EZCORP Reports Third Quarter 2022 Results

Record High Pawn Loans Outstanding Driving Strong Earnings Momentum

AUSTIN, Texas, August 03, 2022--(BUSINESS WIRE)--EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its third quarter ended June 30, 2022.

Unless otherwise noted, all amounts in this release are in conformity with U.S. generally accepted accounting principles ("GAAP") and comparisons shown are to the same period in the prior year.

THIRD QUARTER HIGHLIGHTS

• Pawn loans outstanding (PLO) up 30% to a record-high of $204.2 million.

• Total revenue increased 24%, and gross profit¹ increased 20%.

• Merchandise sales gross margin was at the high end of our target range at 38%.

• Net income was $12.2 million, an increase of $14.8 million.

• Diluted earnings per share of $0.17 was up significantly from a loss of $0.05. On an adjusted basis², diluted earnings per share was $0.16, compared to a loss of $0.03 in the prior-year quarter.

• Return on earning assets (ROEA) remains strong at 165%.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Lachie Given stated, "We have delivered another outstanding quarter of financial results. PLO, the most significant driver of revenue and earnings, hit a record high, surpassing pre-COVID levels on a total and same-store basis. This has driven significant increases in pawn service charges (PSC), and as we continue to drive strong sales margins and gain cost efficiencies across the business, we have delivered very substantial earnings improvement for the quarter."

"With persistent macro issues fueling inflation, we are proud to offer our customers a unique and essential service to address their short-term cash needs. We are also a neighborhood recycling business that extends the useful life of millions of items every year, and are working to expand our customer base of environmentally-conscious consumers across the U.S. and Latin America.

"During the third quarter, we opened eight de novo stores in Latin America and acquired three stores in the Dallas, Texas area. Our EZ+ Rewards program continues to grow across all of our regions, and we now have over 1.4 million enrolled customers. Furthering our commitment to investing in our people, we introduced Career Week for our 6,800 employees to reinforce our new Career Framework and Career Path opportunities.

"The improvement in our financial results is the outcome of our team’s focus and commitment to People, Pawn, and Passion, and on providing the best possible experience for our customers. I am extremely proud of our entire team for delivering such exceptional operating and financial results for our shareholders."

CONSOLIDATED RESULTS

Three Months Ended June 30
in millions, except per share amounts
Total revenues	$	215.8		$	174.0			$	215.8		$	174.0
Gross profit1	$	129.5		$	108.0			$	129.5		$	108.0
Income (loss) before tax	$	13.1		$	(0.8	)		$	14.9		$	3.6
Net income (loss)	$	12.2		$	(2.6	)		$	11.0		$	(1.4	)
Diluted earnings (loss) per share	$	0.17		$	(0.05	)		$	0.16		$	(0.03	)
EBITDA (non-GAAP measure)	$	23.3		$	11.7			$	25.1		$	12.5

• Diluted earnings per share were $0.17 for the third quarter, up from a loss of $0.05. On an adjusted basis, diluted earnings per share were $0.16, up from a loss of $0.03.

• Income before taxes improved to $13.1 million from a loss of $0.8 million, while adjusted EBITDA increased 100% to $25.1 million.

• PLO increased 30% to $204.2 million, up $47.0 million. On a same-store basis³, PLO increased 30% to its highest level due to increased loan demand reflecting a recovery above pre-COVID levels.

• Total revenues increased 24%, and gross profit increased 20%, reflecting improved pawn service charge (PSC) revenue and merchandise sales.

• PSC increased 33% due to an increase in the average PLO balance during the quarter.

• Merchandise sales gross margin was at the high end of our target range at 38%, reflecting our commitment to improving the core business by decreasing aged general merchandise (now less than 1% of total general merchandise inventory) and focusing on selling inventory in the first 90 days.

• Net inventory increased 44% reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 2.8x for the quarter, down from 3.1x.

• Store expenses increased 9%, due to increased store count and labor costs in line with increased store activity. On a same-store basis, store expenses increased 5%.

• General and administrative expenses increased 28%, primarily due to a litigation accrual and increased performance-based incentive compensation.

• Cash and cash equivalents at the end of the quarter was $222.3 million, down 22% year-over-year. The decrease is primarily due to the increase in PLO and inventory.

SEGMENT RESULTS

U.S. Pawn

• PLO continued to increase, ending the quarter at $159.7 million, up 36% (36% on a same store basis).

• Total revenue was up 22% and gross profit increased 18%, reflecting increasing PSC.

• PSC increased 35% as a result of higher average PLO.

• Merchandise sales gross margin decreased to 41% from 46% as expected. Aged general merchandise inventory improved to 0.4% from 1.2% of total general merchandise inventory.

• Net inventory increased 47%. Inventory turnover decreased to 2.5x from 2.8x due to increased inventory levels in the current quarter and stimulus impacts in the prior year.

• Store expenses increased 6% primarily due to store count and labor increases in line with store activity.

• Segment contribution increased 64% to $29.8 million.

• Segment store count increased by three acquired stores during the quarter.

Latin America Pawn

• PLO improved to $44.5 million or 11% (13% on constant currency basis). On a same store basis, PLO increased 9% (10% on a constant currency basis).

• Total revenue was up 31% (same on a constant currency basis), while gross profit increased 26% (same on a constant currency basis).

• PSC increased to $21.0 million or 28% (same on a constant currency basis) as a result of higher average PLO for the quarter.

• Merchandise sales gross margin decreased from 35% to 29%, reflecting a return to more normalized margins.

• Net inventory increased 34% (35% on a constant currency basis). Inventory turnover remains strong at 3.7x, down from 4.0x.

• Store expenses increased 21% (same on a constant currency basis) primarily due to year-over-year store count and growth in labor in line with increased store activity. Same-store expenses increased 4% (6% on a constant currency basis).

• Segment contribution increased to $6.1 million or 71% (48% on a constant currency basis), compared to $3.6 million.

• Segment store count increased by eight de novo stores opened during the quarter.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 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.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, August 4, 2022, at 7:00 am Central Time to discuss Third Quarter Fiscal 2022 results. Analysts and institutional investors may participate on the conference call by dialing (844) 200-6205, Conference ID: 464794, or internationally by dialing (929) 526-1599. 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.

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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.

Note: Percentages are calculated from the underlying numbers in thousands and, as a result, may not agree to the percentages calculated from numbers in millions.
¹"We have relabeled "net revenues" to "gross profit" throughout our filings, which we believe will improve comparability across industries and companies. This change is effective for this and future filings.
²"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.
³"Same Store" basis, which is a financial measure, includes stores open the entirety of the comparable periods.

EZCORP, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended June 30,								Nine Months Ended June 30,
(in thousands, except per share amounts)	2022				2021				2022				2021
Revenues:
Merchandise sales	$	128,334			$	107,808			$	399,610			$	330,816
Jewelry scrapping sales		7,168				5,673				19,802				18,507
Pawn service charges		80,291				60,431				232,999				187,356
Other revenues, net		49				121				407				428
Total revenues		215,842				174,033				652,818				537,107
Merchandise cost of goods sold		80,167				60,539				245,524				190,872
Jewelry scrapping cost of goods sold		6,167				5,473				16,747				16,076
Gross profit		129,508				108,021				390,547				330,159
Operating expenses:
Store expenses		89,430				81,803				261,944				242,261
General and administrative		18,715				14,589				46,487				40,870
Depreciation and amortization		7,746				7,419				22,770				23,080
(Gain) loss on sale or disposal of assets and other		—				—				(692	)			90
Other charges		—				497				—				497
Total operating expenses		115,891				104,308				330,509				306,798
Operating income		13,617				3,713				60,038				23,361
Interest expense		2,693				5,569				7,651				16,542
Interest income		(190	)			(512	)			(749	)			(1,918	)
Equity in net income of unconsolidated affiliates		(1,758	)			(643	)			(1,457	)			(2,409	)
Other expense (income)		(210	)			65				41				(389	)
Income (loss) before income taxes		13,082				(766	)			54,552				11,535
Income tax expense		867				1,804				11,729				4,476
Net income (loss)	$	12,215			$	(2,570	)		$	42,823			$	7,059
Basic earnings (loss) per share	$	0.22			$	(0.05	)		$	0.76			$	0.13
Diluted earnings (loss) per share	$	0.17			$	(0.05	)		$	0.59			$	0.13
Weighted-average basic shares outstanding		56,656				55,898				56,465				55,639
Weighted-average diluted shares outstanding		82,504				55,898				82,349				55,653

EZCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)	June 30,				June 30,				September 30,
	2022				2021				2021
	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	222,342			$	283,668			$	253,667
Restricted cash		8,614				13,795				9,957
Pawn loans		204,155				157,155				175,901
Pawn service charges receivable, net		32,000				24,965				29,337
Inventory, net		132,713				92,242				110,989
Prepaid expenses and other current assets		29,822				28,343				31,010
Total current assets		629,646				600,168				610,861
Investments in unconsolidated affiliates		43,384				35,387				37,724
Other investments		18,000				—				—
Property and equipment, net		51,505				55,630				53,811
Right-of-use asset, net		217,506				185,467				200,990
Goodwill		286,798				283,619				285,758
Intangible assets, net		61,017				61,922				62,104
Notes receivable, net		1,207				1,173				1,181
Deferred tax asset, net		15,773				10,292				9,746
Other assets		5,991				4,992				4,736
Total assets	$	1,330,827			$	1,238,650			$	1,266,911
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	76,566			$	84,966			$	90,268
Customer layaway deposits		14,927				11,884				12,557
Lease liability		53,358				47,241				52,263
Total current liabilities		144,851				144,091				155,088
Long-term debt, net		312,521				260,632				264,186
Deferred tax liability, net		307				1,309				3,684
Lease liability		175,489				149,342				161,330
Other long-term liabilities		11,905				10,058				10,385
Total liabilities		645,073				565,432				594,673
Commitments and Contingencies
Stockholders’ equity:
Class A Non-voting Common Stock, par value $0.01 per share; shares authorized: 100 million; issued and outstanding: 53,685,333 as of June 30, 2022; 53,086,438 as of June 30, 2021; and 53,086,438 as of September 30, 2021		537				530				530
Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171		30				30				30
Additional paid-in capital		343,763				402,522				403,312
Retained earnings		396,461				325,228				326,781
Accumulated other comprehensive loss		(55,037	)			(55,092	)			(58,415	)
Total stockholders' equity		685,754				673,218				672,238
Total liabilities and stockholders' equity	$	1,330,827			$	1,238,650			$	1,266,911

EZCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Nine Months Ended
	June 30,
(in thousands)	2022				2021
Operating activities:
Net income	$	42,823			$	7,059
Adjustments to rec...