Pawn Loans Outstanding and Record Sales Driving Strong Revenue and Earnings Growth

AUSTIN, Texas--(BUSINESS WIRE)--EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its first quarter ended December 31, 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.

FIRST QUARTER HIGHLIGHTS

  • Pawn loans outstanding (PLO) up 19% to $209.9 million.
  • Total revenue increased 20%, and gross profit increased 15%.
  • Merchandise sales gross margin remains within our targeted range at 36%.
  • Net income for the quarter was $16.8 million, an increase of $1.1 million.
  • Diluted earnings per share of $0.25 was up from $0.21. On an adjusted basis1, diluted earnings per share was $0.28, compared to $0.22 in the prior-year quarter.
  • Return on earning assets (ROEA) remains strong at 163%.
  • Refinanced convertible debt, that included the repurchase of $109.4 million convertible notes due 2024 and $69.1 million convertible notes due 2025, and the issuance of $230.0 million due 2029.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Lachie Given stated, “We began fiscal 2023 with another outstanding quarter, continuing to execute on our three-year strategic plan. Our PLO was the highest on record for this quarter, and we achieved our strongest ever quarterly sales result. The challenging macro-economic backdrop continues to drive increased demand for our two core products, which are providing solutions for our customers' short-term cash needs and selling second-hand goods. And our team’s relentless focus on improving the performance of every one of our 1,186 stores, continues to drive our excellent financial and operating results.

"We remain committed to market-leading customer service, by investing in our store-based and support teams, technology improvements, process efficiencies and automation, as we provide our customers with a fast, convenient and respectful solution to address their short-term cash needs. Additionally, our neighborhood retail locations provide affordable pre-owned and recycled general merchandise and jewelry to our cost-conscious and environmentally concerned consumers.

“During the first quarter, we acquired nine stores in the Houston, Texas area and one store in Las Vegas, Nevada. We opened two de novo stores in Latin America and expect to open more this quarter. We now have 2.4 million EZ+ Rewards members across all geographies, an increase of 26% over the fourth quarter of 2022.

“We proactively addressed our near-term convertible debt maturities with a successful placement of $230 million of 7-year convertible notes, materially de-risking the balance sheet while providing a stable, low cash-cost capital base from which to continue to grow. We retired approximately $178.5 million of convertible notes maturing in 2024 and 2025 and repurchased approximately $5 million in shares as part of this financing, in addition to the $2 million in shares we acquired during the quarter as part of our announced buy-back program.

“During the quarter, we launched new initiatives to enhance work-life balance for our team members and increase employer competitiveness at all levels. I believe we have the best, most passionate, engaged and productive team members in the industry. We are committed to doing everything we can to retain and incentivize them because it is their operational excellence that drives our financial results and ultimately enhances value for all shareholders,” concluded Given.

CONSOLIDATED RESULTS

Three Months Ended December 31

As Reported

Adjusted1

in millions, except per share amounts

2022

2021

2022

2021

Total revenues

$

264.3

$

221.0

$

261.6

$

221.0

Gross profit

$

152.5

$

132.1

$

151.1

$

132.1

Income before tax

$

24.5

$

21.3

$

28.0

$

21.4

Net income

$

16.8

$

15.7

$

21.4

$

16.0

Diluted earnings per share

$

0.25

$

0.21

$

0.28

$

0.22

EBITDA (non-GAAP measure)

$

38.1

$

31.0

$

37.9

$

31.1

  • Diluted earnings per share were $0.25, up from $0.21. On an adjusted basis, diluted earnings per share were $0.28, up from $0.22.
  • Income before taxes improved to $24.5 million from $21.3 million, while adjusted EBITDA increased 22% to $37.9 million.
  • PLO increased 19% to $209.9 million, up $33.3 million. On a same-store basis2, PLO increased 16% due to increased loan demand, reflecting growth above pre-COVID levels.
  • Total revenues increased 20% and gross profit increased 15%, reflecting improved pawn service charge (PSC) revenue, merchandise sales and merchandise sales gross profit.
  • PSC increased 22% as a result of higher average PLO.
  • Merchandise sales gross margin remains within our targeted range at 36%. Aged general merchandise has increased to 1.6% of total general merchandise inventory.
  • Net inventory increased 31%, reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 2.8x for the quarter, down from 3.0x.
  • Store expenses increased 16%, primarily due to increased labor in-line with store activity, and to a lesser extent, expenses related to our loyalty program and rent associated with lease renewals. On a same-store basis, store expenses increased 14%. General and administrative expenses were flat.
  • Cash and cash equivalents at the end of the quarter was $207.7 million, down 11% year-over-year. The decrease is primarily due to the increase in PLO and inventory, the acquisition of new stores, and strategic investments, partially offset by the net cash proceeds associated with the convertible debt refinancing.

SEGMENT RESULTS

U.S. Pawn

  • PLO ended the quarter at $166.9 million, up 18% or 15% on a same store basis.
  • Total revenue was up 19% and gross profit increased 13%, reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.
  • PSC increased 23% as a result of higher average PLO.
  • Merchandise sales gross margin decreased to 38% from 43%, reflecting a more normalized operating environment. Aged general merchandise remains less than 1% of total general merchandise inventory.
  • Net inventory increased 31% reflecting a return towards normalized inventory levels. Inventory turnover decreased to 2.6x from 2.8x.
  • Store expenses increased 13%, primarily due to increased labor in-line with store activity, and to a lesser extent, expenses related to our loyalty program and rent associated with lease renewals.
  • Segment contribution increased 14% to $39.3 million.
  • Segment store count increased by 10 stores during this quarter due to two acquisitions.

Latin America Pawn

  • PLO improved to $43.0 million, up 21% (17% on constant currency basis). On a same store basis, PLO increased 19% (15% on a constant currency basis).
  • Total revenue was up 21% (16% on constant currency basis) and gross profit increased 23% (18% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.
  • PSC increased 20% (15% on a constant currency basis) as a result of higher average PLO.
  • Merchandise sales gross margin increased from 29% to 30%. Aged general merchandise inventory increased to 2.9% from 0.5% of total merchandise inventory.
  • Net inventory increased 32% (27% on a constant currency basis), reflecting a return towards normalized inventory levels. Inventory turnover remains strong at 3.3x, down from 3.6x.
  • Store expenses increased 25% (20% on a constant currency basis), primarily due to increased labor in-line with store activity, and to a lesser extent, expenses related to our loyalty program and rent associated with lease renewals. Same-store expenses increased 22% (18% on a constant currency basis).
  • Segment contribution increased 16% (12% on a constant currency basis) to $7.5 million. On an adjusted basis, segment contribution was up 15% to $7.5 million.
  • Segment store count increased by 1 store due to the net impact of opening 2 de novo stores and consolidating 1 store during the quarter.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended December 31, 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, February 2, 2023, at 8:00 am Central Time to discuss First Quarter Fiscal 2023 results. Analysts and institutional investors may participate on the conference call by dialing (844) 200-6205, Conference ID: 341829, 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 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“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.

2“Same Store” basis, which is a financial measure, includes stores open the entirety of the comparable periods.

EZCORP, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended December 31,

(in thousands, except per share amounts)

2022

2021

(Unaudited)

Revenues:

Merchandise sales

$

163,787

$

137,720

Jewelry scrapping sales

7,884

6,944

Pawn service charges

92,593

76,025

Other revenues, net

63

305

Total revenues

264,327

220,994

Merchandise cost of goods sold

104,877

83,111

Jewelry scrapping cost of goods sold

6,953

5,772

Gross profit

152,497

132,111

Operating expenses:

Store expenses

100,803

86,771

General and administrative

15,476

15,545

Depreciation and amortization

7,988

7,574

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

(16

)

5

Total operating expenses

124,251

109,895

Operating income

28,246

22,216

Interest expense

6,190

2,431

Interest income

(664

)

(304

)

Equity in net income of unconsolidated affiliates

(1,584

)

(1,138

)

Other income

(234

)

(120

)

Income before income taxes

24,538

21,347

Income tax expense

7,760

5,626

Net income

$

16,778

$

15,721

Basic earnings per share

$

0.30

$

0.28

Diluted earnings per share

$

0.25

$

0.21

Weighted-average basic shares outstanding

56,308

56,183

Weighted-average diluted shares outstanding

83,779

81,948

EZCORP, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

December 31, 2022

December 31, 2021

(Unaudited)

Assets:

Current assets:

Cash and cash equivalents

$

207,658

$

233,274

Restricted cash

8,359

8,692

Pawn loans

209,855

176,586

Pawn service charges receivable, net

34,921

29,765

Inventory, net

156,064

119,313

Prepaid expenses and other current assets

45,559

31,209

Total current assets

662,416

598,839

Investments in unconsolidated affiliates

37,789

42,513

Other investments

39,220

16,500

Property and equipment, net

55,612

52,201

Right-of-use asset, net

230,554

201,527

Goodwill

297,361

284,619

Intangible assets, net

58,029

61,458

Notes receivable, net

1,224

1,190

Deferred tax asset, net

12,428

15,623

Other assets

7,682

5,851

Total assets

$

1,402,315

$

1,280,321

Liabilities and equity:

Current liabilities:

Accounts payable, accrued expenses and other current liabilities

$

69,930

$

75,531

Customer layaway deposits

16,276

13,142

Operating lease liabilities, current

52,799

51,843

Total current liabilities

139,005

140,516

Long-term debt, net

358,984

311,844

Deferred tax liability, net

221

Operating lease liabilities

188,730

161,841

Other long-term liabilities

10,261

11,398

Total liabilities

696,980

625,820

Commitments and Contingencies

Stockholders’ equity:

Class A Non-voting Common Stock, par value $0.01per share; shares authorized: 100 million; issued and outstanding: 52,877,930 as of December 31, 2022; 53,344,218 as of December 31, 2021; and 53,454,885 as of September 30, 2022

529

533

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

30

30

Additional paid-in capital

343,012

339,955

Retained earnings

414,929

369,359

Accumulated other comprehensive loss

(53,165

)

(55,376

)

Total equity

705,335

654,501

Total liabilities and equity

$

1,402,315

$

1,280,321

EZCORP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended December 31,

(in thousands)

2022

2021

(Unaudited)

Operating activities:

Net income

$

16,778

$

15,721

Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation and amortization

7,988

7,574

Amortization of debt discount and deferred financing costs

378

374

Non-cash lease expense

13,596

12,694

Deferred income taxes

656

587

Other adjustments

(91

)

(30

)

Provision for inventory reserve

532

(820

)

Stock compensation expense

1,886

1,698

Equity in net income of unconsolidated affiliates

(1,584

)

(1,138

)

Loss on extinguishment of debt

3,545

Changes in operating assets and liabilities:

Service charges and fees receivable

(691

)

(419

)

Inventory

(1,881

)

(2,314

)

Prepaid expenses, other current assets and other assets

(2,280

)

(2,330

)

Accounts payable, accrued expenses and other liabilities

(34,761

)

(29,531

)

Customer layaway deposits

(752

)

551

Income taxes

6,574

4,741

Dividends from unconsolidated affiliates

1,775

1,660

Net cash provided by operating activities

11,668

9,018

Investing activities:

Loans made

(189,074

)

(166,480

)

Loans repaid

109,125

95,542

Recovery of pawn loan principal through sale of forfeited collateral

88,030

65,297

Capital expenditures, net

(7,182

)

(4,985

)

Acquisitions, net of cash acquired

(12,884

)

Issuance of notes receivable

(15,500

)

(1,000

)

Investment in unconsolidated affiliates

(2,133

)

(2,477

)

Investment in other investments

(15,000

)

(16,500

)

Net cash used in investing activities

(44,618

)

(30,603

)

Financing activities:

Taxes paid related to net share settlement of equity awards

(1,138

)

(792

)

Proceeds from issuance of debt

230,000

Debt issuance cost

(7,403

)

Cash paid on extinguishment of debt

(1,951

)

Payments on debt

(178,488

)

Repurchase of common stock

(7,027

)

Net cash provided by (used in) financing activities

33,993

(792

)

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

605

719

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

1,648

(21,658

)

Cash, cash equivalents and restricted cash at beginning of period

214,369

263,624

Cash, cash equivalents and restricted cash at end of period

$

216,017

$

241,966

EZCORP, Inc.

OPERATING SEGMENT RESULTS

Three Months Ended December 31, 2022 (Unaudited)

(in thousands)

U.S. Pawn

Latin America Pawn

Other Investments

Total Segments

Corporate Items

Consolidated

Revenues:

Merchandise sales

$

118,314

$

45,473

$

$

163,787

$

$

163,787

Jewelry scrapping sales

7,176

708

7,884

7,884

Pawn service charges

69,310

23,283

92,593

92,593

Other revenues

25

16

22

63

63

Total revenues

194,825

69,480

22

264,327

264,327

Merchandise cost of goods sold

73,256

31,621

104,877

104,877

Jewelry scrapping cost of goods sold

6,216

737

6,953

6,953

Other cost of revenues

Gross profit

115,353

37,122

22

152,497

152,497

Store expenses

73,304

27,499

100,803

100,803

General and administrative

(3

)

(3

)

15,479

15,476

Depreciation and amortization

2,755

2,215

4,970

3,018

7,988

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

3

(19

)

(16

)

(16

)

Interest expense

6,190

6,190

Interest income

(169

)

(169

)

(495

)

(664

)

Equity in net income of unconsolidated affiliates

(1,584

)

(1,584

)

(1,584

)

Other (income) expense

70

4

74

(308

)

(234

)

Segment contribution

$

39,291

$

7,529

$

1,602

$

48,422

Income (loss) before income taxes

$

48,422

$

(23,884

)

$

24,538

Three Months Ended December 31, 2021 (Unaudited)

(in thousands)

U.S. Pawn

Latin America Pawn

Other Investments

Total Segments

Corporate Items

Consolidated

Revenues:

Merchandise sales

$

102,078

$

35,642

$

$

137,720

$

$

137,720

Jewelry scrapping sales

4,980

1,964

6,944

6,944

Pawn service charges

56,557

19,468

76,025

76,025

Other revenues

22

240

43

305

305

Total revenues

163,637

57,314

43

220,994

220,994

Merchandise cost of goods sold

57,832

25,279

83,111

83,111

Jewelry scrapping cost of goods sold

3,975

1,797

5,772

5,772

Gross profit

101,830

30,238

43

132,111

132,111

Segment and corporate expenses (income):

Store expenses

64,689

22,082

86,771

86,771

General and administrative

15,545

15,545

Depreciation and amortization

2,670

1,980

4,650

2,924

7,574

Gain on sale of disposal of assets and other

5

5

5

Interest expense

2,431

2,431

Interest income

(182

)

(182

)

(122

)

(304

)

Equity in net income of unconsolidated affiliates

(1,138

)

(1,138

)

(1,138

)

Other (income) expense

(134

)

(12

)

(146

)

26

(120

)

Segment contribution

$

34,471

$

6,487

$

1,193

$

42,151

Income (loss) before income taxes

$

42,151

$

(20,804

)

$

21,347

EZCORP, Inc.

STORE COUNT ACTIVITY

(Unaudited)

Three Months Ended December 31, 2022

U.S. Pawn

Latin America Pawn

Consolidated

As of September 30, 2022

515

660

1,175

New locations opened

2

2

Locations acquired

10

10

Locations sold, combined or closed

(1

)

(1

)

As of December 31, 2022

525

661

1,186

Three Months Ended December 31, 2021

U.S. Pawn

Latin America Pawn

Consolidated

As of September 30, 2021

516

632

1,148

New locations opened

1

1

Locations acquired

Locations sold, combined or closed

As of December 31, 2021

516

633

1,149

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, Guatemalan quetzales 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.

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. In addition, we have an equity method investment that is denominated in Australian dollars and is translated into U.S. dollars. 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.

Contacts

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

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