline in Adjusted EBITDA compared to the quarter ended September 30, 2011 is primarily due to a decrease in overall revenue in Canada and increased costs associated with expansion in the United Kingdom. The year-over-year decline in Adjusted EBITDA is a result of lower loan volumes in Canada, costs associated with the United Kingdom expansion, additional investment in the collection system infrastructure and the roll-out of new credit products.

Response to Short Seller

The Company also announced that the Board of Directors of the Company recently received a letter from a self-described short seller. The letter alleges that the Company is in violation of payday loan regulations in the Province of Ontario and that, as a result, the Company's existing public reports are not accurate. After reviewing the allegations, the Company believes that it is in compliance with applicable regulations in the Province of Ontario in all material respects. The Company suspects that the letter is the commencement of an opportunistic attack on the Company by a short seller, designed to disrupt the Company's previously announced private offering of senior secured notes. The Company will vigorously defend itself against the short-seller's self-interested and misleading attacks.

Shares are trading down 11.14% on the day.

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