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EZCORP Announces Third Quarter Fiscal 2016 Results

Aug 9, 2016
  • Net Revenue up $6.6 million to $100.4 million, and Income From Continuing Operations Before Income Taxes up $7.6 million to $3.8 million, driven by strong pawn performance in both U.S. and Mexico.

–   Pawn loans outstanding (PLO) up 11% to $160.3 million; same store PLO up 9%.

–   Pawn service charges (PSC) up 8% to $62.5 million; same store PSC up 8%.

–   Merchandise sales gross margin on both consolidated and same store basis increased 200bps to 36%.

  • Definitive agreement to sell Grupo Finmart announced July 6, 2016; close expected by September 30, 2016.
     
  • Received commitment for a $100 million secured credit facility to support the business.

All amounts in this release are EZCORP continuing operations 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.

AUSTIN, Texas, Aug. 09, 2016 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its third quarter ended June 30, 2016.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP’s Chief Executive Officer, said: "We have been consistently executing the three year strategic program announced in July 2015 to lead the market in serving and satisfying customers’ need for cash.  Pawn momentum remains strong with four consecutive quarters of improvement in same store PLO in the U.S. and eight consecutive quarters in Mexico.

"Our focus on customer engagement and optimizing our U.S. and Mexico pawn businesses will continue, including investments in technology to improve innovation and productivity, reduce costs, and leverage investments.  We are confident these initiatives, along with the quality pawn performance we have demonstrated in recent quarters, will help us continue to build our platform for profitable growth.

"We recently announced an agreement to sell Grupo Finmart, and we expect to close that transaction by the end of our fiscal year.  After the sale of Grupo Finmart, 99% of our revenue will be generated from our U.S. and Mexico pawn businesses."

CONSOLIDATED RESULTS

Three-Months Ended June 30, 2016

  • Net income from continuing operations attributable to EZCORP was $2.9 million ($0.05 per share), compared to a net loss of $0.7 million ($0.01 per share). This increase was driven by revenue growth from strong customer engagement and continued focus on expense management.

1 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.

  • Total revenue for the current quarter was $170.2 million, up 3%, and net revenue was $100.4 million, up 7%. On a constant currency basis1, total revenue was $174.3 million, up 6%, with net revenue of $102.8 million, up 10%. The increase in both total revenue and net revenue (stated on a GAAP and constant currency basis) is primarily due to higher pawn service charges and merchandise margin.
     
  •  Total operating expenses for the current quarter decreased 2% (flat on a constant currency basis) as we continue to implement operational efficiencies.  Corporate administrative expense was $14.5 million, down 14%.

Nine-Months Ended June 30, 2016

  • Net income from continuing operations attributable to EZCORP was $9.0 million ($0.16 per share), compared to net income of $5.8 million ($0.11 per share). This increase reflects continued improvement in our U.S. and Mexico pawn businesses (as discussed below).
     
  • Total revenue for the nine-months ended June 30, 2016 was $545.9 million, 1% lower, with net revenue of $321.4 million, a 6% increase. On a constant currency basis, total revenue was $559.9 million, 2% higher, and net revenue was $329.1 million, 8% higher.  Higher pawn service charges and merchandise margins drove the increase in total revenue and net revenue on a constant currency basis.
     
  • Total operating expenses for the nine-months ended June 30, 2016 increased 5% (7% on a constant currency basis), primarily due to new store costs offset by store rationalization, accrued incentives at both field and corporate levels, as well as restatement expenses.

 

OPERATING METRICS

U.S. Pawn Segment

Three-Months Ended June 30, 2016 

  • Enhanced focus on customers drove pawn lending, resulting in an increase in total PLO of 13% to $143.9 million, up 10% on a same store basis. The pawn loan redemption rate for the quarter was 85%, consistent with the prior-year period.
     
  • Total PSC increased 10% to $54.4 million, up 8% on a same store basis, as a result of strong same store PLO growth of 10%. Annualized yield on PLO decreased slightly to 164%, from 167% in the prior year quarter.  The lower PLO yield is primarily due to shift in portfolio composition.
     
  • Merchandise sales gross margin improved to 37% from 35% attributable to discipline in pawn loan valuations and pricing cadence, driving merchandise sales gross profit growth of 8% to $29.2 million.
     
  • Store expenses were tightly managed, leveraging 9% growth in net revenue to $85.7 million into a 25% increase in segment profit before tax to $20.2 million.
     
  • Aged inventory reduced to 9% of total inventory from 11%.
     

Nine-Months Ended June 30, 2016 

  • Same store PLO growth continues, increasing to 10% as compared to a decrease of 11% in the prior-year period, generating same store PSC growth of 5% in the nine-month period ended June 30, 2016.
     
  • Annualized PLO yield and pawn loan redemption rate both decreased slightly from the prior-year period to 164% from 165%, and to 84% from 85%, respectively.
     
  • Merchandise sales gross margin increased to 38% from 34%, resulting in a 15% increase in merchandise sales gross profit to $102.3 million.
     
  • Expense management leveraged a 7% growth in net revenue to $277.3 million into an 11% increase in segment profit before tax to $78.7 million.


Mexico Pawn Segment

Three-Months Ended June 30, 2016 

  • Focusing on customer engagement drove the increase in PSC and PLO on a constant currency basis.  PSC grew 1% to $8.1 million (up 20% on a constant currency basis). PLO decreased 1% to $16.3 million (up 19% on a constant currency basis).  The pawn loan redemption rate increased to 77% from 76% in the prior-year period.  Annualized PLO yield was a strong 192% compared to 194%.
     
  • Merchandise sales gross margin increased to 33% from 29% as the result of disciplined pawn loan valuations and pricing cadence. Merchandise sales gross profit increased 5% to $4.6 million (up 24% on a constant currency basis).
     
  • Store expenses were tightly managed, leveraging 2% growth in net revenue to $12.9 million into a 476% increase in segment profit before tax to $2.7 million (net revenue up 20% and segment profit before tax up 773% on a constant currency basis).
     
  • Aged inventory reduced to 3% of total inventory from 8%.


Nine-Months Ended June 30, 2016 

  • PSC increased 2% to $23.6 million (up 22% on a constant currency basis).  Annualized yield on pawn loans decreased to 194% from 196%. The pawn loan redemption rate on pawn loans year-to-date increased slightly to 78% from 77%.
     
  • Merchandise sales gross margin increased to 33% from 29%, resulting in a 1% increase in merchandise sales gross profit to $14.9 million (up 21% on a constant currency basis).
     
  • Expense management leveraged a 1% growth in net revenue to $39.0 million into a 165% increase in segment profit before tax to $6.2 million (net revenue up 20% and segment profit before tax up 259% on a constant currency basis).

DISCONTINUED OPERATIONS: GRUPO FINMART

On July 6, 2016, we announced that we had entered into a definitive agreement to sell Prestaciones Finmart, S.A.P.I. DE C.V., SOFOM, E.N.R. (“Grupo Finmart”) to Alpha Holding, S.A. de C.V. (“AlphaCredit”), a leader in consumer lending in Mexico and Colombia.  We currently own 94% of Grupo Finmart, a provider of consumer loans to government agency employees in Mexico.

The decision to divest Grupo Finmart is a result of the continued execution of our three-year strategic program and is expected to provide us with additional capital to invest in our U.S. and Mexico pawn businesses.

As a result of the decision to sell the Grupo Finmart business, we have classified our Grupo Finmart segment as held for sale as of June 30, 2016 and recast all operations of Grupo Finmart as discontinued operations for the three and nine-months ended June 30, 2016.

CONFERENCE CALL

EZCORP will host a conference call on Wednesday, August 10, 2016, at 7:30am Central Time to discuss third quarter results.  Analysts and institutional investors may participate on the conference call by dialing (888) 734-0328, Conference ID: 58992016, 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended June 30,   Nine Months Ended June 30,
  2016   2015   2016   2015
               
  (Unaudited)
  (in thousands, except per share amounts)
Revenues:              
Merchandise sales $ 94,014     $ 93,137     $ 311,941     $ 310,628  
Jewelry scrapping sales 11,230     10,588     33,631     47,521  
Pawn service charges 62,473     57,599     193,197     181,996  
Consumer loan fees and interest 2,201     2,708     6,603     7,517  
Other revenues 232     587     548     2,047  
Total revenues 170,150     164,619     545,920     549,709  
Merchandise cost of goods sold 60,140     61,460     194,731     206,430  
Jewelry scrapping cost of goods sold 9,110     8,580     28,271     37,609  
Consumer loan bad debt 506     771     1,549     2,197  
Net revenues 100,394     93,808     321,369     303,473  
Operating expenses:              
Operations 73,172     71,455     221,446     213,335  
Administrative 14,481     16,860     50,085     44,212  
Depreciation and amortization 6,274     7,537     20,422     22,448  
(Gain) loss on sale or disposal of assets (41 )   82     641     725  
Restructuring     37     1,910     763  
Total operating expenses 93,886     95,971     294,504     281,483  
Operating income (loss) 6,508     (2,163 )   26,865     21,990  
Interest expense 3,936     3,783     12,014     12,456  
Interest income (50 )   (84 )   (66 )   (223 )
Equity in net income of unconsolidated affiliate (1,694 )   (1,822 )   (5,626 )   (338 )
Other expense (income) 500     (222 )   815     953  
Income (loss) from continuing operations before income taxes 3,816     (3,818 )   19,728     9,142  
Income tax expense (benefit) 1,038     (3,035 )   11,224     4,217  
Income (loss) from continuing operations, net of tax 2,778     (783 )   8,504     4,925  
Loss from discontinued operations, net of tax (9,133 )   (9,454 )   (100,916 )   (5,047 )
Net loss (6,355 )   (10,237 )   (92,412 )   (122 )
Net loss attributable to noncontrolling interest (666 )   (390 )   (5,124 )   (3,230 )
Net (loss) income attributable to EZCORP, Inc. $ (5,689 )   $ (9,847 )   $ (87,288 )   $ 3,108  
               
Basic earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.05     $ (0.01 )   $ 0.16     $ 0.11  
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.05     $ (0.01 )   $ 0.16     $ 0.11  
               
Weighted-average basic shares outstanding 53,980     54,820     54,574     54,216  
               
Net income (loss) from continuing operations attributable to EZCORP, Inc. $ 2,904     $ (683 )   $ 8,954     $ 5,807  
Net loss from discontinued operations attributable to EZCORP, Inc. (8,593 )   (9,164 )   (96,242 )   (2,699 )
Net (loss) income attributable to EZCORP, Inc. $ (5,689 )   $ (9,847 )   $ (87,288 )   $ 3,108  

 

EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
  June 30,
 2016
  June 30,
 2015
  September 30,
 2015
           
  (Unaudited)    
Assets:          
Current assets:          
Cash and cash equivalents $ 29,380     $ 113,405     $ 56,244  
Restricted cash 5,000     218     144  
Pawn loans 160,269     144,377     159,964  
Pawn service charges receivable, net 29,643     26,989     30,852  
Inventory, net 130,368     115,283     124,084  
Income taxes receivable     2,745     40,657  
Current assets held for sale 156,587     82,845     72,858  
Prepaid expenses and other current assets 20,734     57,644     24,933  
Total current assets 531,981     543,506     509,736  
Investment in unconsolidated affiliate 57,656     90,423     56,182  
Property and equipment, net 61,201     99,353     73,938  
Goodwill 254,273     249,174     251,646  
Intangible assets, net 30,569     37,951     30,778  
Deferred tax asset, net 33,386     39,569     24,405  
Non-current assets held for sale     231,977     226,623  
Other assets, net 18,950     26,493     13,736  
Total assets $ 988,016     $ 1,318,446     $ 1,187,044  
           
Liabilities, temporary equity and equity:          
Current liabilities:          
Accounts payable, accrued expenses and other current liabilities $ 59,239     $ 77,966     $ 109,875  
Current liabilities held for sale 130,627     81,248     87,725  
Customer layaway deposits 11,201     9,635     10,470  
Income taxes payable 4,842          
Total current liabilities 205,909     168,849     208,070  
Long-term debt, net 211,421     207,925     197,976  
Non-current liabilities held for sale     125,378     101,644  
Deferred gains and other long-term liabilities 3,321     4,752     3,703  
Total liabilities 420,651     506,904     511,393  
Commitments and contingencies          
Temporary equity:          
Class A Non-voting Common Stock, subject to possible redemption at $10.06 per share; none as of June 30, 2016 and 1,168,456 shares issued and outstanding at redemption value as of June 30, 2015 and September 30, 2015     11,696     11,696  
Redeemable noncontrolling interest (2,410 )   16,318     2,532  
Total temporary equity (2,410 )   28,014     14,228  
Stockholders’ equity:          
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of June 30, 2016 and 2015 and September 30, 2015; issued and outstanding: 51,019,332 as of June 30, 2016; 50,681,477 as of June 30, 2015; and 50,726,289 as of September 30, 2015 510     506     507  
Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171 30     30     30  
Additional paid-in capital 313,607     327,018     307,080  
Retained earnings 320,537     498,360     407,825  
Accumulated other comprehensive loss (64,703 )   (42,386 )   (54,019 )
EZCORP, Inc. stockholders’ equity 569,981     783,528     661,423  
Noncontrolling interest (206 )        
Total equity 569,775     783,528     661,423  
Total liabilities, temporary equity and equity $ 988,016     $ 1,318,446     $ 1,187,044  

 

EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months Ended June 30,
  2016   2015
       
  (Unaudited)
  (in thousands)
Operating activities:      
Net loss $ (92,412 )   $ (122 )
Loss from discontinued operations* 100,172     7,819  
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 20,422     25,316  
Amortization of debt discount and consumer loan premium, net 6,574     6,099  
Consumer loan loss provision 278     18,652  
Deferred income taxes (321 )   (5,742 )
Impairment of goodwill     10,550  
Amortization of deferred financing costs 1,318     1,213  
Other adjustments 961     1,348  
Loss on sale or disposal of assets 641     956  
Stock compensation expense (benefit) 3,206     (1,319 )
Income from investment in unconsolidated affiliate (5,626 )   (338 )
Changes in operating assets and liabilities, net of business acquisitions:      
Service charges and fees receivable 1,838     5,329  
Inventory (1,349 )   926  
Prepaid expenses, other current assets and other assets (1,038 )   (5,124 )
Accounts payable and other, deferred gains and other long-term liabilities (22,902 )   (13,029 )
Customer layaway deposits 781     1,127  
Restricted cash (4,861 )   (459 )
Income taxes receivable 45,499     17,459  
Payments of restructuring charges (8,367 )   (3,668 )
Dividends from unconsolidated affiliate 2,197     4,842  
Net cash provided by operating activities — continuing operations 47,011     71,835  
Net cash provided by (used in) operating activities — discontinued operations* 10,926     (21,523 )
Investing activities:      
Loans made (469,133 )   (575,038 )
Loans repaid 291,704     409,793  
Recovery of pawn loan principal through sale of forfeited collateral 173,710     191,170  
Additions to property and equipment (6,408 )   (21,914 )
Acquisitions, net of cash acquired (6,000 )   (4,120 )
Investment in unconsolidated affiliate     (12,140 )
Net cash used in investing activities — continuing operations (16,127 )   (12,249 )
Net cash provided by (used in) investing activities — discontinued operations* 4,590     (1,894 )
Financing activities:      
Payout of deferred consideration (14,875 )   (6,000 )
Repurchase of redeemable common stock issued due to acquisitions (11,750 )    
Purchase of subsidiary shares from noncontrolling interest     (2,774 )
Payments on capital lease obligations (48 )   (355 )
Net cash used in financing activities — continuing operations (26,673 )   (9,129 )
Net cash (used in) provided by financing activities — discontinued operations* (41,237 )   37,713  
Effect of exchange rate changes on cash and cash equivalents (6,506 )   (5,691 )
Net (decrease) increase in cash and cash equivalents (28,016 )   59,062  
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 31,108     114,387  
Less: cash and cash equivalents held for sale at end of period (1,728 )   (982 )
Cash and cash equivalents at end of period, excluding held for sale $ 29,380     $ 113,405  
       
Non-cash investing and financing activities:      
Pawn loans forfeited and transferred to inventory $ 179,394     $ 170,185  
Issuance of common stock, subject to possible redemption, due to acquisition     11,696  
Deferred consideration     124  
Payable to purchase additional shares of noncontrolling interest     322  


 

EZCORP, Inc.
SELECTED OPERATING SEGMENT RESULTS (UNAUDITED)

U.S. Pawn

The following table presents selected summary financial data from continuing operations for the U.S. Pawn segment:

  Three Months Ended June 30,   Percentage
Change
  2016   2015  
           
  (in thousands)    
Net revenues:          
Pawn service charges $ 54,395     $ 49,609     10 %
           
Merchandise sales 79,826     77,126     4 %
Merchandise sales gross profit 29,240     27,043     8 %
Gross margin on merchandise sales 37 %   35 %   200 bps
           
Jewelry scrapping sales 10,918     9,614     14 %
Jewelry scrapping sales gross profit 2,073     1,966     5 %
Gross margin on jewelry scrapping sales 19 %   20 %   (100 )bps
           
Other revenues 39     162     (76 )%
Net revenues 85,747     78,780     9 %
           
Segment operating expenses:          
Operations 62,733     58,902     7 %
Depreciation and amortization 2,888     3,707     (22 )%
Segment operating contribution 20,126     16,171     24 %
           
Other segment (income) expenses (52 )   65       *
Segment contribution $ 20,178     $ 16,106     25 %
           
Other data:          
Net earning assets — continuing operations $ 257,396     $ 223,941     15 %
Inventory turnover — general merchandise (b) 2.5     2.9   (14 )%
Inventory turnover — jewelry (b) 1.1     1.1   %
Average monthly ending pawn loan balance per store (a) $ 262     $ 235     11 %
Average annual yield on pawn loans outstanding 164 %   167 %   (300 )bps
Pawn loan redemption rate (c) 85 %   85 %   bps

 

   
* Represents an increase or decrease in excess of 100% or not meaningful.
(a) Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(b) Calculation of inventory turnover excludes the effects of scrapping.
(c) Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

 

Mexico Pawn

The following table presents selected summary financial data from continuing operations for the Mexico Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currency of the Mexican peso. See “Non-GAAP Financial Information” below.

  Three Months Ended June 30,
  2016 (GAAP)   2015 (GAAP)   Percentage Change (GAAP)   2016 (Constant Currency)   Percentage Change (Constant Currency)
                   
  (in USD thousands)       (in USD thousands)    
Net revenues:                  
Pawn service charges $ 8,078     $ 7,990     1 %   $ 9,556     20 %
                   
Merchandise sales 14,187     15,447     (8 )%   16,783     9 %
Merchandise sales gross profit 4,633     4,420     5 %   5,481     24 %
Gross margin on merchandise sales 33 %   29 %   400 bps   33 %   400 bps
                   
Jewelry scrapping sales 312     886     (65 )%   369     (58 )%
Jewelry scrapping sales gross profit 47     19       *   56       *
Gross margin on jewelry scrapping sales 15 %   2 %   1,300 bps   15 %   1,300 bps
                   
Other revenues 157     274     (43 )%   186     (32 )%
Net revenues 12,915     12,703     2 %   15,279     20 %
                   
Segment operating expenses:                  
Operations 8,744     10,801     (19 )%   10,344     (4 )%
Depreciation and amortization 720     1,097     (34 )%   852     (22 )%
Segment operating contribution 3,451     805       *   4,083       *
                   
Other segment expenses (income) (a) 748     336       *   (12 )     *
Segment contribution $ 2,703     $ 469       *   $ 4,095       *
                   
Other data:                  
Net earning assets — continuing operations $ 33,214     $ 35,464     (6 )%   $ 39,349     11 %
Inventory turnover (b) 2.3     2.6     (12 )%   2.3     (12 )%
Average monthly ending pawn loan balance per store (c) $ 71     $ 70     1 %   $ 84     20 %
Average annual yield on pawn loans outstanding 192 %   194 %   (200 )bps   194 %   bps
Pawn loan redemption rate (d) 77 %   76 %   100 bps   77 %   100 bps
                             

 

* Represents an increase or decrease in excess of 100% or not meaningful.
(a) The three-months ended June 30, 2016 constant currency balance excludes $0.8 million of net foreign currency transaction losses resulting from movement in exchange rates. The three-months ended June 30, 2015 includes net foreign currency transaction losses totaling $0.4 million that are not excluded from the above results.
(b) Calculation of inventory turnover excludes the effects of scrapping.
(c) Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(d) Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

 

U.S. Pawn

The following table presents selected summary financial data from continuing operations for the U.S. Pawn segment:

  Nine Months Ended June 30,   Percentage
Change
  2016   2015  
           
  (in thousands)    
Net revenues:          
Pawn service charges $ 169,630     $ 158,961     7 %
           
Merchandise sales 266,560     259,040     3 %
Merchandise sales gross profit 102,272     88,850     15 %
Gross margin on merchandise sales 38 %   34 %   400 bps
           
Jewelry scrapping sales 32,117     44,012     (27 )%
Jewelry scrapping sales gross profit 5,084     9,568     (47 )%
Gross margin on jewelry scrapping sales 16 %   22 %   (600 )bps
           
Other revenues 281     570     (51 )%
Net revenues 277,267     257,949     7 %
           
Segment operating expenses:          
Operations 187,518     176,329     6 %
Depreciation and amortization 9,489     10,766     (12 )%
Segment operating contribution 80,260     70,854     13 %
           
Other segment expenses 1,607     64       *
Segment contribution $ 78,653     $ 70,790     11 %
           
Other data:          
Average monthly ending pawn loan balance per store (a) $ 264     $ 248     6 %
Average annual yield on pawn loans outstanding 164 %   165 %   (100 )bps
Pawn loan redemption rate (b) 84 %   85 %   (100 )bps
                 

 

* Represents an increase or decrease in excess of 100% or not meaningful.
(a) Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(b) Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

 

Mexico Pawn

The following table presents selected summary financial data from continuing operations for the Mexico Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currency of the Mexican peso. See “Non-GAAP Financial Information” below.

  Nine Months Ended June 30,
  2016 (GAAP)   2015 (GAAP)   Percentage Change (GAAP)   2016 (Constant Currency)   Percentage Change (Constant Currency)
                   
  (in USD thousands)       (in USD thousands)    
Net revenues:                  
Pawn service charges $ 23,567     $ 23,035     2 %   $ 28,216     22 %
                   
Merchandise sales 45,376     49,910     (9 )%   54,328     9 %
Merchandise sales gross profit 14,934     14,719     1 %   17,880     21 %
Gross margin on merchandise sales 33 %   29 %   400 bps   33 %   400 bps
                   
Jewelry scrapping sales 1,493     3,210     (53 )%   1,788     (44 )%
Jewelry scrapping sales gross profit 271     262     3 %   325     24 %
Gross margin on jewelry scrapping sales 18 %   8 %   1,000 bps   18 %   1,000 bps
                   
Other revenues 231     783     (70 )%   277     (65 )%
Net revenues 39,003     38,799     1 %   46,698     20 %
                   
Segment operating expenses:                  
Operations 28,961     31,727     (9 )%   34,674     9 %
Depreciation and amortization 2,285     3,442     (34 )%   2,736     (21 )%
Segment operating contribution 7,757     3,630       *   9,288       *
                   
Other segment expenses (a) 1,547     1,291     20 %   884       *
Segment contribution $ 6,210     $ 2,339       *   $ 8,404       *
                   
Other data:                  
Average monthly ending pawn loan balance per store (b) $ 68     $ 64     6 %   $ 81     27 %
Average annual yield on pawn loans outstanding 194 %   196 %   (200 )bps   194 %   (200 )bps
Pawn loan redemption rate (c) 78 %   77 %   100 bps   78 %   100 bps
                             

 

* Represents an increase or decrease in excess of 100% or not meaningful.
(a) The nine-months ended June 30, 2016 constant currency balance excludes $0.8 million net foreign currency transaction losses resulting from movement in exchange rates. The net foreign currency transaction losses for the nine-months ended June 30, 2015 were $1.1 million and are not excluded from the above results.
(b) Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(c) Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

 

EZCORP, Inc.
STORE COUNT ACTIVITY

  Three Months Ended June 30, 2016
  Company-owned Stores    
  U.S. Pawn   Mexico Pawn   Other International   Consolidated   Franchises
                   
As of March 31, 2016 522     237     27     786      
New locations opened     1         1      
As of June 30, 2016 522     238     27     787      

 

  Three Months Ended June 30, 2015
  Company-owned Stores    
  U.S. Pawn   Mexico Pawn   Other International   Consolidated   Franchises
                   
As of March 31, 2015 519     262   * 39     820     2  
Locations sold, combined or closed     (1 ) *     (1 )   (1 )
As of June 30, 2015 519     261     39     819     1  

* Includes 21 buy/sell stores. One buy/sell store was closed during the period.

  Nine Months Ended June 30, 2016
  Company-owned Stores    
  U.S. Pawn   Mexico Pawn   Other International   Consolidated   Franchises
                   
As of September 30, 2015 522     237   * 27     786     1  
New locations opened     1         1      
Locations acquired 6     1         7      
Locations sold, combined or closed (6 )   (1 )       (7 )   (1 )
As of June 30, 2016 522     238     27     787      

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

  Nine Months Ended June 30, 2015
  Company-owned Stores    
  U.S. Pawn   Mexico Pawn   Other International   Consolidated   Franchises
                   
As of September 30, 2014 504     261   * 39     804     5  
New locations opened 5     2   *     7      
Locations acquired 12             12      
Locations sold, combined or closed (2 )   (2 ) *     (4 )   (4 )
As of June 30, 2015 519     261     39     819     1  

* Includes 19 buy/sell stores. Two buy/sell stores were opened and one buy/sell store was closed during the period.

 

NON-GAAP FINANCIAL INFORMATION

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 its 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 condensed 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 condensed consolidated balance sheet and condensed 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 comparable period, in order to exclude the effects of foreign currency rate fluctuations. For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and nine-months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss.

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, where not already included in constant currency segment results above.

Miscellaneous Non-GAAP Financial Measures

  U.S. Dollar
Amount
  Percentage
Change YOY
       
  (in thousands)    
Consolidated revenue (three-months ended June 30, 2016) $ 170,150     3 %
Currency exchange rate fluctuations 4,160      
Constant currency consolidated revenue (three-months ended June 30, 2016) $ 174,310     6 %
       
Consolidated net revenue (three-months ended June 30, 2016) $ 100,394     7 %
Currency exchange rate fluctuations 2,364      
Constant currency consolidated net revenue (three-months ended June 30, 2016) $ 102,758     10 %
       
Consolidated operating expenses (three-months ended June 30, 2016) $ 93,886     (2 )%
Currency exchange rate fluctuations 1,730      
Constant currency consolidated operating expenses (three-months ended June 30, 2016) $ 95,616     %
       
Consolidated revenue (nine-months ended June 30, 2016) $ 545,920     (1 )%
Currency exchange rate fluctuations 13,942      
Constant currency consolidated revenue (nine-months ended June 30, 2016) $ 559,862     2 %
       
Consolidated net revenue (nine-months ended June 30, 2016) $ 321,369     6 %
Currency exchange rate fluctuations 7,695      
Constant currency consolidated net revenue (nine-months ended June 30, 2016) $ 329,064     8 %
       
Consolidated operating expenses (nine-months ended June 30, 2016) $ 294,504     5 %
Currency exchange rate fluctuations 6,294      
Constant currency consolidated operating expenses (nine-months ended June 30, 2016) $ 300,798     7 %
       
Mexico Pawn loans outstanding as of June 30, 2016 $ 16,332     (1 )%
Currency exchange rate fluctuations 3,017      
Constant currency Mexico Pawn loans outstanding as of June 30, 2016 $ 19,349     18 %

 

Contact:
Jeff Christensen
Vice President, Investor Relations
Email: jeff_christensen@ezcorp.com
Phone: (512) 437-3545
Categories: Press Releases
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