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EZCORP Reports Fourth Quarter and Full Year Fiscal 2021 Results

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  • EZPW

Store Count Up 14% and PLO Up 34% for the Year

AUSTIN, Texas, November 17, 2021--(BUSINESS WIRE)--EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its fiscal fourth quarter and full year ended September 30, 2021.

All amounts in this release are 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.

FOURTH QUARTER HIGHLIGHTS

  • Pawn Loans Outstanding (PLO) up 34% and up 12% compared to the third quarter.

  • Total revenue increased 15% and net revenue increased 33%.

  • Merchandise sales gross profit margin was 41% up from 31%.

  • Diluted earnings per share was $0.03, compared to a diluted loss per share of $0.42. On an adjusted basis1, diluted earnings per share was $0.11, compared to diluted earnings per share of $0.08.

  • Return on Earning Assets (ROEA) improved to 175% from 154%.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Jason Kulas stated, "I am pleased with our results in the fourth quarter and for the fiscal year, and am proud the team has executed on the strategy we put in place at the end of fiscal 2020. We are improving the customer experience, embracing technological improvements, and have launched our new loyalty program which will be rolled out in the majority of stores by the end of the calendar year. Our key financial metrics continue to improve sequentially due to the initiatives that we have taken throughout the year. We credit our team members who have embraced the renewed emphasis on culture and serving our customers while focusing on innovative ways to improve the core pawn business, grow PLO and increase margins.

"We are seeing strong signs of recovery from the pandemic and stimulus impact in the U.S., with Latin America slightly lagging due to the concerns over the Delta variant.

"The integration of the 139 stores we acquired this year is going well, and our current acquisition pipeline remains robust. In addition, we recently invested in a company that gives us increased geographical diversification by having interests in pawn stores in the Caribbean.

"As we continue to grow our footprint outside of the US, I am delighted to announce the recent promotion of Blair Powell to President of Global Pawn with management responsibility for all of our pawn operations worldwide. Blair has over 30 years of experience in the industry and has been serving as President of US Pawn for the past year. I am confident that this more streamlined global structure will enhance the in-store experience, optimize expenses and further drive profitability.

"Looking ahead toward fiscal 2022, we remain committed to maintaining operating excellence, a strong balance sheet and cost discipline while pursuing sustainable growth. Our customers and team members are critical to our success. We strive to be our customers’ first and best choice for their short-term cash needs and for affordable pre-owned and recycled goods. Enhanced training and diversity and inclusion programs are in place to help develop team members and improve productivity and retention. We are appreciative of our team members’ excellent execution and passion for pawn, and we are enthusiastic about the year ahead."

CONSOLIDATED RESULTS

Three Months Ended September 30

As Reported

Adjusted1

in millions, except per share amounts

2021

2020

2021

2020

Total Revenues

$

192.4

$

166.8

$

188.7

$

166.8

Net Revenues

$

119.3

$

89.6

$

117.2

$

89.6

Income (Loss), Before Tax

$

4.5

$

(28.7

)

$

9.0

$

3.3

Net Income (Loss)

$

1.6

$

(23.3

)

$

6.0

$

4.2

Diluted Earnings (Loss) Per Share

$

0.03

$

(0.42

)

$

0.11

$

0.08

EBITDA

$

17.2

$

(16.0

)

$

18.1

$

12.3

Twelve Months Ended September 30

As Reported

Adjusted1

in millions, except per share amounts

2021

2020

2021

2020

Total Revenues

$

729.6

$

822.8

$

724.1

$

822.8

Net Revenues

$

449.5

$

449.2

$

446.3

$

451.5

Income (Loss), Before Tax

$

16.1

$

(70.1

)

$

31.1

$

29.4

Net Income (Loss)

$

8.6

$

(68.5

)

$

21.0

$

21.6

Diluted Earnings (Loss) Per Share

$

0.15

$

(1.24

)

$

0.38

$

0.39

EBITDA

$

66.4

$

(20.0

)

$

67.5

$

66.3

  • Diluted earnings per share was $0.03 for the fourth quarter, compared to a loss of $0.42. On an adjusted basis, diluted earnings per share was $0.11, compared to $0.08. For the full year, diluted earnings per share was $0.15, compared to a loss of $1.24. On an adjusted basis, diluted earnings per share for the year was $0.38, compared to $0.39.

  • For the fourth quarter, income before taxes improved 116% from a loss of $28.7 million to income of $4.5 million. Adjusted EBITDA increased 47% from $12.3 million to $18.1 million. For the full year, income before taxes improved by 123% to $16.1 million from a loss of $70.1 million and adjusted EBITDA increased 2% to $67.5 million from $66.3 million.

  • PLO significantly increased to $175.9 million, up 34% and 12% on a sequential basis. On a same-store basis2, PLO increased 29% year-over-year and 12% sequentially.

  • In the fourth quarter, total revenues increased 15% and net revenues increased 33%, reflecting improved PSC and merchandise sales gross profit. For the full year, total revenues decreased 11% and net revenues were flat, reflecting lower average PLO (driving lower PSC) for the year, offset by improved sales profit margins.

  • Merchandise sales gross profit margin was 41% in the fourth quarter, up from 31%. For the full year, merchandise sales gross profit margin was 42% compared to 33%. These improvements reflect the commitment to improving the core business by driving down aged general merchandise (now less than 1% of total general merchandise inventory) and focusing on selling inventory in the first 90 days.

  • For the fourth quarter, PSC increased 32% due to an increase in the average PLO balance during the quarter. Though PLO significantly increased during the year, average PLO for fiscal 2021 was lower than in fiscal 2020, which led to a full year PSC decrease of 5%.

  • Net inventory increased 16% year-over-year and 20% sequentially, reflecting an increase in pawn activity. Due to significant improvements at the store level, inventory turnover remained strong at a flat 2.8x for the fourth quarter and increased from 2.4x to 2.9x for the year.

  • In the fourth quarter, store expenses increased $11.1 million or 14.3%, primarily due to the store count increase of 14.2% and increased incentive compensation. On a same-store basis, store expenses increased 7%. In addition, general and administrative expenses increased $11.8 million or 314%, primarily due to increased incentive compensation. For the full year, when removing the fiscal 2020 incentive compensation reversal of $20.9 million, store expenses on a same-store basis decreased $15.9 million or 5% and G&A expenses decreased $14.6 million or 21%.

  • Cash and cash equivalents at the end of the quarter was $253.7 million, down $50.9 million or 17% and $30.0 million or 11% on a sequential basis. The decrease is primarily due to the increase in PLO and the acquisition of new stores.

SEGMENT RESULTS

U.S. Pawn

  • PLO continued to increase, ending the year up 28% (27% on a same store basis) and up 16% compared to the end of the third quarter.

  • In the fourth quarter, total revenue was up 12% and net revenues increased 21%, reflecting increasing PSC, higher sales and improved merchandise sales gross profit. For the full year, total revenues decreased 13% and net revenues decreased 3%, reflecting lower average PLO for the year (driving lower PSC) offset by improved sales profit margins.

  • For the fourth quarter, merchandise sales gross profit gross margins continued to remain high at 43% compared to 37%. During the year, merchandise sales gross profit gross margins increased 768 bps to 44%, reflecting a focus on improving retailing and lower levels of aged general merchandise inventory (which improved to 0.7% from 4.3% of total merchandise inventory).

  • PSC increased 22% in the fourth quarter as a result of higher average PLO. Though PLO significantly increased during the year, the average PLO for the year was lower than in fiscal 2020 which led to a full year PSC decrease of 6%.

  • Net inventory increased 9% and 19% sequentially. Inventory turnover continued to improve, increasing to 2.7x from 2.5x for the prior year quarter and increasing to 2.7x from 2.3x for the year.

  • In the fourth quarter, store expenses increased 9% or $5.4 million to $65.1 million, primarily due to the increase of incentive compensation of approximately $7.0 million, reflecting improved performance compared to the prior year. For the full year, when removing the fiscal 2020 incentive compensation reversal, store expenses on a same-store basis decreased $11.9 million or 4%, reflecting expense optimization.

  • Segment contribution increased $13.3 million to $20.9 million in the fourth quarter and increased $12.4 million to $85.5 million for the year. On an adjusted basis, segment contribution increased $10.2 million in the quarter and decreased $3.5 million in the year.

  • Segment store count increased by 11 during the year resulting from the acquisition in the Houston, Texas area completed in May.

Latin America Pawn

  • PLO significantly improved, increasing 60% to $40.0 million (51% on constant currency basis). On a sequential basis, PLO was flat compared to a 5% sequential decrease in the prior-year quarter. On a same store basis, PLO increased 37% (29% on a constant currency basis) and decreased 2% (increased 2% on a constant currency basis) sequentially.

  • In the fourth quarter, total revenue was up 27% (18% on a constant currency basis), while net revenues increased 91% (78% on a constant currency basis). For the fiscal year, total revenues were down 3% (6% on a constant currency basis), while net revenues increased by 14% (11% on a constant currency basis) reflecting significantly improved margins.

  • Merchandise sales gross profit margins significantly improved in the fourth quarter to 34% compared to 13%. During the year, merchandise sales gross profit gross margins increased 1,270 bps to 35% (up 1,266 bps to 35% on a constant currency basis), reflecting a focus on improving retailing and lower levels of aged general merchandise inventory (which improved to 0.3% from 7.8% of total merchandise inventory).

  • PSC increased by 66% in the fourth quarter to $20.0 million (up 55% to $18.7 million on a constant currency basis) as a result of higher average PLO for the quarter. For the fiscal year, PSC increased 1% (down 2% on a constant currency basis) as a result of lower average PLO for the year.

  • Net inventory increased 42% (34% on a constant currency basis), but was up 24% sequentially (up 31% on a constant currency basis). Inventory turnover remains strong at 3.3x down from 3.8x for the prior year quarter and increased substantially for the year to 3.7x from 2.8x.

  • In the fourth quarter, store expenses increased $7.1 million or 43% ($4.9 million or 30% on a constant currency basis) primarily due to growth in store count and the increase in incentive compensation, reflecting improved performance compared to fiscal 2020. Same-store expenses increased $2.4 million or 15% ($0.9 million or 5% on a constant currency basis). For the full year, when removing the fiscal 2020 incentive compensation reversal, store expenses on a same-store basis increased $1.7 million or 2% (down 1% on a constant currency basis).

  • Segment contribution for the fourth quarter was $6.1 million ($5.8 million on a constant currency basis), compared to a segment loss of $3.9 million in the prior year quarter. For the year, segment contribution was up by $44.0 million to $17.3 million (a $43.2 million increase to $16.7 million on a constant currency basis). On an adjusted basis, the increase in segment contribution for the fourth quarter was $7.0 million to $6.3 million and the increase for the year was $5.2 million to $17.6 million.

  • Segment store count increased by 5 de novo stores during the fourth quarter and increased by 132 stores for the year through acquisitions and de novo stores.

FORM 10-K

EZCORP’s Annual Report on Form 10-K for fiscal 2021 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, November 18, 2021, at 7:00 am Central Time to discuss Fourth Quarter and Full Year Fiscal 2021 results. Analysts and institutional investors may participate on the conference call by dialing (833) 579-0921, Conference ID: 1962857, or internationally by dialing (778) 560-2579. 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 transactions in the United States and Latin America. We also sell merchandise, primarily collateral forfeited from pawn lending operations and pre-owned and recycled 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 1000 Index and Nasdaq Composite Index.

Follow us on social media:

Facebook EZPAWN Official https://www.facebook.com/EZPAWN/

EZCORP Instagram Official https://www.instagram.com/ezcorp_official/

EZPAWN Instagram Official https://www.instagram.com/ezpawnofficial/

EZCORP Linked In https://www.linkedin.com/company/ezcorp/

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, current or future litigation and risks associated with the COVID-19 pandemic. 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,

Twelve Months Ended
September 30,

(in thousands, except per share amounts)

2021

2020

2021

2020

(Unaudited)

Revenues:

Merchandise sales

$

111,982

$

105,118

$

442,798

$

498,213

Jewelry scrapping sales

7,518

6,244

26,025

47,953

Pawn service charges

72,840

55,231

260,196

272,638

Other revenues

104

246

532

3,973

Total revenues

192,444

166,839

729,551

822,777

Merchandise cost of goods sold

66,346

72,770

257,218

334,481

Jewelry scrapping cost of goods sold

6,772

4,512

22,848

38,041

Other cost of revenues

(39

)

1,054

Net revenues

119,326

89,596

449,485

449,201

Operating expenses:

Store expenses

88,576

77,506

330,837

336,770

General and administrative

15,625

3,778

56,495

54,133

Impairment of goodwill, intangible and other assets

7,606

54,666

Depreciation and amortization

7,592

7,653

30,672

30,827

(Gain) loss on sale or disposal of assets and other

(7

)

(459

)

83

801

Other charges

(268

)

20,388

229

20,388

Total operating expenses

111,518

116,472

418,316

497,585

Operating income (loss)

7,808

(26,876

)

31,169

(48,384

)

Interest expense

5,635

5,883

22,177

22,472

Interest income

(559

)

(761

)

(2,477

)

(3,173

)

Equity in net (income) loss of unconsolidated affiliates

(1,394

)

(3,467

)

(3,803

)

2,429

Other (income) expense

(401

)

198

(790

)

(17

)

Income (loss) before income taxes

4,527

(28,729

)

16,062

(70,095

)

Income tax expense (benefit)

2,974

(5,389

)

7,450

(1,632

)

Net income (loss)

$

1,553

$

(23,340

)

$

8,612

$

(68,463

)

Basic earnings (loss) per share

$

0.03

$

(0.42

)

$

0.15

$

(1.24

)

Diluted earnings (loss) per share

$

0.03

$

(0.42

)

$

0.15

$

(1.24

)

Weighted-average basic shares outstanding

56,057

55,070

55,744

55,313

Weighted-average diluted shares outstanding

56,441

55,070

55,949

55,313

EZCORP, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

September 30,
2021

September 30,
2020

Assets:

Current assets:

Cash and cash equivalents

$

253,667

$

304,542

Restricted cash

9,957

8,011

Pawn loans

175,901

131,323

Pawn service charges receivable, net

29,337

20,580

Inventory, net

110,989

95,891

Notes receivable, net

Prepaid expenses and other current assets

31,010

32,903

Total current assets

610,861

593,250

Investments in unconsolidated affiliates

37,724

32,458

Property and equipment, net

53,811

56,986

Right-of-use asset, net

200,990

183,809

Goodwill

285,758

257,582

Intangible assets, net

62,104

58,638

Notes receivable, net

1,181

1,148

Deferred tax asset, net

9,746

8,931

Other assets

4,736

4,221

Total assets

$

1,266,911

$

1,197,023

Liabilities and equity:

Current liabilities:

Current maturities of long-term debt, net

$

$

213

Accounts payable, accrued expenses and other current liabilities

90,268

71,504

Customer layaway deposits

12,557

11,008

Lease liability

52,263

49,742

Total current liabilities

155,088

132,467

Long-term debt, net

264,186

251,016

Deferred tax liability, net

3,684

524

Lease liability

161,330

153,040

Other long-term liabilities

10,385

10,849

Total liabilities

594,673

547,896

Commitments and contingencies (Note 13)

Stockholders’ equity:

Class A Non-Voting Common Stock, par value $0.01 per share; shares authorized: 100 million; 53,086,438 issued and outstanding as of September 30, 2021; and issued and outstanding of 52,332,848 as of September 30, 2020

530

521

Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171 as of September 30, 2021 and 2020

30

30

Additional paid-in capital

403,312

398,475

Retained earnings

326,781

318,169

Accumulated other comprehensive loss

(58,415

)

(68,068

)

Total equity

672,238

649,127

Total liabilities and equity

$

1,266,911

$

1,197,023

EZCORP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve Months Ended
September 30,

(in thousands)

2021

2020

Operating activities:

Net income (loss)

$

8,612

$

(68,463

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

30,672

30,827

Amortization of debt discount and deferred financing costs

13,797

13,200

Amortization of right-of-use asset

48,480

45,649

Accretion of notes receivable discount and deferred compensation fee

(821

)

Deferred income taxes

3,283

(8,393

)

Impairment of goodwill, intangibles and other assets

54,666

Other adjustments

(185

)

1,652

Provision for inventory reserve

(8,003

)

2,577

Stock compensation expense

3,946

(5,094

)

Equity in net (income) loss from investment in unconsolidated affiliates

(3,803

)

2,429

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

Service charges and fees receivable

(7,332

)

11,021

Inventory

371

14,466

Prepaid expenses, other current assets and other assets

7,373

(875

)

Accounts payable, accrued expenses and other liabilities

(54,209

)

(37,401

)

Customer layaway deposits

1,256

(1,647

)

Income taxes

2,180

(4,715

)

Net cash provided by operating activities

46,438

49,078

Investing activities:

Loans made

(601,638

)

(568,368

)

Loans repaid

351,092

394,469

Recovery of pawn loan principal through sale of forfeited collateral

208,551

304,323

Capital expenditures, net

(23,601

)

(28,526

)

Acquisitions, net of cash acquired

(19,015

)

Principal collections on notes receivable

8,000

Net cash (used in) provided by investing activities

(84,611

)

109,898

Financing activities:

Taxes paid related to net share settlement of equity awards

(839

)

(1,459

)

Payout of deferred consideration

(350

)

Proceeds from borrowings, net of issuance costs

912

Payments on assumed debt and other borrowings

(15,414

)

(198

)

Repurchase of common stock

...

(5,158

)

Net cash used in financing activities

(16,253

)

(6,253

)

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

5,497

(2,612

)

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

(48,929

)

150,111

Cash and cash equivalents and restricted cash at beginning of period

312,553

162,442

Cash and cash equivalents and restricted cash at end of period

...