Western Capital Resources, Inc. (WCRS)

[downsideup]

I went back and looked at the last Q...

The bottom line published in November has three key elements:

One, is that the debt keeps getting paid down at a good rate...

The second is that while the debt is being reduced, the payments in arrears on the preferred keep increasing...

Third is that they're working on engineering a transition and diversification out of payday loans...

They're making progress growing the Cricket store revenues at a very good pace... and the new stores added this fall should put them at 50% of revenue or better, soon.

Revenues are increasing... even prior to the impact that will be seen in growth driven by the new stores they've added... and it is growing in spite of the payday loan business shrinking. Payday loans held their own with fewer locations...

What it boils down to is that the cost of implementing the transition from payday loans (fewer stores) to Cricket stores (more stores) has imposed a "pause" in the pace in the progress that was being made paying down the debt. But, while that has them basically standing still on progress in paying down debt, they're clearly not standing still on making progress in growing the business...

Whether that shift in focus will pay off for us... we should see in the next Q... when we see the impact on revenue growth of the 8 new stores they've opened recently... and holiday sales.

Interesting to note that the "pause" in paying down the debts... is also paired with a transition in who is owed what... with the straight debt still not increasing this Q, even with the new loan... while the deferred portion of what is owed on the preferred issues grows fast enough that it compensates for the performance in the debt paydown that is occurring...

How quickly will the Cricket stores pay for themselves... and then enable eliminating debt, and paying the arrears in the preferred issues ?

I guess most of the common holders would rather see them digging out of the debt hole they're in faster than it is happening... and then use payday loan revenues to fund the growth and to diversify, rather than using new debt to do that now... even if that meant accepting more short term risk on the payday loan business. But, the choice to diversify now using debt while lowering risk... is very clearly the more prudent and conservative choice.

I can't project, yet, when they should be able to get this thing up out of the wallow its in, and back up on a smooth plane... but, it still looks like it will happen... just a matter of time... and it is a good thing that the risk is being reduced, now, while the value of the business and their (better diversified) revenues are both still increasing at a good pace. Maybe the next Q will give more clarity on things that enable projecting a timeline... assuming they don't find more "adjustments" to make that will tend to benefit others more than common holders...

Progress is still occurring at the same pace as before... only now its showing up as progress made in different categories than the ones that will tend to lead to greater market recognition of value in the common.