EZCORP Announces Fourth Quarter and Full-Year Fiscal 2016 Results

Dec 7, 2016

AUSTIN, Texas, Dec. 07, 2016  -- EZCORP, Inc. (NASDAQ:EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its fourth quarter and fiscal year ended September 30, 2016.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP's Chief Executive Officer, said: "Fiscal 2016 was an important year for our company.  Our intense focus on market leadership in meeting our customers' desire for cash whenever they want it, combined with consistent execution, delivered strong operating results for our pawn businesses in the U.S. and Mexico.  We achieved market leading growth in same store pawn loans outstanding (PLO), the most influential driver of revenue and profitability, and continued to improve our customer experience metrics.

“In September, we completed the divestiture of Grupo Finmart, which frees up capital, management attention and other resources that we can now deploy to grow our pawn businesses.  We exit the year in a strong liquidity position, including $66 million of cash, $50 million available on our credit facility and $89.8 million in notes receivable from the Grupo Finmart sale, over half of which we expect to receive in fiscal 2017.

“From a financial standpoint, the positive pawn operating results were offset by $16.8 million of non-cash charges associated with our minority equity investment in Cash Converters International Limited recorded in the fourth quarter.

"Our intense focus on customer leadership and delivering an outstanding customer experience will continue with investments in process improvements, product and customer data analytics and feedback, technology, targeted incentives, and coaching and mentoring for our field team.  We are confident these initiatives will continue to improve our core pawn operating performance, which will provide our platform for profitable growth."

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.

OPERATIONAL HIGHLIGHTS

  • Strong pawn fundamentals:
    • For the year, pawn loans outstanding (PLO) up 4% to $149.8 million in the U.S. and up 7% to $17.5 million in Mexico.
    • Leading the U.S. market with average PLO of $288,100 per store.
    • Pawn service charges (PSC) up 5% to $60.3 million in the quarter and up 6% to $229.9 million for the year in the U.S., and up 5% to $8.3 million in the quarter and up 3% to $31.9 million for the year in Mexico.
    • Merchandise sales gross margin up 200bps to 35% in the quarter and up 400bps to 37% for the year.
  • Revenue growth from strong customer engagement and continued focus on expense management drove underlying business improvement:
    • Total revenue up $14.3 million in the fourth quarter and $10.5 million for the year.
    • Net revenue up $7.3 million (7%) in the fourth quarter and $25.2 million (6%) for the year.
    • Total operating expenses down $32.6 million (24%) in the quarter and $19.6 million (5%) for the year.
  • Strong liquidity position to support growth with $66 million cash balance at year-end plus $50 million undrawn on our credit facility.  Of the $89.8 million in notes receivable from the Grupo Finmart sale, EZCORP anticipates receiving $45.7 million in fiscal 2017. To date, $6.4 million has been received, consistent with the terms of the notes.

CONSOLIDATED RESULTS

Three-Months Ended September 30, 2016

  • Net loss from continuing operations attributable to EZCORP was $16.9 million ($(0.31) per share), compared to a net loss of $57.1 million ($(1.04) per share) in the prior year quarter. This improvement was driven by revenue growth and continued focus on expense management. The fourth quarter results included a $16.8 million non-cash impairment and equity loss on our investment in Cash Converters International Limited.
  • Total revenue was $184.6 million, up 8%, and net revenue was $106.9 million, up 7%. On a constant currency basis1, total revenue was $188.2 million, up 11%, with net revenue of $108.8 million, up 9%. Higher PLO balances drove increased PSC, and improved inventory management drove increased merchandise margins.
  • Total operating expenses for the fourth quarter decreased 24% (23% decrease a constant currency basis) as we continue to implement operational efficiencies. Corporate administrative expense decreased $10.8 million to $18.0 million, down 37%.

Fiscal Year Ended September 30, 2016

  • Net loss from continuing operations attributable to EZCORP was $8.0 million ($(0.15) per share), compared to a net loss of $51.3 million ($(0.94) per share). This increase reflects continued improvement in our U.S. and Mexico pawn businesses (as discussed below). Fiscal year 2016 results included $11.0 million non-cash impairment on our investment in Cash Converters International Limited, $4.2 million in restatement related expenses and $1.9 million in restructuring costs.
  • Total revenue was $730.5 million, 1% higher, with net revenue of $428.2 million, a 6% increase. On a constant currency basis, total revenue was $748.1 million, 4% higher, and net revenue was $437.9 million, 9% higher. The net revenue increases were driven by growth in PSC as a result of higher PLO balances, as well as improved merchandise sales margins.
  • Total operating expenses decreased 5% (3% on a constant currency basis), with store operating expenses up due to the addition of new stores during the year.

In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), we provide certain financial information on a “constant currency” basis, which excludes the impact of foreign currency exchange rate fluctuations. For additional information about the constant currency calculations, as well as a reconciliation of the constant currency financial measures to the comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.

OPERATING METRICS

U.S. Pawn Segment

Three-Months Ended September 30, 2016

  • Enhanced focus on lending operations resulted in an increase in total PLO of 4% to $149.8 million, up 4% on a same store basis.
  • Same store sales were strong in the quarter, up 8%. Merchandise sales gross margin improved to 36% from 35% attributable to efficiently pricing and selling aged inventory, driving merchandise sales gross profit growth of 9% to $29.2 million.
  • Total PSC increased 5% to $60.3 million; 4% on a same store basis. Average monthly yield on PLO decreased to 13% from 14% in the prior-year quarter.
  • Net revenue gains along with reduced expenses led to an increase in segment profit before tax of 136% to $21.4 million.
  • Inventory aged over one year reduced to 8% of total inventory from 10%.

Fiscal Year Ended September 30, 2016

  • PSC of $229.9 million, up 6%, with same store PSC growth of 4%.
  • Average monthly PLO yield remained flat to the prior-year period at 14%.
  • Same store sales increased 3%. Merchandise sales gross margin increased to 38% from 35%, resulting in a 14% increase in merchandise sales gross profit to $131.5 million.
  • Net revenue increased 7% to $369.4 million and segment expenses increased 2%, resulting in a 25% increase in segment profit before tax to $100.1 million.

Mexico Pawn Segment

Three-Months Ended September 30, 2016

  • PLO increased 7% to $17.5 million (up 21% on a constant currency basis). PSC grew 5% to $8.3 million (up 21% on a constant currency basis). Average monthly PLO yield was consistent with the prior-year at 16%
  • Same store sales increased 4% (19% in constant currency). Merchandise sales gross margin increased to 29% from 21% as a result of more disciplined pawn loan valuations and pricing cadence. Merchandise sales gross profit increased 32% to $4.4 million (up 52% on a constant currency basis).
  • Segment profit before tax increased $5.6 million to $2.3 million (up $6.5 million on a constant currency basis).
  • Inventory aged over one year reduced to 3% of total inventory from 4%.

Fiscal Year Ended September 30, 2016

  • PSC increase of 3% to $31.9 million (up 22% on a constant currency basis). Annualized yield on pawn loans remained unchanged to the prior-year period at 16%.
  • Same store sales were flat (19% increase on a constant currency basis). Merchandise sales gross margin increased to 32% from 28%, resulting in a 7% increase in merchandise sales gross profit to $19.3 million (up 27% on a constant currency basis).
  • Expense management leveraged a 3% growth in net revenue to $52.0 million into a $9.5 million increase in segment profit before tax to $8.5 million (net revenue up 22% and segment profit before tax up $12.6 million on a constant currency basis to $11.6 million).

DISCONTINUED OPERATIONS: GRUPO FINMART

During the fourth quarter of fiscal 2016 as a result of the Grupo Finmart disposition, we recorded a gain of $34.2 million. The gain does not take into consideration the total costs associated with the transaction, which were $9.8 million, approximately $8.0 million of which were recorded in our consolidated statements of operations in fiscal 2016 and the remaining $1.8 million of which will be recorded in our consolidated statements of operations in future periods due to ongoing employee service requirements.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, December 8, 2016, at 7:30am Central Time to discuss fourth quarter and fiscal year results.  Analysts and institutional investors may participate on the conference call by dialing (888) 734-0328, Conference ID: 29660657, International dialing (678) 894-3054. 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 call.

ABOUT EZCORP

EZCORP is a leading provider of pawn loans in the United States and Mexico. At our pawn stores, we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers.

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.

 

EZCORP, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
  Three Months Ended 
September 30,
  Fiscal Year Ended 
September 30,
  2016   2015   2016   2015
               
      As 
Corrected
      As 
Corrected
  (in thousands, except per share amounts)
Revenues:              
Merchandise sales $ 97,166     $ 91,490     $ 409,107     $ 402,118  
Jewelry scrapping sales 16,482     10,452     50,113     57,973  
Pawn service charges 68,603     65,208     261,800     247,204  
Other revenues 2,334     3,141     9,485     12,705  
Total revenues 184,585     170,291     730,505     720,000  
Merchandise cost of goods sold 63,540     61,359     258,271     267,789  
Jewelry scrapping cost of goods sold 13,768     8,457     42,039     46,066  
Other cost of revenues 416     928     1,965     3,125  
Net revenues 106,861     99,547     428,230     403,020  
Operating expenses:              
Operations 79,941     81,604     301,387     294,939  
Administrative 18,016     28,774     68,101     72,986  
Depreciation and amortization 6,120     8,511     26,542     30,959  
Loss on sale or disposal of assets 465     1,934     1,106     2,659  
Restructuring 11     16,317     1,921     17,080  
Total operating expenses 104,553     137,140     399,057     418,623  
Operating income (loss) 2,308     (37,593 )   29,173     (15,603 )
Interest expense 4,463     3,929     16,477     16,385  
Interest income (15 )   (55 )   (81 )   (278 )
Loss from investment in unconsolidated affiliates 5,881     5,811     255     5,473  
Impairment of investments 10,957     26,837     10,957     26,837  
Other expense 387     1,234     1,202     2,187  
(Loss) income from continuing operations before income taxes (19,365 )   (75,349 )   363     (66,207 )
Income tax (benefit) expense (1,863 )   (18,242 )   9,361     (14,025 )
Loss from continuing operations, net of tax (17,502 )   (57,107 )   (8,998 )   (52,182 )
Income (loss) from discontinued operations, net of tax 19,636     (36,998 )   (79,432 )   (42,045 )
Net income (loss) 2,134     (94,105 )   (88,430 )   (94,227 )
Net loss attributable to noncontrolling interest (1,097 )   (1,805 )   (7,686 )   (5,035 )
Net income (loss) attributable to EZCORP, Inc. $ 3,231     $ (92,300 )   $ (80,744 )   $ (89,192 )
               
Basic loss per share attributable to EZCORP, Inc. — continuing operations $ (0.31 )   $ (1.04 )   $ (0.15 )   $ (0.94 )
Diluted loss per share attributable to EZCORP, Inc. — continuing operations $ (0.31 )   $ (1.04 )   $ (0.15 )   $ (0.94 )
               
Weighted-average basic shares outstanding 53,991     54,821     54,427     54,369  
               
Net loss from continuing operations attributable to EZCORP, Inc. $ (16,927 )   $ (57,105 )   $ (7,973 )   $ (51,298 )
Income (loss) from discontinued operations attributable to EZCORP, Inc. 20,158     (35,195 )   (72,771 )   (37,894 )
Net income (loss) attributable to EZCORP, Inc. $ 3,231     $ (92,300 )   $ (80,744 )   $ (89,192 )

Certain immaterial corrections have been made to the fiscal 2015 amounts from those as previously filed.

 

EZCORP, Inc.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
  September 30,
  2016   2015
       
      As 
Corrected
Assets:      
Current assets:      
Cash and cash equivalents $ 65,737     $ 56,244  
Pawn loans 167,329     159,964  
Pawn service charges receivable, net 31,062     30,852  
Inventory, net 140,224     124,084  
Notes receivable, net 41,946      
Income taxes receivable 2,533     42,231  
Current assets held for sale     72,849  
Prepaid expenses and other current assets 33,312     25,077  
Total current assets 482,143     511,301  
Investment in unconsolidated affiliate 37,128     56,182  
Property and equipment, net 58,455     73,938  
Goodwill 253,976     251,646  
Intangible assets, net 30,681     30,778  
Non-current notes receivable, net 41,119      
Deferred tax asset, net 35,303     34,176  
Non-current assets held for sale     217,233  
Other assets, net 44,439     13,736  
Total assets $ 983,244     $ 1,188,990  
       
Liabilities, temporary equity and equity:      
Current liabilities:      
Accounts payable, accrued expenses and other current liabilities $ 84,285     $ 109,875  
Current liabilities held for sale     87,329  
Customer layaway deposits 10,693     10,470  
Total current liabilities 94,978     207,674  
Long-term debt, net 283,611     197,976  
Non-current liabilities held for sale     101,644  
Deferred gains and other long-term liabilities 10,450     9,929  
Total liabilities 389,039     517,223  
Commitments and contingencies      
Temporary equity:      
Class A Non-voting Common Stock, subject to possible redemption at $10.06 per share; none as of September 30, 2016 and 1,168,456 shares issued and outstanding at redemption value as of September 30, 2015     11,696  
Redeemable noncontrolling interest     4,040  
Total temporary equity     15,736  
Stockholders’ equity:      
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of September 30, 2016 and 2015; issued and outstanding: 51,129,144 as of September 30, 2016 and 50,726,289 as of September 30, 2015 511     507  
Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171 30     30  
Additional paid-in capital 318,723     310,038  
Retained earnings 319,808     400,552  
Accumulated other comprehensive loss (44,089 )   (55,096 )
EZCORP, Inc. stockholders’ equity 594,983     656,031  
Noncontrolling interest (778 )    
Total equity 594,205     656,031  
Total liabilities, temporary equity and equity $ 983,244     $ 1,188,990  

Certain immaterial corrections have been made to the fiscal 2015 amounts from those as previously filed.

 

EZCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
  Fiscal Year Ended September 30,
  2016   2015
       
      As Corrected
  (in thousands)
Operating activities:      
Net loss $ (88,430 )   $ (94,227 )
Loss from discontinued operations* 78,872     14,728  
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 26,542     34,450  
Amortization of debt discount 8,928     8,888  
Amortization of deferred financing costs 1,763     1,657  
Consumer loan loss provision 704     22,303  
Deferred income taxes 849     (6,050 )
Impairment of goodwill     12,253  
Impairment of long-lived assets     18,529  
Other adjustments 969     (95 )
Loss on sale or disposal of assets 1,106     2,893  
Stock compensation 5,346     2,374  
Loss from investments in unconsolidated affiliates 255     5,473  
Impairment of investments 10,957     26,837  
Changes in operating assets and liabilities, net of business acquisitions:      
Service charges and fees receivable 286     5,181  
Inventory (3,735 )   433  
Prepaid expenses, other current assets and other assets (14,875 )   7,475  
Accounts payable and other, deferred gains and other long-term liabilities (3,505 )   22,079  
Customer layaway deposits 329     1,997  
Income taxes receivable 42,108     (18,298 )
Payments of restructuring charges (8,478 )   (5,376 )
Dividends from unconsolidated affiliate 2,197     4,842  
Net cash provided by operating activities — continuing operations 62,188     68,346  
Net cash provided by operating activities — discontinued operations* 2,215     11,052  
Investing activities:      
Loans made (640,977 )   (756,463 )
Loans repaid 385,333     528,733  
Recovery of pawn loan principal through sale of forfeited collateral 235,168     243,692  
Additions to property and equipment (9,486 )   (23,174 )
Acquisitions, net of cash acquired (6,000 )   (7,802 )
Investments in unconsolidated affiliate     (12,140 )
Proceeds from sale of assets     564  
Net cash used in investing activities — continuing operations (35,962 )   (26,590 )
Net cash provided by (used in) investing activities — discontinued operations* 42,678     (41,103 )
Financing activities:      
Taxes paid related to net share settlement of equity awards (172 )   (210 )
Debt issuance costs (740 )    
Payout of deferred consideration (15,000 )   (6,000 )
Purchase of subsidiary shares from noncontrolling interest     (32,411 )
Proceeds from borrowings and line of credit 48,688      
Payments on borrowings, line of credit and capital lease obligations (48 )   (418 )
Repurchase of common stock (11,750 )    
Net cash provided by (used in) financing activities — continuing operations 20,978     (39,039 )
Net cash (used in) provided by financing activities — discontinued operations* (84,134 )   41,441  
Effect of exchange rate changes on cash and cash equivalents (1,350 )   (10,308 )
Net increase in cash and cash equivalents 6,613     3,799  
Cash and cash equivalents at beginning of period, excluding held for sale 56,244     52,294  
Cash and cash equivalents held for sale at beginning of period 2,880     3,031  
Cash and cash equivalents at end of period 65,737     59,124  
Less: cash and cash equivalents held for sale at end of period     (2,880 )
Cash and cash equivalents at end of period, excluding held for sale $ 65,737     $ 56,244  

Certain immaterial corrections have been made to the fiscal 2015 amounts from those as previously filed.

*  Represents operations discontinued subsequent to the adoption of FASB ASU 2014-08. Amounts are exclusive of intercompany loans.

 

EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
  Three Months Ended September 30, 2016
  U.S. Pawn   Mexico 
Pawn
  Other
International
  Total 
Segments
  Corporate 
Items
  Consolidated
                       
  (in thousands)
Revenues:                      
Merchandise sales $ 82,211     $ 14,955     $     $ 97,166     $     $ 97,166  
Jewelry scrapping sales 15,693     789         16,482         16,482  
Pawn service charges 60,263     8,340         68,603         68,603  
Other revenues 50     154     2,130     2,334         2,334  
Total revenues 158,217     24,238     2,130     184,585         184,585  
Merchandise cost of goods sold 52,980     10,560         63,540         63,540  
Jewelry scrapping cost of goods sold 13,105     663         13,768         13,768  
Other cost of revenues         416     416         416  
Net revenues 92,132     13,015     1,714     106,861         106,861  
Operating expenses (income):                      
Operations 67,803     9,520     2,618     79,941         79,941  
Administrative                 18,016     18,016  
Depreciation and amortization 2,753     680     55     3,488     2,632     6,120  
Loss on sale or disposal of assets 162     53     4     219     246     465  
Restructuring 11             11         11  
Interest expense     6         6     4,457     4,463  
Interest income     (7 )       (7 )   (8 )   (15 )
Loss from investment in unconsolidated affiliate         5,881     5,881         5,881  
Impairment of investment         10,957     10,957         10,957  
Other expense (income)     465     (1 )   464     (77 )   387  
Segment contribution (loss) $ 21,403     $ 2,298     $ (17,800 )   $ 5,901          
Loss from continuing operations before income taxes                 $ 5,901     $ (25,266 )   $ (19,365 )


 

EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
  Three Months Ended September 30, 2015
  U.S. Pawn   Mexico 
Pawn
  Other
International
  Total 
Segments
  Corporate 
Items
  Consolidated
                       
  (in thousands)
Revenues:                      
Merchandise sales $ 75,595     $ 15,498     $ 397     $ 91,490     $     $ 91,490  
Jewelry scrapping sales 10,331     57     64     10,452         10,452  
Pawn service charges 57,250     7,958         65,208         65,208  
Other revenues 375     238     2,528     3,141         3,141  
Total revenues 143,551     23,751     2,989     170,291         170,291  
Merchandise cost of goods sold 48,763     12,180     416     61,359         61,359  
Jewelry scrapping cost of goods sold 8,401     6     50     8,457         8,457  
Other cost of revenues         928     928         928  
Net revenues 86,387     11,565     1,595     99,547         99,547  
Operating expenses (income):                      
Operations 67,903     12,200     1,501     81,604         81,604  
Administrative                 28,774     28,774  
Depreciation and amortization 4,461     998     103     5,562     2,949     8,511  
Loss (gain) on sale or disposal of assets 918     (6 )       912     1,022     1,934  
Restructuring 4,016     799     2,563     7,378     8,939     16,317  
Interest expense 44     6         50     3,879     3,929  
Interest income (1 )   (24 )       (25 )   (30 )   (55 )
Loss from investment in unconsolidated affiliate         5,811     5,811         5,811  
Impairment of investment         26,837     26,837         26,837  
Other expense (income) (12 )   916     7     911     323     1,234  
Segment (loss) contribution $ 9,058     $ (3,324 )   $ (35,227 )   $ (29,493 )        
Loss from continuing operations before income taxes                 $ (29,493 )   $ (45,856 )   $ (75,349 )

 

EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
  Fiscal Year Ended September 30, 2016
  U.S. Pawn   Mexico 
Pawn
  Other
International
  Total 
Segments
  Corporate 
Items
  Consolidated
                       
  (in thousands)
Revenues:                      
Merchandise sales $ 348,771     $ 60,331     $ 5     $ 409,107     $     $ 409,107  
Jewelry scrapping sales 47,810     2,282     21     50,113         50,113  
Pawn service charges 229,893     31,907         261,800         261,800  
Other revenues 331     385     8,769     9,485         9,485  
Total revenues 626,805     94,905     8,795     730,505         730,505  
Merchandise cost of goods sold 217,268     41,002     1     258,271         258,271  
Jewelry scrapping cost of goods sold 40,138     1,885     16     42,039         42,039  
Other cost of revenues         1,965     1,965         1,965  
Net revenues 369,399     52,018     6,813     428,230         428,230  
Operating expenses (income):                      
Operations 255,321     38,481     7,585     301,387         301,387  
Administrative                 68,101     68,101  
Depreciation and amortization 12,242     2,965     218     15,425     11,117     26,542  
Loss on sale or disposal of assets 664     169     4     837     269     1,106  
Restructuring 993     543     202     1,738     183     1,921  
Interest expense 125     109         234     16,243     16,477  
Interest income (2 )   (30 )       (32 )   (49 )   (81 )
Loss from investment in unconsolidated affiliate         255     255         255  
Impairment of investment         10,957     10,957         10,957  
Other expense (income)     1,273     2     1,275     (73 )   1,202  
Segment contribution (loss) $ 100,056     $ 8,508     $ (12,410 )   $ 96,154          
Income from continuing operations before income taxes             $ 96,154     $ (95,791 )   $ 363  

 

EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
  Fiscal Year Ended September 30, 2015
  U.S. Pawn   Mexico 
Pawn
  Other
International
  Total 
Segments
  Corporate 
Items
  Consolidated
                       
  (in thousands)
Revenues:                      
Merchandise sales                                                               $ 334,635     $ 65,408     $ 2,075     $ 402,118     $     $ 402,118  
Jewelry scrapping sales 54,343     3,267     363     57,973         57,973  
Pawn service charges 216,211     30,993         247,204         247,204  
Other revenues 945     1,021     10,739     12,705         12,705  
Total revenues 606,134     100,689     13,177     720,000         720,000  
Merchandise cost of goods sold 218,953     47,371     1,465     267,789         267,789  
Jewelry scrapping cost of goods sold 42,845     2,954     267     46,066         46,066  
Other cost of revenues         3,125     3,125         3,125  
Net revenues 344,336     50,364     8,320     403,020         403,020  
Operating expenses (income):                      
Operations 244,232     43,927     6,780     294,939         294,939  
Administrative                 72,986     72,986  
Depreciation and amortization 15,227     4,440     616     20,283     10,676     30,959  
Loss (gain) on sale or disposal of assets 995     258     (1 )   1,252     1,407     2,659  
Restructuring 4,016     799     2,563     7,378     9,702     17,080  
Interest expense 60     15         75     16,310     16,385  
Interest income (42 )   (78 )       (120 )   (158 )   (278 )
Loss from investment in unconsolidated affiliate         5,473     5,473         5,473  
Impairment of investments         26,837     26,837         26,837  
Other expense     1,988     7     1,995     192     2,187  
Segment contribution (loss) $ 79,848     $ (985 )   $ (33,955 )   $ 44,908          
Loss from continuing operations before income taxes             $ 44,908     $ (111,115 )   $ (66,207 )

 

EZCORP, Inc.
STORE COUNT ACTIVITY (UNAUDITED)
 
  Company-owned Stores    
  U.S. 
Pawn
  Mexico 
Pawn
  Other 
International
  Consolidated   Franchises
                   
As of September 30, 2013 502     258     39     799     8  
New locations opened 9     3         12      
Locations sold, combined or closed (7 )           (7 )   (3 )
As of September 30, 2014 504     261     39     804     5  
New locations opened 5     3         8      
Locations acquired 25             25      
Locations sold, combined or closed (12 )   (27 )   (12 )   (51 )   (4 )
As of September 30, 2015 522     237   * 27     786     1  
New locations opened     3         3      
Locations acquired 6     1         7      
Locations sold, combined or closed (8 )   (2 )       (10 )   (1 )
As of September 30, 2016 520     239     27     786      

*  Includes five buy/sell stores reflected in fiscal 2015 ending count which were converted to Mexico Pawn stores during the three-months ended March 31, 2016.

NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), we provide certain other non-GAAP financial information on a constant currency basis ("constant currency"). We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos and believe that presentation of constant currency results are meaningful and useful in understanding the activities and business metrics of our Mexico Pawn 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 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 Mexican pesos 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 during the appropriate period for statement of operations items. The end-of-period exchange rate as of September 30, 2016 and 2015 was 19.4 to 1 and 17.1 to 1, respectively. The average exchange rate for the years ended September 30, 2016, 2015 and 2014 was 17.9 to 1, 15.1 to 1, and 13.1 to 1, respectively. Constant currency results, where presented, also exclude the foreign currency gain or loss and the related foreign currency derivative gain or loss impact.

The following information provides reconciliations of certain non-GAAP financial measures presented in this press release to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Miscellaneous Non-GAAP Financial Measures

  U.S. 
Dollar 
Amount
  Percentage 
Change 
YOY
       
  (in thousands)    
Consolidated revenue (three-months ended September 30, 2016) $ 184,585     8 %
Currency exchange rate fluctuations 3,656      
Constant currency consolidated revenue (three-months ended September 30, 2016) $ 188,241     11 %
       
Consolidated net revenue (three-months ended September 30, 2016) $ 106,861     7 %
Currency exchange rate fluctuations 1,950      
Constant currency consolidated net revenue (three-months ended September 30, 2016) $ 108,811     9 %
       
Consolidated operating expenses (three-months ended September 30, 2016) $ 104,553     (24 )%
Currency exchange rate fluctuations 1,524      
Constant currency consolidated operating expenses (three-months ended September 30, 2016) $ 106,077     (23 )%
       
Consolidated revenue (year ended September 30, 2016) $ 730,505     1 %
Currency exchange rate fluctuations 17,598      
Constant currency consolidated revenue (year ended September 30, 2016) $ 748,103     4 %
       
Consolidated net revenue (year ended September 30, 2016) $ 428,230     6 %
Currency exchange rate fluctuations 9,645      
Constant currency consolidated net revenue (year ended September 30, 2016) $ 437,875     9 %
       
Consolidated operating expenses (year ended September 30, 2016) $ 399,057     (5 )%
Currency exchange rate fluctuations 7,818      
Constant currency consolidated operating expenses (year ended September 30, 2016) $ 406,875     (3 )%
       
Mexico Pawn loans outstanding as of September 30, 2016 $ 17,538     7 %
Currency exchange rate fluctuations 2,359      
Constant currency Mexico Pawn loans outstanding as of September 30, 2016 $ 19,897     21 %
       
Mexico Pawn service charges (three-months ended September 30, 2016) $ 8,340     5 %
Currency exchange rate fluctuations 1,268      
Constant currency Mexico Pawn service charges (three-months ended September 30, 2016) $ 9,608     21 %
       
Mexico Pawn same store merchandise revenue (three-months ended September 30, 2016) $ 14,559     4 %
Currency exchange rate fluctuations 2,144      
Constant currency Mexico Pawn same store merchandise revenue (three-months ended September 30, 2016) $ 16,703     19 %
       
Mexico Pawn merchandise sales gross profit (three-months ended September 30, 2016) $ 4,395     32 %
Currency exchange rate fluctuations 638      
Constant currency Mexico Pawn merchandise sales gross profit (three-months ended September 30, 2016) $ 5,033     52 %
       
Mexico Pawn segment profit before tax (three-months ended September 30, 2016) $ 2,298     N/A        
Currency exchange rate fluctuations 922      
Constant currency Mexico Pawn segment profit before tax (three-months ended September 30, 2016) $ 3,220     N/A        
       
Mexico Pawn service charges (year ended September 30, 2016) $ 31,907     3 %
Currency exchange rate fluctuations 5,917      
Constant currency Mexico Pawn service charges (year ended September 30, 2016) $ 37,824     22 %
       
Mexico Pawn same store merchandise revenue (year ended September 30, 2016) $ 58,636     %
Currency exchange rate fluctuations 10,873      
Constant currency Mexico Pawn same store merchandise revenue (year ended September 30, 2016) $ 69,509     19 %
       
Mexico Pawn merchandise sales gross profit (year ended September 30, 2016) $ 19,329     7 %
Currency exchange rate fluctuations 3,584      
Constant currency Mexico Pawn merchandise sales gross profit (year ended September 30, 2016) $ 22,913     27 %
       
Mexico Pawn net revenue (year ended September 30, 2016) $ 52,018     3 %
Currency exchange rate fluctuations 9,645      
Constant currency Mexico Pawn net revenue (year ended September 30, 2016) $ 61,663     22 %
       
Mexico Pawn segment profit before tax (year ended September 30, 2016) $ 8,508     N/A      
Currency exchange rate fluctuations 3,116      
Constant currency Mexico Pawn segment profit before tax (year ended September 30, 2016) $ 11,624     N/A      
Jeff Christensen
Vice President, Investor Relations
Email: jeff_christensen@ezcorp.com
Phone: (512) 437-3545

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