U.S. Markets closed

EZCORP Reports Fourth Quarter Fiscal Year 2019 Results

AUSTIN, Texas--(BUSINESS WIRE)--EZCORP, Inc. (NASDAQ: EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2019 and the authorization of a share repurchase program.

All amounts in this release are from EZCORP continuing operations and in conformity with U.S. generally accepted accounting principles ("GAAP") unless otherwise noted. Comparisons shown in this release are to the same period in the prior year unless otherwise noted.

HIGHLIGHTS

  • In December 2019, the Board of Directors authorized a stock repurchase program for up to $60 million of our Class A Non-Voting common shares over the next three years.

  • Total revenues for the quarter were up 4% to $214.3 million. The improvement was driven by continued growth in key pawn operating metrics including pawn loans outstanding (PLO), pawn service charges (PSC) and merchandise sales.

  • For the quarter, income from continuing operations before tax was $0.4 million and diluted loss per share was $0.01, representing a $0.01 per share improvement over the prior-year quarter. These results include costs related to certain growth investments, acquisition due diligence and other discrete items. Excluding those items and adjusting for constant currency1, adjusted1 income from continuing operations before tax was $13.0 million and adjusted diluted earnings per share was $0.19 versus $18.5 million and $0.22, respectively, in the year-ago quarter. Full year diluted earnings per share were $0.05 compared to $0.66 in the prior year; adjusted diluted earnings per share improved to $0.90 from $0.86 in the prior year. As previously discussed, PSC and related profits were negatively impacted by point-of-sale system performance issues in the third quarter and a 24-hour system outage in July.

  • Enhanced inventory management efforts yielded a significant reduction in aged general merchandise, from 8% of total general merchandise at September 30, 2018 to 6% at September 30, 2019.

  • Net cash from operating activities nearly doubled to $38.5 million in the quarter from $19.7 million in the prior-year quarter. For the year, net cash from operating activities increased 16% to $103.5 million from $89.0 million in fiscal 2018.

  • Cash and cash equivalents ended the current quarter at $157.6 million ($162.4 million including restricted cash). During the quarter, the company collected $12.2 million under the Alpha Credit / Grupo Finmart notes.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Stuart Grimshaw commented, "We saw a continued expansion of our store count, grew total revenues, grew PLO to a record fiscal year-end balance of $199 million ($201 million on a constant currency basis) and increased free cash flow in both the fourth quarter and the full fiscal year. We achieved these results despite fourth quarter headwinds, including newly introduced social welfare programs in Mexico reducing customers’ current need for pawn loans, technology system issues resolved by mid-July, and other investments and non-recurring costs. There have been several key developments since the June quarter.

“First, the Board of Directors approved a three-year share repurchase authorization for up to $60 million that enables us to return capital to shareholders and buy back publicly traded Class A shares at what we believe to be attractive valuations. Second, we completed the rollout of our new point-of-sale system to all stores in the U.S. and Mexico in October, which will further optimize lending decisions, with related improvements over time in yields, pawn service charges, merchandise sales gross profits and margins. Third, we recently implemented several initiatives, including re-aligning field management to increase senior management’s interaction at store level, consolidation of certain administrative functions and other expense control measures to increasingly leverage our scale, driving an increase in the return on earning assets through improved productivity and operating efficiencies. Some of these initiatives will involve incremental expense in the short-term to drive greater sustainable efficiencies. Fourth, our differentiated digital engagement strategy designed to broaden customer acquisition and service levels, enhance retention and drive revenue enhancements remains on track for initial introduction during the first quarter of fiscal 2020 under the name Lana. The introduction will be in Texas and Florida, our two largest markets in the U.S., with incremental expansion planned throughout fiscal 2020. Finally, strong free cash flow and the strength of our balance sheet, with $162 million cash and no substantial debt due until 2024, provides us with the financial flexibility to continue to fund new store openings, capitalize on M&A opportunities as they arise, and invest in the business to drive sustainable growth. As part of that investment, we plan to accelerate new store openings in Latin America in fiscal 2020 to approximately 40 new stores, up from 22 new stores in fiscal 2019. While this will create some short-term earnings drag, new stores in Latin America represent one of our best opportunities for long-term returns on invested capital.”

SHARE REPURCHASE PROGRAM

The Board of Directors has authorized a stock repurchase program that will allow the Company to repurchase up to $60 million of our Class A Non-Voting common shares over the next three years. This decision reflects the strength of our balance sheet, the Board’s confidence in our continued ability to generate significant cash flows and our commitment to driving long-term shareholder value through efficient capital deployment. Execution of the program will be responsive to fluctuating market conditions and valuations, liquidity needs and the expected return on investment compared to other opportunities.

Under the stock repurchase program, the Company may purchase Class A Non-voting common stock from time to time at management’s discretion in accordance with applicable securities laws, including through open market transactions, block or privately negotiated transactions, or any combination thereof. In addition, the Company may purchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934.

The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows, and corporate considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities. The Board of Directors has reserved the right to modify, suspend or terminate the program at any time.

CONSOLIDATED RESULTS

Three Months Ended September 30
in thousands, except per share amounts




 

As Reported

 

Adjusted1

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Total Revenues

$

214,339

 

 

$

205,976

 

 

$

215,391

 

 

$

205,976

 

Net Revenues

$

120,856

 

 

$

124,463

 

 

$

121,677

 

 

$

124,463

 

Income from Continuing Operations, Before Tax

$

437

 

 

$

2,872

 

 

$

13,012

 

 

$

18,469

 

Net Income from Continuing Operations

$

(592

)

 

$

(807

)

 

$

10,437

 

 

$

12,899

 

Diluted Earnings Per Share from Continuing Operations

$

(0.01

)

 

$

(0.02

)

 

$

0.19

 

 

$

0.22

 

Adjusted EBITDA1

$

12,096

 

 

$

14,677

 

 

$

22,293

 

 

$

26,734

 

  • Total revenues grew 4% on a GAAP basis and 5% on a constant currency basis, contributing to the increase in cash generation. PSC was up 1% to $83.1 million reflecting a 2% increase in the average monthly PLO balance for the fourth quarter combined with a slight improvement in yields. Consolidated merchandise sales gross profit declined 10% to $34.9 million, with a 2% increase in merchandise sales more than offset by higher cost of goods sold. Adjusted merchandise sales gross profit declined 9% to $35.3 million and sales margins decreased 411 basis points to 33%, reflecting the effective liquidation of aged general merchandise. The net impact of these factors was a 3% reduction in net revenues to $120.9 million on a GAAP basis and a 2% reduction to $121.7 million on an adjusted basis. Although the aged inventory liquidation impacted margins, it contributed to the overall increase in cash generation. For the full year, free cash flow1 increased 32% to $77.9 million. Cash receipts on the AlphaCredit notes receivable provided an additional $34.1 million for the year.

  • Consolidated operations expenses rose 3% in the quarter to $88.8 million. Total pawn store count increased 3%, consisting of a net 31 stores acquired or opened since the end of the prior-year quarter (27 new and acquired stores in Latin America and seven acquired stores in the U.S., net of three store closures in the U.S.).

  • Administrative expense increased $2.9 million to $16.9 million in the quarter principally as a result of a $2.7 million strategic investment in the development of the Lana (previously "Evergreen") customer-centric digital platform and $1.7 million in acquisition due diligence costs.

  • Net interest expense decreased $0.6 million, driven by the June 2019 repayment of our $195.0 million cash convertible senior notes, offset by lower interest income on the declining balance of notes receivable from AlphaCredit as principal collections are received monthly. The first $6 million installment of the $14 million deferred compensation fee on the notes receivable was received in September 2019 with the remaining $8 million due in fiscal 2020. Interest income in the period does not reflect the majority of that cash receipt, as it has been recognized under GAAP over the life of the loans.

SEGMENT RESULTS

U.S. Pawn

  • Same store PSC rose slightly, with ending PLO per store of $307,000, up 1% on a year-over-year basis. The growth reflected disciplined lending practices and a focus on meeting customers' need for cash. The ending per store average is the highest since 2011.

  • Merchandise margins remained within our target range but declined 359 basis points year-over-year to 35%, largely reflecting the effective liquidation of aged general merchandise inventory. Scrap sales increased by 32% to $17.5 million on a step up in volumes and higher gold prices, though lower diamond prices pressured related margins.

  • U.S. Pawn's net revenues decreased 2% to $93.8 million, with a $1.9 million increase in expenses and depreciation. Same store operations expense increased 2%, primarily due to higher labor and benefit costs, including a $1.3 million increase in workers’ compensation costs. The current period included a single large claim and the prior year period reflected a $0.8 million credit. Although the segment’s cash generation increased significantly, the segment contribution decreased 13% to $22.2 million.

Latin America Pawn

  • Net revenues increased slightly to $26.6 million ($27.1 million on a constant currency basis).

  • PSC rose 1% to $19.4 million ($19.7 million on a constant currency basis). Ending PLO decreased 4% to $41.6 million (down 1% to $43.1 million on a constant currency basis), with ending PLO per store of $87,000, down 8%. As previously discussed, recent social programs in Mexico involving transfers to low-income individuals have impacted demand for pawn loans.

  • Merchandise sales increased 9%, to $26.8 million (9% to $27.4 million constant currency), while merchandise margins declined to 25% reflecting an ongoing focus on optimizing inventory and sales gross profits along with reducing aged inventory and increasing free cash flow.

  • Operations expense totaled $19.5 million compared to $16.7 million in the prior year period reflecting higher store licensing requirements, rent costs, labor-related expenses, and robbery and related security costs. In addition, year-over-year trends were impacted by stores acquired or opened since the prior-year quarter and stores expanded or relocated, for which the revenue improvement is expected to lag the incremental costs.

  • We added 22 de novo stores and acquired five stores in the year. Ten of the new stores were opened in the fourth quarter. New stores drive attractive long-term profit enhancement and represent one of our highest returns on invested capital but create a short-term drag on earnings as they ramp. Acquired stores are generally less efficient than our existing stores until fully integrated, but typically are accretive in their first full quarter of ownership.

  • Segment contribution totaled $5.8 million compared to $9.1 million in the prior-year quarter. Adjusted segment contribution totaled $6.5 million versus $9.1 million as a result of new and acquired stores, recently expanded and relocated stores, and the operations expense increase previously described combined with administrative costs to support the growth.

FORM 10-K

EZCORP’s Annual Report on Form 10-K for fiscal 2019 has been filed with the Securities and Exchange Commission. The report is available in the Investor Relations section of the company’s website at http://investors.ezcorp.com. EZCORP shareholders may obtain a paper copy of the report, free of charge, by sending a request to the investor relations contact below.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, December 5, 2019, at 4:00pm Central Time to discuss fourth quarter and fiscal year-end results. Analysts and institutional investors may participate on the conference call by dialing (877) 201-0168, Conference ID: 3248107, or internationally by dialing (647) 788-4901. The conference call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay of the conference call will be available online at http://investors.ezcorp.com/ shortly after the end of the call.

ABOUT EZCORP

Formed in 1989, EZCORP has grown into a leading provider of pawn loans in the United States and Latin America. It also sells merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers. We are dedicated to satisfying the short-term cash needs of consumers who are both cash and credit constrained, focusing on an industry-leading customer experience. EZCORP is traded on NASDAQ under the symbol EZPW and is a member of the Russell 2000 Index, S&P SmallCap 600 Index, S&P 1000 Index and Nasdaq Composite Index.

FORWARD LOOKING STATEMENTS

This announcement contains certain forward-looking statements regarding the company’s strategy, initiatives and expected performance. These statements are based on the company’s current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the company's strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates, will, should or may occur in the future, including future financial or operating results, are forward-looking statements. 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, including operating risks, liquidity risks, legislative or regulatory developments, market factors or current or future litigation. For a discussion of these and other factors affecting the company’s business and prospects, see the company’s annual, quarterly and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

1”Adjusted” basis, which is a non-GAAP measure, excludes certain items. “Constant currency” basis, which is a non-GAAP measure, excludes the impact of foreign currency exchange rate fluctuations. “Free cash flow,” which is a non-GAAP measure, includes certain adjustments to cash flow from operating activities.

For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.

EZCORP, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended September 30,

 

Fiscal Year Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

(in thousands, except per share amounts)

Revenues:

 

 

 

 

 

 

 

Merchandise sales

$

107,191

 

 

$

105,102

 

 

$

453,375

 

 

$

438,372

 

Jewelry scrapping sales

22,572

 

 

16,586

 

 

60,445

 

 

60,752

 

Pawn service charges

83,066

 

 

81,980

 

 

327,366

 

 

304,577

 

Other revenues

1,510

 

 

2,308

 

 

6,043

 

 

8,455

 

Total revenues

214,339

 

 

205,976

 

 

847,229

 

 

812,156

 

Merchandise cost of goods sold

72,325

 

 

66,335

 

 

297,508

 

 

276,618

 

Jewelry scrapping cost of goods sold

20,287

 

 

14,754

 

 

52,935

 

 

52,290

 

Other cost of revenues

871

 

 

424

 

 

2,338

 

 

1,697

 

Net revenues

120,856

 

 

124,463

 

 

494,448

 

 

481,551

 

Operating expenses:

 

 

 

 

 

 

 

Operations

88,822

 

 

86,083

 

 

350,578

 

 

334,841

 

Administrative

16,870

 

 

13,951

 

 

63,665

 

 

53,639

 

Depreciation and amortization

7,683

 

 

7,186

 

 

28,797

 

 

25,484

 

Loss on sale or disposal of assets and other

756

 

 

10

 

 

4,399

 

 

463

 

Total operating expenses

114,131

 

 

107,230

 

 

447,439

 

 

414,427

 

Operating income

6,725

 

 

17,233

 

 

47,009

 

 

67,124

 

Interest expense

5,425

 

 

8,764

 

 

32,637

 

 

27,834

 

Interest income

(1,449

)

 

(4,145

)

 

(11,086

)

 

(17,041

)

Equity in net loss (income) of unconsolidated affiliates

767

 

 

(2,052

)

 

135

 

 

(5,529

)

Impairment of investment in unconsolidated affiliates

 

 

11,712

 

 

19,725

 

 

11,712

 

Other expense (income)

1,545

 

 

82

 

 

1,424

 

 

(5,391

)

Income from continuing operations before income taxes

437

 

 

2,872

 

 

4,174

 

 

55,539

 

Income tax expense

1,029

 

 

3,679

 

 

2,406

 

 

18,389

 

(Loss) income from continuing operations, net of tax

(592

)

 

(807

)

 

1,768

 

 

37,150

 

Loss from discontinued operations, net of tax

(53

)

 

(225

)

 

(457

)

 

(856

)

Net (loss) income

(645

)

 

(1,032

)

 

1,311

 

 

36,294

 

Net (loss) income attributable to noncontrolling interest

 

 

360

 

 

(1,230

)

 

(988

)

Net (loss) income attributable to EZCORP, Inc.

$

(645

)

 

$

(1,392

)

 

$

2,541

 

 

$

37,282

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to EZCORP, Inc. — continuing operations

$

(0.01

)

 

$

(0.02

)

 

$

0.05

 

 

$

0.70

 

Diluted earnings per share attributable to EZCORP, Inc. — continuing operations

$

(0.01

)

 

$

(0.02

)

 

$

0.05

 

 

$

0.66

 

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

55,446

 

 

54,466

 

 

55,341

 

 

54,456

 

Weighted-average diluted shares outstanding

55,446

 

 

54,466

 

 

55,984

 

 

57,896

 

EZCORP, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

September 30,

 

2019

 

2018

 

 

 

 

Assets:

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

157,567

 

 

$

285,311

 

Pawn loans

199,058

 

 

198,463

 

Pawn service charges receivable, net

31,802

 

 

30,959

 

Inventory, net

179,355

 

 

166,997

 

Notes receivable, net

7,182

 

 

34,199

 

Prepaid expenses and other current assets

30,796

 

 

33,456

 

Total current assets

605,760

 

 

749,385

 

Investments in unconsolidated affiliates

34,516

 

 

49,500

 

Property and equipment, net

67,357

 

 

73,649

 

Goodwill

300,527

 

 

299,248

 

Intangible assets, net

68,044

 

 

54,923

 

Notes receivable, net

1,117

 

 

3,226

 

Deferred tax asset, net

1,998

 

 

7,986

 

Other assets

4,383

 

 

3,863

 

Total assets

$

1,083,702

 

 

$

1,241,780

 

 

 

 

 

Liabilities and equity:

 

 

 

Current liabilities:

 

 

 

Current maturities of long-term debt, net

$

214

 

 

$

190,181

 

Accounts payable, accrued expenses and other current liabilities

77,957

 

 

57,958

 

Customer layaway deposits

12,915

 

 

11,824

 

Total current liabilities

91,086

 

 

259,963

 

Long-term debt, net

238,380

 

 

226,702

 

Deferred tax liability, net

1,985

 

 

8,817

 

Other long-term liabilities

7,302

 

 

6,890

 

Total liabilities

338,753

 

 

502,372

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Class A Non-Voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding:
52,565,064 as of September 30, 2019 and 51,614,746 as of September 30, 2018

526

 

 

516

 

Class B Voting Common Stock, convertible, par value $.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171

30

 

 

30

 

Additional paid-in capital

407,628

 

 

397,927

 

Retained earnings

389,163

 

 

386,622

 

Accumulated other comprehensive loss

(52,398

)

 

(42,356

)

EZCORP, Inc. stockholders’ equity

744,949

 

 

742,739

 

Noncontrolling interest

 

 

(3,331

)

Total equity

744,949

 

 

739,408

 

Total liabilities and equity

$

1,083,702

 

 

$

1,241,780

 

EZCORP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Fiscal Year Ended September 30,

 

2019

 

2018

 

2017

 

 

 

 

 

 

 

(in thousands)

Operating activities:

 

 

 

 

 

Net income

$

1,311

 

 

$

36,294

 

 

$

29,760

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

28,797

 

 

25,484

 

 

23,661

 

Amortization of debt discount and deferred financing costs

19,759

 

 

17,595

 

 

12,303

 

Accretion of notes receivable discount and deferred compensation fee

(4,524

)

 

(9,150

)

 

(3,788

)

Deferred income taxes

1,616

 

 

7,916

 

 

6,096

 

Other adjustments

5,776

 

 

2,607

 

 

4,566

 

Reserve on jewelry scrap receivable

3,646

 

 

 

 

 

Stock compensation expense

9,751

 

 

10,784

 

 

5,866

 

Loss (income) from investments in unconsolidated affiliates

135

 

 

(5,529

)

 

(4,916

)

Impairment of investment in unconsolidated affiliates

19,725

 

 

11,712

 

 

 

Changes in operating assets and liabilities, net of business acquisitions:

 

 

 

 

 

Service charges and fees receivable

(732

)

 

(1,788

)

 

(285

)

Inventory

(493

)

 

(1,074

)

 

721

 

Prepaid expenses, other current assets and other assets

5,732

 

 

477

 

 

4,225

 

Accounts payable, accrued expenses and other liabilities

22,246

 

 

(3,271

)

 

(30,894

)

Customer layaway deposits

1,176

 

 

709

 

 

241

 

Income taxes, net of excess tax benefit from stock compensation

(10,404

)

 

(3,785

)

 

3,110

 

Net cash provided by operating activities

103,517

 

 

88,981

 

 

50,666

 

Investing activities:

 

 

 

 

 

Loans made

(737,585

)

 

(707,220

)

 

(646,625

)

Loans repaid

434,142

 

 

421,331

 

 

386,383

 

Recovery of pawn loan principal through sale of forfeited collateral

288,502

 

 

266,962

 

 

244,632

 

Capital expenditures, net

(38,839

)

 

(40,474

)

 

(25,001

)

Acquisitions, net of cash acquired

(8,116

)

 

(93,165

)

 

(2,250

)

Investment in unconsolidated affiliate

 

 

(14,036

)

 

 

Principal collections on notes receivable

34,067

 

 

32,396

 

 

29,458

 

Net cash used in investing activities

(27,829

)

 

(134,206

)

 

(13,403

)

Financing activities:

 

 

 

 

 

Taxes paid related to net share settlement of equity awards

(3,288

)

 

(311

)

 

(767

)

Proceeds from borrowings, net of issuance costs

1,064

 

 

171,409

 

 

139,506

 

Payments on borrowings

(196,093

)

 

(3,510

)

 

(85,388

)

Net cash (used in) provided by financing activities

(198,317

)

 

167,588

 

 

53,351

 

Effect of exchange rate changes on cash and cash equivalents and restricted cash

(507

)

 

(654

)

 

724

 

Net (decrease) increase in cash and cash equivalents and restricted cash

(123,136

)

 

121,709

 

 

91,338

 

Cash and cash equivalents and restricted cash at beginning of period

285,578

 

 

163,869

 

 

72,531

 

Cash and cash equivalents and restricted cash at end of period

$

162,442

 

 

$

285,578

 

 

$

163,869

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

$

12,900

 

 

$

8,412

 

 

$

9,068

 

Income taxes, net

11,132

 

 

13,676

 

 

8,866

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

Pawn loans forfeited and transferred to inventory

$

301,357

 

 

$

274,590

 

 

$

257,388

 

Dividend reinvestment acquisition of additional ownership in unconsolidated affiliate








1,153


EZCORP, Inc.
OPERATING SEGMENT RESULTS
(Unaudited and in thousands)


 

 

Three Months Ended September 30, 2019

 

U.S. Pawn

 

Latin America
Pawn

 

Other

International

 

Total Segments

 

Corporate Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

80,357

 

 

$

26,832

 

 

$

 

 

$

107,189

 

 

$

 

 

$

107,189

 

Jewelry scrapping sales

17,458

 

 

5,114

 

 

 

 

22,572

 

 

 

 

22,572

 

Pawn service charges

63,711

 

 

19,357

 

 

 

 

83,068

 

 

 

 

83,068

 

Other revenues

108

 

 

45

 

 

1,357

 

 

1,510

 

 

 

 

1,510

 

Total revenues

161,634

 

 

51,348

 

 

1,357

 

 

214,339

 

 

 

 

214,339

 

Merchandise cost of goods sold

52,205

 

 

20,120

 

 

 

 

72,325

 

 

 

 

72,325

 

Jewelry scrapping cost of goods sold

15,638

 

 

4,649

 

 

 

 

20,287

 

 

 

 

20,287

 

Other cost of revenues

 

 

 

 

871

 

 

871

 

 

 

 

871

 

Net revenues

93,791

 

 

26,579

 

 

486

 

 

120,856

 

 

 

 

120,856

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

Operations

68,119

 

 

19,496

 

 

1,207

 

 

88,822

 

 

 

 

88,822

 

Administrative

 

 

 

 

 

 

 

 

16,870

 

 

16,870

 

Depreciation and amortization

2,928

 

 

1,724

 

 

29

 

 

4,681

 

 

3,002

 

 

7,683

 

Loss on sale or disposal of assets and other

546

 

 

(52

)

 

260

 

 

754

 

 

2

 

 

756

 

Interest expense

 

 

39

 

 

211

 

 

250

 

 

5,175

 

 

5,425

 

Interest income

 

 

(375

)

 

 

 

(375

)

 

(1,074

)

 

(1,449

)

Equity in net loss of unconsolidated affiliates

 

 

 

 

767

 

 

767

 

 

 

 

767

 

Other expense (income)

 

 

(30

)

 

1,605

 

 

1,575

 

 

(30

)

 

1,545

 

Segment contribution (loss)

$

22,198

 

 

$

5,777

 

 

$

(3,593

)

 

$

24,382

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

$

24,382

 

 

$

(23,945

)

 

$

437

 

 

Three Months Ended September 30, 2018

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Total Segments

 

Corporate Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

80,554

 

 

$

24,548

 

 

$

 

 

$

105,102

 

 

$

 

 

$

105,102

 

Jewelry scrapping sales

13,230

 

 

3,356

 

 

 

 

16,586

 

 

 

 

16,586

 

Pawn service charges

62,906

 

 

19,074

 

 

 

 

81,980

 

 

 

 

81,980

 

Other revenues

45

 

 

(503

)

 

2,766

 

 

2,308

 

 

 

 

2,308

 

Total revenues

156,735

 

 

46,475

 

 

2,766

 

 

205,976

 

 

 

 

205,976

 

Merchandise cost of goods sold

49,443

 

 

16,892

 

 

 

 

66,335

 

 

 

 

66,335

 

Jewelry scrapping cost of goods sold

11,734

 

 

3,020

 

 

 

 

14,754

 

 

 

 

14,754

 

Other cost of revenues

 

 

 

 

424

 

 

424

 

 

 

 

424

 

Net revenues

95,558

 

 

26,563

 

 

2,342

 

 

124,463

 

 

 

 

124,463

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

Operations

66,460

 

 

16,709

 

 

2,914

 

 

86,083

 

 

 

 

86,083

 

Administrative

 

 

 

 

 

 

 

 

13,951

 

 

13,951

 

Depreciation and amortization

3,529

 

 

1,356

 

 

42

 

 

4,927

 

 

2,259

 

 

7,186

 

Loss on sale or disposal of assets

6

 

 

(4

)

 

 

 

2

 

 

8

 

 

10

 

Interest expense

71

 

 

19

 

 

 

 

90

 

 

8,674

 

 

8,764

 

Interest income

 

 

(547

)

 

 

 

(547

)

 

(3,598

)

 

(4,145

)

Equity in net income of unconsolidated affiliates

 

 

 

 

(2,052

)

 

(2,052

)

 

 

 

(2,052

)

Impairment of investment in unconsolidated affiliates

 

 

 

 

11,712

 

 

11,712

 

 

 

 

11,712

 

Other expense (income)

 

 

(53

)

 

(14

)

 

(67

)

 

149

 

 

82

 

Segment contribution (loss)

$

25,492

 

 

$

9,083

 

 

$

(10,260

)

 

$

24,315

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

$

24,315

 

 

$

(21,443

)

 

$

2,872

 

 

Fiscal Year Ended September 30, 2019

 

U.S. Pawn

 

Latin America
Pawn

 

Other

International

 

Total Segments

 

Corporate Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

355,996

 

 

$

97,379

 

 

$

 

 

$

453,375

 

 

$

 

 

$

453,375

 

Jewelry scrapping sales

45,815

 

 

14,630

 

 

 

 

60,445

 

 

 

 

60,445

 

Pawn service charges

248,369

 

 

78,997

 

 

 

 

327,366

 

 

 

 

327,366

 

Other revenues

233

 

 

179

 

 

5,631

 

 

6,043

 

 

 

 

6,043

 

Total revenues

650,413

 

 

191,185

 

 

5,631

 

 

847,229

 

 

 

 

847,229

 

Merchandise cost of goods sold

225,136

 

 

72,372

 

 

 

 

297,508

 

 

 

 

297,508

 

Jewelry scrapping cost of goods sold

39,318

 

 

13,617

 

 

 

 

52,935

 

 

 

 

52,935

 

Other cost of revenues

 

 

 

 

2,338

 

 

2,338

 

 

 

 

2,338

 

Net revenues

385,959

 

 

105,196

 

 

3,293

 

 

494,448

 

 

 

 

494,448

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

Operations

269,003

 

 

74,199

 

 

7,376

 

 

350,578

 

 

 

 

350,578

 

Administrative

 

 

 

 

 

 

 

 

63,665

 

 

63,665

 

Depreciation and amortization

11,879

 

 

6,267

 

 

219

 

 

18,365

 

 

10,432

 

 

28,797

 

Loss on sale or disposal of assets and other

3,402

 

 

691

 

 

282

 

 

4,375

 

 

24

 

 

4,399

 

Interest expense

 

 

1,609

 

 

491

 

 

2,100

 

 

30,537

 

 

32,637

 

Interest income

 

 

(1,601

)

 

 

 

(1,601

)

 

(9,485

)

 

(11,086

)

Equity in net loss of unconsolidated affiliates

 

 

 

 

135

 

 

135

 

 

 

 

135

 

Impairment of investment in unconsolidated affiliates

 

 

 

 

19,725

 

 

19,725

 

 

 

 

19,725

 

Other expense (income)

 

 

(93

)

 

1,895

 

 

1,802

 

 

(378

)

 

1,424

 

Segment contribution (loss)

$

101,675

 

 

$

24,124

 

 

$

(26,830

)

 

$

98,969

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

$

98,969

 

 

$

(94,795

)

 

$

4,174

 

 

Fiscal Year Ended September 30, 2018

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Total Segments

 

Corporate Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 



 

 



 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 



 

 



Merchandise sales

$

350,699

 

 

$

87,673

 

 

$

 

 

$

438,372

 

 

$

 

 

$

438,372

 

Jewelry scrapping sales

47,745

 

 

13,007

 

 

 

 

60,752

 

 


 

 

 

60,752

 

Pawn service charges

237,086

 

 

67,491

 

 

 

 

304,577

 

 


 

 

 

304,577

 

Other revenues

250

 

 

85

 

 

8,120

 

 

8,455

 

 


 

 

 

8,455

 

Total revenues

635,780

 

 

168,256

 

 

8,120

 

 

812,156

 

 


 

 

 

812,156

 

Merchandise cost of goods sold

216,408

 

 

60,210

 

 

 

 

276,618

 

 


 

 

 

276,618

 

Jewelry scrapping cost of goods sold

40,417

 

 

11,873

 

 

 

 

52,290

 

 


 

 

 

52,290

 

Other cost of revenues

 

 

 

 

1,697

 

 

1,697

 

 


 

 

 

1,697

 

Net revenues

378,955

 

 

96,173

 

 

6,423

 

 

481,551

 

 


 

 

 

481,551

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 


 

 

 



Operations

263,094

 

 

61,553

 

 

10,194

 

 

334,841

 

 


 

 

 

334,841

 

Administrative

 

 

 

 

 

 

 

 

 

53,639

 

 

 

53,639

 

Depreciation and amortization

12,869

 

 

4,068

 

 

184

 

 

17,121

 

 

 

8,363

 

 

 

25,484

 

Loss on sale or disposal of assets

203

 

 

27

 

 

 

 

230

 

 

 

233

 

 

 

463

 

Interest expense

71

 

 

25

 

 

 

 

96

 

 

 

27,738

 

 

 

27,834

 

Interest income

 

 

(2,619

)

 

 

 

(2,619

)

 

 

(14,422

)

 

 

(17,041

)

Equity in net income of unconsolidated affiliates

 

 

 

 

(5,529

)

 

(5,529

)

 


 

 

 

(5,529

)

Impairment of investment in unconsolidated affiliates

 

 

 

 

11,712

 

 

11,712

 

 


 

 

 

11,712

 

Other income

(3

)

 

(42

)

 

(132

)

 

(177

)

 

 

(5,214

)

 

 

(5,391

)

Segment contribution (loss)

$

102,721

 

 

$

33,161

 

 

$

(10,006

)

 

$

125,876

 

 

 


 

 

 



Income from continuing operations before income taxes













$

125,876



$

(70,337

)


$

55,539


EZCORP, Inc.

STORE COUNT ACTIVITY

(Unaudited)


 

 

Three Months Ended September 30, 2019

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of June 30, 2019

514

 

 

470

 

 

22

 

 

1,006

 

New locations opened

 

 

10

 

 

 

 

10

 

Locations sold, combined or closed

(2

)

 

 

 

 

 

(2

)

As of September 30, 2019

512

 

 

480

 

 

22

 

 

1,014

 

 

Three Months Ended September 30, 2018

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of June 30, 2018

510

 

 

451

 

 

27

 

 

988

 

New locations opened

 

 

2

 

 

 

 

2

 

Locations sold, combined or closed

(2

)

 

 

 

 

 

(2

)

As of September 30, 2018

508

 

 

453

 

 

27

 

 

988

 

 

Twelve Months Ended September 30, 2019

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of September 30, 2018

508

 

 

453

 

 

27

 

 

988

 

New locations opened

 

 

22

 

 

 

 

22

 

Locations acquired

7

 

 

5

 

 

 

 

12

 

Locations sold, combined or closed

(3

)

 

 

 

(5

)

 

(8

)

As of September 30, 2019

512

 

 

480

 

 

22

 

 

1,014

 

 

Twelve Months Ended September 30, 2018

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of September 30, 2017

513

 

 

246

 

 

27

 

 

786

 

New locations opened

 

 

12

 

 

 

 

12

 

Locations acquired

 

 

196

 

 

 

 

196

 

Locations sold, combined or closed

(5

)

 

(1

)

 

 

 

(6

)

As of September 30, 2018

508

 

 

453

 

 

27

 

 

988

 

 

Non-GAAP Financial Information (Unaudited)

In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency ("constant currency") and adjusted basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos and other Latin American currencies. We believe that presentation of constant currency and adjusted results is meaningful and useful in understanding the activities and business metrics of our operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use this non-GAAP financial information primarily to evaluate and compare operating results across accounting periods.

Additionally, we provide free cash flow which represents net cash provided by operating activities less net funding of loan originations and maintenance capital expenditures which is commonly used by investors as an additional measure of cash generated by business operations that may be used to repay scheduled debt maturities and debt service or, following payment of such debt obligations and other non-discretionary items, may be available to invest in future growth through new business development activities or acquisitions, among other things. These metrics can also be used to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity. However, free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for cash flow from operating activities or other income statement data prepared in accordance with GAAP.

Readers should consider the information in addition to, but not instead of or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the three and twelve months ended September 30, 2019 and 2018 were as follows:

 

 

September 30,

 

Three Months Ended September 30,

 

Twelve Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Mexican peso

 

19.7

 

 

18.7

 

 

19.4

 

 

18.9

 

 

19.4

 

 

19.0

 

Guatemalan quetzal

 

7.6

 

 

7.6

 

 

7.5

 

 

7.5

 

 

7.6

 

 

7.3

 

Honduran lempira

 

24.2

 

 

24.0

 

 

24.1

 

 

23.8

 

 

24.1

 

 

23.5

 

Peruvian sol

 

3.4

 

 

3.3

 

 

3.3

 

 

3.3

 

 

3.3

 

 

3.2

 

Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss.

Miscellaneous Non-GAAP Financial Measures

 

2019 Q4

 

2018 Q4

 

 

 

 

 

(in millions)

Net loss

$

(0.6

)

 

$

(0.8

)

Loss from discontinued operations, net of tax

(0.1

)

 

(0.2

)

Interest expense

5.4

 

 

8.8

 

Interest income

(1.4

)

 

(4.1

)

Income tax expense

1.0

 

 

3.7

 

Depreciation and amortization

7.7

 

 

7.2

 

Adjusted EBITDA

$

12.0

 

 

$

14.6

 

 

Consolidated
Total
Revenues

 

Consolidated
Net Revenues

 

Consolidated
Merch. Sales
Gross Profit

 

Cons. Merch.
Sales Gross
Profit Margin

 

 

 

 

 

 

 

 

 

(in millions)

 

 

2019 Q4 reported

$

214.3

 

 

$

120.9

 

 

$

34.9

 

 

32.5

%

Natural disaster inventory destruction impact

 

 

0.3

 

 

0.3

 

 

 

Currency exchange rate fluctuations

1.1

 

 

0.5

 

 

0.1

 

 

 

2019 Q4 adjusted

$

215.4

 

 

$

121.7

 

 

$

35.3

 

 

32.8

%















 















 

 

U.S.
Pawn

 

Latin America
Pawn

 

Total

 

 

 

 

 

 

 

(in millions)

2019 Q4 reported segment contribution

$

22.2

 

 

$

5.8

 

 

$

28.0

 

Natural disaster inventory and asset destruction impact

0.9

 

 

 

 

0.9

 

Trade name impairment

 

 

0.6

 

 

0.6

 

Currency exchange rate fluctuations

 

 

0.1

 

 

0.1

 

2019 Q4 adjusted segment contribution

$

23.1

 

 

$

6.5

 

 

$

29.6

 












 

 

2019

 

2018

 

 

 

 

 

(in millions)

Net cash from operating activities

$

103.5

 

 

$

89.0

 

Net funding of loan growth

(14.9

)

 

(18.9

)

Maintenance capital expenditures

(10.7

)

 

(11.0

)

Free cash flow

$

77.9

 

 

$

59.1

 

 

Income from
Continuing
Operations,
Before Tax

 

Tax
Effect

 

Net Income
from
Continuing
Operations

 

Adjusted
EBITDA

 

Continuing
Operations
Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2019 Q4 reported

$

0.4

 

 

$

(1.0

)

 

$

(0.6

)

 

$

12.0

 

 

$

(0.01

)

Natural disaster inventory and asset destruction impact

0.8

 

 

(0.1

)

 

0.7

 

 

0.8

 

 

0.01

 

Trade name impairment

0.6

 

 

(0.1

)

 

0.5

 

 

0.6

 

 

0.01

 

Acquisition due diligence costs

1.7

 

 

(0.2

)

 

1.5

 

 

1.7

 

 

0.03

 

Board of director search fees

0.3

 

 

 

 

0.3

 

 

0.3

 

 

0.01

 

Discrete Cash Converters International Limited items

2.0

 

 

(0.3

)

 

1.7

 

 

2.0

 

 

0.03

 

Write-off of RDC call option

1.9

 

 

(0.2

)

 

1.7

 

 

1.9

 

 

0.03

 

Currency exchange rate fluctuations

0.2

 

 

(0.1

)

 

0.1

 

 

0.2

 

 

 

Non-cash net interest expense

2.4

 

 

(0.3

)

 

2.1

 

 

 

 

0.04

 

Discretionary strategic investment in digital platform

2.7

 

 

(0.3

)

 

2.4

 

 

2.8

 

 

0.04

 

2019 Q4 adjusted

$

13.0

 

 

$

(2.6

)

 

$

10.4

 

 

$

22.3

 

 

$

0.19

 

 

 

Continuing
Operations
Diluted EPS

 

 

2019 reported

$

0.05

 

Natural disaster inventory and asset destruction impact, net of tax impact

0.01

 

Trade name impairment, net of tax impact

0.01

 

Acquisition due diligence costs, net of tax impact

0.03

 

Board of director search fees, net of tax impact

0.01

 

Discrete Cash Converters International Limited items, net of tax impact

0.03

 

Write-off of RDC call option, net of tax impact

0.03

 

Non-cash net interest expense, net of tax impact

0.21

 

Discretionary strategic investment in digital platform, net of tax impact

0.12

 

Discrete transaction tax adjustment, net of tax impact

0.08

 

Non-recurring income tax benefit

(0.03

)

Impairment on CCV investment, net of tax impact

0.26

 

Adjustment for Republic Metals Corporation reserve, net of tax impact

0.05

 

Settlement of GPMX PSC-related indemnification claim, net of tax impact

(0.01

)

Charge-off of aged assets and other, net of tax impact

0.01

 

Impact on CCV earnings from litigation settlement, net of tax impact

0.04

 

2019 adjusted

$

0.90

 

 

Income from
Continuing
Operations,
Before Tax

 

Tax
Effect

 

Net Income
from
Continuing
Operations

 

Adjusted
EBITDA

 

Continuing
Operations
Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2018 Q4 reported

$

2.9

 

 

$

(3.7

)

 

$

(0.8

)

 

$

14.6

 

 

$

(0.02

)

Impairment of investment

11.7

 

 

(1.5

)

 

10.2

 

 

11.7

 

 

0.18

 

Acquisition expenses

0.2

 

 

 

 

0.2

 

 

0.2

 

 

 

Currency exchange rate fluctuations

0.2

 

 

(0.2

)

 

 

 

0.2

 

 

 

Non-cash net interest expense

3.5

 

 

(0.2

)

 

3.3

 

 

 

 

0.06

 

2018 Q4 adjusted

$

18.5

 

 

$

(5.6

)

 

$

12.9

 

 

$

26.7

 

 

$

0.22

 




















 


















Continuing
Operations
Diluted EPS

2018 reported

















$

0.66


Impairment of investment, net of tax impact


















0.16


Acquisition expenses, net of tax impact


















0.01


Litigation settlement, net of tax impact


















(0.06

)

Non-cash net interest expense, net of tax impact


















0.09


2018 adjusted

















$

0.86



U.S. Dollar
Amount

 

Percentage
Change YOY

 

 

 

 

 

(in millions)

 

 

Consolidated PLO

$

199.1

 

 

%

Currency exchange rate fluctuations

1.5

 

 

 

Constant currency consolidated PLO

$

200.6

 

 

1

%

 

 

 

 

Latin America Pawn PLO

$

41.6

 

 

(4

)%

Currency exchange rate fluctuations

1.5

 

 

 

Constant currency Latin America Pawn PLO

$

43.1

 

 

(1

)%

 

 

 

 

Latin America Pawn net revenue (three months ended September 30, 2019)

$

26.6

 

 

%

Currency exchange rate fluctuations

0.5

 

 

 

Constant currency Latin America Pawn net revenue (three months ended September 30, 2019)

$

27.1

 

 

2

%

 

 

 

 

Latin America Pawn PSC revenues (three months ended September 30, 2019)

$

19.4

 

 

1

%

Currency exchange rate fluctuations

0.3

 

 

 

Constant currency Latin America Pawn PSC revenues (three months ended September 30, 2019)

$

19.7

 

 

3

%

 

 

 

 

Latin America Pawn merchandise sales (three months ended September 30, 2019)

$

26.8

 

 

9

%

Currency exchange rate fluctuations

0.6

 

 

 

Constant currency Latin America Pawn merchandise sales (three months ended September 30, 2019)

$

27.4

 

 

10

%

 

 

 

 

Latin America Pawn segment profit before tax (three months ended September 30, 2019)

$

5.8

 

 

(36

)%

Currency exchange rate fluctuations

0.1

 

 

 

Constant currency Latin America Pawn segment profit before tax (three months ended September 30, 2019)

$

5.9

 

 

(35

)%

 

Contacts

Email: Investor_Relations@ezcorp.com
Phone: (512) 314-2220