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EZCORP Reports Third Quarter 2022 Results

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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.

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.

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...