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EZCORP Announces Strong Fourth Quarter and Full Fiscal 2017 Earnings

Nov 15, 2017

EPS from continuing operations of $0.21 for the fourth quarter and $0.62 for the full fiscal year

AUSTIN, Texas, Nov. 15, 2017 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2017.

All amounts in this release are from EZCORP continuing operations and conform with U.S. generally accepted accounting principles (GAAP) unless otherwise noted. Comparisons are made to the same period in the prior year unless otherwise noted.

FOURTH QUARTER HIGHLIGHTS

  • Seventh consecutive quarter of year-over-year (YOY) earnings and profit growth. Earnings per share improved $0.52 to $0.21 in the fourth quarter and grew $0.77 to $0.62 in the full fiscal year.

  • Net income from continuing operations improved $27.6 million to $10.1 million in the fourth quarter, and grew $41.0 million to $32.0 million in the full fiscal year. Adjusted EBITDA1 improved $19.1 million to $22.1 million in the fourth quarter, and grew 39%, or $24.6 million, to $88.5 million in the full fiscal year.

  • Continue to lead the U.S. market in same store pawn loans outstanding (PLO) YOY growth. PLO increased 19% in Mexico (11% on a constant currency basis2).

  • Operating contribution from the Mexico Pawn segment improved significantly — up 153% to $5.8 million. Highest growth segment now 20% of company’s total pawn profit contribution.

  • Cash balance at September 30 up 150% to $164.4 million.

  • Successfully completed $143.8 million offering of convertible notes, improving liquidity with an attractive coupon rate of 2.875% and seven-year term.

  • Favorable restructuring of the notes receivable repayment arrangement with AlphaCredit improved the return and risk profile and increases future cash flow and profit.

In October 2017, the company significantly expanded its footprint in the emerging Latin American pawn market by acquiring 112 pawn stores in Guatemala, El Salvador, Honduras and Peru for $60 million cash, with an additional $2.25 million earn-out possible based on post-acquisition performance. This acquisition will be accretive to earnings starting the first quarter of fiscal 2018 and provides a platform for further growth and expansion in the high growth rate region.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Stuart Grimshaw said, “Even though our results were somewhat impacted by the hurricane activity in Texas and Florida, we are proud of our operating performance during the fourth quarter, which capped off a fiscal year that showed a dramatic turnaround on the bottom line. We delivered significant earnings growth in both the U.S and Mexico pawn segments during the quarter and the year, driven by continued execution on our strategic initiatives to create long-term profitable growth.

“First, we continue the diversification of our revenue base and operations, increasing our mix of business from Latin America. Our Mexico Pawn segment is our fastest growing business and is now providing 20% of our total pawn operating contribution. We added 10 new stores in Mexico during the year and see plenty of opportunity to open and acquire more. And we are increasing our presence in Latin America beyond Mexico. The recent acquisition of 112 pawn stores in four new countries expands our Latin American store base, which now comprises 41% of our total pawn stores. It provides compelling opportunities for further growth through the expansion of general merchandise pawn loan and retail activities, the opening of new stores in attractive and under-penetrated markets, and the pursuit of complementary acquisitions in the region.

“Second, we are improving the experience customers have in our stores,” Grimshaw continued. “Our customers represent a large, underserved market. We are updating our technology, better training our field staff and refreshing our stores to meet their needs and exceed their expectations.

“Third, we’re strengthening our balance sheet and liquidity, reducing our corporate expenses, better analyzing and acting on customer data and process improvements, and optimizing loan values and merchandise pricing. These actions are expected to further increase our market share and profitability and provide us with the ability to continue to capitalize on attractive growth opportunities.”

1EBITDA is earnings before interest, taxes, depreciation and amortization. “Adjusted EBITDA” includes EBITDA attributable to continuing operations, further adjusted to exclude the estimated impact of the hurricanes that affected the Texas Gulf Coast and Florida in the fourth quarter, as well as certain other discrete items. See "Non-GAAP Financial Information" at the end of this release.

2In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (GAAP), we provide financial information on a “constant currency” and "adjusted EBITDA" basis, which excludes the impact of foreign currency exchange rate fluctuations, and provides a different way to view the operational results of our business, respectively. 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 and calculation of our adjusted EBITDA, see “Non-GAAP Financial Information” at the end of this release.

CONSOLIDATED RESULTS

Temporary Impact of U.S. Hurricanes

During the fourth quarter, the U.S. Pawn segment was affected by Hurricanes Harvey and Irma resulting in the temporary closure of stores in the affected areas, all of which have since reopened. In addition to the loss of inventory and loan collateral and the damage to physical facilities, all totaling $1.0 million, the company estimates that the effects of the hurricanes include a reduction in U.S. pawn loan balances of $5.0 million as of September 30, 2017, with a resulting reduction in pawn service charge (PSC) revenues and merchandise sales gross profit. The company expects pawn loan demand to return to normal levels after the annual tax refund season in the U.S.

Three Months Ended September 30, 2017 Results

  • Despite the impacts of the hurricanes, net revenue improved 1% to $108.1 million (flat at $107.4 million on a constant currency basis), due largely to a 4% increase in PSC revenue (up 3% on a constant currency basis). Same store PLO was down 1% in the U.S. (up 3% in stores unaffected by the hurricanes). Same store PLO rose 19% in Mexico (up 11% in Mexico on a constant currency basis). Merchandise sales gross margins held at 35%, within the 35-38% target range.

  • Continued discipline in cost control reduced operations expenses 2% to $78.3 million (down 3% to $77.8 million on a constant currency basis) and reduced corporate expenses 34% to $11.9 million.

  • The company restructured the repayment of the remaining $60.9 million of principal from AlphaCredit, improving its risk and return profile, as well as significantly increasing future cash flow and profit. Under the restructured arrangement, the company expects to collect $32.6 million of principal in fiscal 2018 and $28.3 million in fiscal 2019. The restructured arrangement includes a higher interest rate and an incremental deferred compensation fee of up to $14.0 million to be received in 2019 and 2020.

  • Interest expense includes a $5.3 million debt extinguishment charge offset by a $3.0 million pre-tax benefit from the restructuring of the AlphaCredit notes. The AlphaCredit note restructuring drove an additional one-time income tax benefit of $3.0 million in the quarter.

  • Improvements in net revenues and cost discipline have increased operating leverage and the resulting bottom line. Earnings per share increased YOY for the seventh-consecutive quarter. EPS from continuing operations is $0.21, up from a loss of $0.31 a year ago.

Fiscal Year Ended September 30, 2017

  • The continued focus on investment in customer experience increased net revenue 2% to $435.5 million (up 3% to $439.3 million on a constant currency basis), driven primarily by a 4% rise in PSC revenue (up 5% on a constant currency basis). Merchandise sales gross margins were down slightly to 36%, but within the 35-38% target range.

  • Corporate expenses were down 22% to $53.3 million.  The company remains on track to reduce corporate expenses to no more than $50 million in FY18.

  • During the year and prior to the note restructuring, EZCORP collected a total of $34 million from AlphaCredit ($29.5 million in principal and $4.5 million in interest).

  • Earnings per share from continuing operations reached $0.62, a significant turnaround from the loss of ($0.15) in the prior year. The strategic transformation initiatives achieved during fiscal 2017 set the stage for further success in fiscal 2018 and beyond.

PAWN RESULTS

U.S. Pawn Segment

Three Months Ended September 30, 2017

  • PLO was down 1% in total and on a same store basis, to $148.1 million (up 3% in stores unaffected by the hurricanes). Changes in PLO resulted in PSC increasing 1% in total and 2% on a same-store basis to $61.0 million.

  • The merchandise sales gross margin of 36% was consistent with the prior-year quarter and within the target range of 35-38%. Inventory aged over one year improved to 10% from 11%.

  • Operations expenses decreased 3% to $65.5 million driven by cost control initiatives and lower variable compensation.

  • Segment contribution increased 7% to $22.8 million. Initiatives are underway to continue improving long-term net revenue and profitability. These include investing in upgrading the POS system, enhancing product and customer data analytics, and enhancing the customer experience by refreshing stores.

Fiscal Year Ended September 30, 2017

  • Driven by the impact of PLO outlined above, PSC rose 4% in total and on a same store basis to $238.4 million.

  • Merchandise sales increased 1% in total and on a same store basis. The merchandise sales gross margin of 36% is within the 35-38% U.S. target.

  • Operations expenses grew 2% to $260.0 million as a result of investment in customer facing labor and higher benefit claims.

  • Segment contribution was up 3% to $103.5 million.

Mexico Pawn Segment

Three Months Ended September 30, 2017

  • The company continues to experience significant growth in the Mexico Pawn segment, taking advantage of market opportunities primarily from its existing store footprint. PLO expanded 20% to $21.1 million (up 13% to $19.8 million on a constant currency basis), which drove a 22% increase in PSC to $10.1 million (up 16% to $9.7 million on a constant currency basis).

  • Merchandise sales increased 10% in total and 7% on a same store basis (up 4% in total and 1% in same stores on a constant currency basis). The 30% merchandise sales gross margin was slightly above the prior-year quarter, while aged inventory balances decreased to 2% from 6% in the fiscal 2017 third quarter.

  • Segment contribution increased 153% to $5.8 million (up 140% to $5.5 million on a constant currency basis) driven by an 18% improvement in net revenue, with only a 3% increase in operations expense due to continued discipline in cost control.

  • The company opened four new stores in the fourth quarter, for a total of 10 in fiscal 2017. There is a significant runway for continued store openings and acquisitions, in addition to the growth potential of the existing store base.

Fiscal Year Ended September 30, 2017

  • The PLO changes described above drove a 9% increase in PSC to $34.6 million (up 15% to $36.8 million on a constant currency basis).

  • Merchandise sales grew 4% in total and 3% on a same store basis (up 12% in total and 10% in same stores on a constant currency basis). Merchandise margin was 32%, consistent with the prior year.

  • Segment contribution yielded a 119% increase to $18.7 million (up 130% to $19.6 million on a constant currency basis) as a result of a 7% net revenue expansion while operations expenses dropped 6%.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, November 16, 2017, at 7:30 a.m. Central Time to discuss fourth quarter and fiscal year-end results. Analysts and institutional investors may participate by dialing (877) 201-0168, Conference ID: 8074459, international dialing (647) 788-4901. The call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay 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 Latin America. It also sells merchandise, primarily collateral forfeited from pawn lending operations, and used merchandise purchased from customers. EZCORP is a member of the Russell 2000 Index, S&P SmallCap 600 Index, S&P 1000 Index and Nasdaq Composite Index.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements on the company’s strategy, initiatives and expected performance. These statements are based on management’s current expectations on the outcome and timing of future events. All statements other than historical facts-including those on the company's strategy, initiatives and future performance, which 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 here, due to a number of uncertainties and other factors. These include 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 EZCORP’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.

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


EZCORP, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended September 30, Fiscal Year Ended September 30,
 2017
 2016 2017 2016
        
 (Unaudited)    
 (in thousands, except per share amounts)
Revenues:
Merchandise sales$95,166  $97,166  $414,838  $409,107 
Jewelry scrapping sales13,531  16,482  51,189  50,113 
Pawn service charges71,097  68,603  273,080  261,800 
Other revenues2,275  2,334  8,847  9,485 
Total revenues182,069  184,585  747,954  730,505 
Merchandise cost of goods sold61,685  63,540  266,525  258,271 
Jewelry scrapping cost of goods sold11,736  13,768  43,931  42,039 
Other cost of revenues555  416  1,988  1,965 
Net revenues108,093  106,861  435,510  428,230 
Operating expenses:       
Operations78,284  79,941  304,636  301,387 
Administrative11,949  18,016  53,254  68,101 
Depreciation and amortization5,415  6,120  23,661  26,542 
Loss on sale or disposal of assets348  465  359  1,106 
Restructuring  11    1,921 
Total operating expenses95,996  104,553  381,910  399,057 
Operating income12,097  2,308  53,600  29,173 
Interest expense10,956  4,463  27,803  16,477 
Interest income(5,194) (15) (12,103) (81)
Equity in net (income) loss of unconsolidated affiliate(1,148) 5,881  (4,916) 255 
Impairment of investments  10,957    10,957 
Other (income) expense(129) 387  (423) 1,202 
Income (loss) from continuing operations before income taxes7,612  (19,365) 43,239  363 
Income tax (benefit) expense(2,457) (1,863) 11,206  9,361 
Income (loss) from continuing operations, net of tax10,069  (17,502) 32,033  (8,998)
Income (loss) from discontinued operations, net of tax43  19,636  (1,825) (79,432)
Net income (loss)10,112  2,134  30,208  (88,430)
Net loss attributable to noncontrolling interest(1,298) (1,097) (1,650) (7,686)
Net income (loss) attributable to EZCORP, Inc.$11,410  $3,231  $31,858  $(80,744)
        
Basic earnings per share attributable to EZCORP, Inc. — continuing operations$0.21  $(0.31) $0.62  $(0.15)
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations$0.21  $(0.31) $0.62  $(0.15)
        
Weighted-average basic shares outstanding54,298  53,991  54,260  54,427 
Weighted-average diluted shares outstanding54,428  53,991  54,368  54,427 



EZCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 September 30,
 2017
 September 30,
 2016
 
   
Assets:   
Current assets:   
Cash and cash equivalents$164,393  $65,737 
Pawn loans169,242  167,329 
Pawn service charges receivable, net31,548  31,062 
Inventory, net154,411  140,224 
Notes receivable, net32,598  41,946 
Prepaid expenses and other current assets28,765  35,845 
Total current assets580,957  482,143 
Investment in unconsolidated affiliate43,319  37,128 
Property and equipment, net57,959  58,455 
Goodwill254,760  253,976 
Intangible assets, net32,420  30,681 
Notes receivable, net28,377  41,119 
Deferred tax asset, net16,856  35,303 
Other assets, net9,715  44,439 
Total assets$1,024,363  $983,244 
    
Liabilities and equity:   
Current liabilities:   
Accounts payable, accrued expenses and other current liabilities$61,543  $84,285 
Customer layaway deposits11,032  10,693 
Total current liabilities72,575  94,978 
Long-term debt, net284,807  283,611 
Other long-term liabilities7,055  10,450 
   Total liabilities364,437  389,039 
Stockholders’ equity:   
Class A Non-Voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued
and outstanding: 51,427,832 as of September 30, 2017 and 51,129,144 as of September 30, 2016
514  511 
Class B Voting Common Stock, convertible, par value $.01 per share; shares authorized: 3 million;
issued and outstanding: 2,970,171
30  30 
Additional paid-in capital348,532  318,723 
Retained earnings351,666  319,808 
Accumulated other comprehensive loss(38,367) (44,089)
EZCORP, Inc. stockholders’ equity662,375  594,983 
Noncontrolling interest(2,449) (778)
   Total equity659,926  594,205 
Total liabilities and equity$1,024,363  $983,244 



EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Year Ended September 30,
 2017  2016
        
 (in thousands)
        
Operating activities:       
Net income (loss)$30,208  $(88,430)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:       
Depreciation and amortization23,661  28,651 
Amortization of debt discount and deferred financing costs12,303  12,375 
Amortization of prepaid commissions  13,083 
Accretion of notes receivable discount(3,788)  
Consumer loan loss provision1,988  27,917 
Deferred income taxes6,046  2,674 
Impairment of goodwill  73,244 
Other adjustments17  7,289 
Gain on restructured notes receivable(3,048)  
Gain on disposition of Grupo Finmart, net of loss on extinguishment  (32,172)
Loss on extinguishment of debt and other5,250   
Loss on sale or disposal of assets359  1,106 
Stock compensation expense5,866  5,346 
Income from investment in unconsolidated affiliate(4,916) 255 
Impairment of investments in unconsolidated affiliate  10,957 
Changes in operating assets and liabilities:   
Service charges and fees receivable(224) 7,677 
Inventory721  (3,735)
Prepaid expenses, other current assets and other assets5,166  (15,397)
Accounts payable, accrued expenses and other liabilities(31,041) (26,297)
Customer layaway deposits241  329 
Income taxes, net of excess tax benefit from stock compensation3,027  37,334 
Dividends from unconsolidated affiliate  2,197 
Net cash provided by operating activities51,836  64,403 
Investing activities:   
Loans made(646,625) (676,375)
Loans repaid386,383  428,196 
Recovery of pawn loan principal through sale of forfeited collateral244,632  235,168 
Additions to property and equipment(18,853) (9,550)
Acquisitions, net of cash acquired(2,250) (6,000)
Proceeds from disposition of Grupo Finmart, net of cash disposed  35,277 
Principal collections on notes receivable29,458   
Net cash (used in) provided by investing activities(7,255) 6,716 
Financing activities:   
Taxes paid related to net share settlement of equity awards(767) (172)
Payout of deferred consideration  (15,000)
Proceeds from settlement of forward currency contracts  3,557 
Change in restricted cash  8,199 
Proceeds from borrowings, net of issuance costs139,506  64,133 
Payments on borrowings(85,388) (112,123)
Repurchase of common stock  (11,750)
Net cash provided by (used in) financing activities53,351  (63,156)
Effect of exchange rate changes on cash and cash equivalents724  (1,350)
Net increase in cash and cash equivalents98,656  6,613 
Cash and cash equivalents at beginning of period65,737  59,124 
Cash and cash equivalents at end of period$164,393  $65,737 
Non-cash investing and financing activities:   
Pawn loans forfeited and transferred to inventory$257,388  $249,316 
Dividend reinvestment acquisition of additional ownership in unconsolidated affiliate1,153   



EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED) 
 
 Three Months Ended September 30, 2017 
 U.S. Pawn Mexico
Pawn
 Other
International
 Total
Segments
 Corporate
Items
 Consolidated
                        
 (in thousands)
Revenues:                        
Merchandise sales$78,753  $16,410  $3  $95,166  $  $95,166 
Jewelry scrapping sales13,045  486    13,531    13,531 
Pawn service charges60,957  10,140    71,097    71,097 
Other revenues62  188  2,025  2,275    2,275 
Total revenues152,817  27,224  2,028  182,069    182,069 
Merchandise cost of goods sold50,240  11,445    61,685    61,685 
Jewelry scrapping cost of goods sold11,320  416    11,736    11,736 
Other cost of revenues    555  555    555 
Net revenues91,257  15,363  1,473  108,093    108,093 
Segment and corporate expenses (income):           
Operations65,478  9,772  3,034  78,284    78,284 
Administrative        11,949  11,949 
Depreciation and amortization2,684  765  47  3,496  1,919  5,415 
Loss on sale or disposal of assets252  69    321  27  348 
Interest expense  2    2  10,954  10,956 
Interest income  (1,041)   (1,041) (4,153) (5,194)
Equity in net income of unconsolidated affiliate    (1,148) (1,148)   (1,148)
Other income(5) (8) (68) (81) (48) (129)
Segment contribution (loss)$22,848  $5,804  $(392) $28,260     
Income from continuing operations before income taxes      $28,260  $(20,648) $7,612 


EZCORP, Inc.
OPERATING SEGMENT RESULTS
  
 Twelve Months Ended September 30, 2017 
 U.S. Pawn
 Mexico
Pawn

 Other
International
 Total
Segments
 Corporate
Items
 Consolidated
                        
 (in thousands)
Revenues:                       
Merchandise sales$351,878  $62,957  $3  $414,838  $  $414,838 
Jewelry scrapping sales48,203  2,986    51,189    51,189 
Pawn service charges238,437  34,643    273,080    273,080 
Other revenues219  645  7,983  8,847    8,847 
Total revenues638,737  101,231  7,986  747,954    747,954 
Merchandise cost of goods sold223,475  43,050    266,525    266,525 
Jewelry scrapping cost of goods sold41,434  2,497    43,931    43,931 
Other cost of revenues    1,988  1,988    1,988 
Net revenues373,828  55,684  5,998  435,510    435,510 
Segment and corporate expenses (income):           
Operations259,977  36,211  8,448  304,636    304,636 
Administrative        53,254  53,254 
Depreciation and amortization10,171  2,675  191  13,037  10,624  23,661 
Loss on sale or disposal of assets198  134    332  27  359 
Interest expense  9    9  27,794  27,803 
Interest income  (1,930)   (1,930) (10,173) (12,103)
Equity in net income of unconsolidated affiliate    (4,916) (4,916)   (4,916)
Other income(19) (69) (96) (184) (239) (423)
Segment contribution$103,501  $18,654  $2,371  $124,526     
Income from continuing operations before income taxes      $124,526  $(81,287) $43,239 



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 sales15,693  789    16,482    16,482 
Pawn service charges60,263  8,340    68,603    68,603 
Other revenues50  154  2,130  2,334    2,334 
Total revenues158,217  24,238  2,130  184,585    184,585 
Merchandise cost of goods sold52,980  10,560    63,540    63,540 
Jewelry scrapping cost of goods sold13,105  663    13,768    13,768 
Other cost of revenues    416  416    416 
Net revenues92,132  13,015  1,714  106,861    106,861 
Segment and corporate expenses (income):           
Operations67,803  9,520  2,618  79,941    79,941 
Administrative        18,016  18,016 
Depreciation and amortization2,753  680  55  3,488  2,632  6,120 
Loss on sale or disposal of assets162  53  4  219  246  465 
Restructuring11      11    11 
Interest expense  6    6  4,457  4,463 
Interest income  (7)   (7) (8) (15)
Equity in net loss of unconsolidated affiliate    5,881  5,881    5,881 
Impairment of investments    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
  
 Twelve Months 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 sales47,810  2,282  21  50,113    50,113 
Pawn service charges229,893  31,907    261,800    261,800 
Other revenues331  385  8,769  9,485    9,485 
Total revenues626,805  94,905  8,795  730,505    730,505 
Merchandise cost of goods sold217,268  41,002  1  258,271    258,271 
Jewelry scrapping cost of goods sold40,138  1,885  16  42,039    42,039 
Other cost of revenues    1,965  1,965    1,965 
Net revenues369,399  52,018  6,813  428,230    428,230 
Segment and corporate expenses (income):           
Operations255,321  38,481  7,585  301,387    301,387 
Administrative        68,101  68,101 
Depreciation and amortization12,242  2,965  218  15,425  11,117  26,542 
Loss on sale or disposal of assets664  169  4  837  269  1,106 
Restructuring993  543  202  1,738  183  1,921 
Interest expense125  109    234  16,243  16,477 
Interest income(2) (30)   (32) (49) (81)
Equity in net income of unconsolidated affiliate    255  255    255 
Impairment of investments    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.
STORE COUNT ACTIVITY (UNAUDITED)
 
 Three Months Ended September 30, 2017
 U.S. Pawn Mexico Pawn Other
International
 Consolidated
        
As of June 30, 2017515  244  27  786 
New locations opened  4    4 
Locations acquired2      2 
Locations sold, combined or closed(4) (2)   (6)
As of September 30, 2017513  246  27  786 


 Three Months Ended September 30, 2016
 U.S. Pawn Mexico Pawn Other
International
 Consolidated
        
As of June 30, 2016522  238  27  787 
New locations opened  2    2 
Locations acquired       
Locations sold, combined or closed(2) (1)   (3)
As of September 30, 2016520  239  27  786 


 Twelve Months Ended September 30, 2017
 U.S. Pawn Mexico Pawn Other
International
 Consolidated
        
As of September 30, 2016520  239  27  786 
New locations opened  10    10 
Locations acquired2      2 
Locations sold, combined or closed(9) (3)   (12)
As of September 30, 2017513  246  27  786 


 Twelve Months Ended September 30, 2016
 U.S. Pawn Mexico Pawn Other
International
 Consolidated
        
As of September 30, 2015522  237  27  786 
New locations opened  3    3 
Locations sold, combined or closed(8) (1)   (9)
As of September 30, 2016520  239  27  786 
            
            

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, including adjusted EBITDA and “constant currency” results solely for our Mexico Pawn operations. We use adjusted EBITDA to evaluate the operating and financial performance of the company and period-over-period growth. We derive the financial calculations of adjusted EBITDA, primarily by excluding from a comparable GAAP measure certain items we do not consider to be representative of our actual operating performance. We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos. We believe presenting constant currency results is meaningful and useful in understanding our Mexico Pawn operations, activities and business metrics. We provide non-GAAP financial data for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use non-GAAP information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to-not instead of or superior to-our GAAP financial statements. 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 here are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in Mexican pesos to U.S. dollars. We use the exchange rate from the prior-year comparable period, as opposed to the current period, to exclude the effects of foreign currency rate fluctuations. We use 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. The end-of-period exchange rate for September 30, 2017 and 2016 was 18.2 to 1 and 19.4 to 1, respectively. The approximate average exchange rate for the years ended September 30, 2017, 2016 and 2015 was 19.1 to 1, 17.9 to 1, and 15.1, respectively. However, our statement of operations constant currency results reflect the impact of monthly effects of exchange rates, so can’t be directly calculated from the above rates. Constant currency results also exclude the foreign currency gain or loss, and the related foreign currency derivative gain or loss impact. There has been a prolonged weakening of the Mexican peso to the U.S. dollar. We may continue to experience further weakening in future reporting periods, which may adversely affect our operating results when stated on a GAAP basis.

The following information reconciles certain non-GAAP financial measures presented in this news release to the most directly comparable financial measures calculated and presented in accordance with GAAP, for the three and 12 months ended September 30, 2017.

Adjusted EBITDA (Unaudited) 
    
 Three Months Ended
September 30,
 Fiscal Year Ended
September 30, 
 2017 2016 2017 2016
        
 (in millions)
Income (loss) from continuing operations, net of tax $10.1  $(17.5) 32.0  $(9.0)
Interest expense11.0  4.5  27.8  16.5 
Interest income(5.2)   (12.1) (0.1)
Income taxes(2.5) (1.9) 11.2  9.4 
Depreciation and amortization5.4  6.1  23.7  26.5 
Estimated impact of natural disasters2.9    2.9   
Acquisition costs0.8    1.2   
Impairment of investments  11.0    11.0 
Restatement related costs      6.2 
Mexico buy/sell stores  0.9    4.2 
Other*(0.4) (0.1) 1.8  (0.8)
Adjusted EBITDA$22.1  $3.0  $88.5  $63.9 
                

* Other items include foreign currency impacts and strategic plan costs as well as a one-time legal credit in fiscal 2016.


Other Miscellaneous Non-GAAP Financial Measures (Unaudited)
 
 U.S. Dollar
Amount
 Percentage
Change YOY
    
 (in millions)  
Mexico Pawn same store PLO$20.7  19%
Currency exchange rate fluctuations(1.3)  
Constant currency Mexico Pawn same store PLO$19.4  11%
    
Mexico Pawn segment profit before tax (three months ended September 30, 2017)$5.8  153%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.3)  
Constant currency Mexico Pawn segment profit before tax (three months ended September 30, 2017)$5.5  140%
    
Consolidated net revenue (three months ended September 30, 2017)$108.1  1%
Currency exchange rate fluctuations(0.7)  
Constant currency consolidated net revenue (three months ended September 30, 2017)$107.4  %
    
Consolidated PSC revenue (three months ended September 30, 2017)$71.1  4%
Currency exchange rate fluctuations(0.5)  
Constant currency consolidated PSC revenue (three months ended September 30, 2017)$70.6  3%
    
Consolidated operations expenses (three months ended September 30, 2017)$78.3  (2)%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.5)  
Constant currency consolidated operations expenses (three months ended September 30, 2017)$77.8  3%
    
Consolidated net revenue (twelve months ended September 30, 2017)$435.5  2%
Currency exchange rate fluctuations3.8   
Constant currency consolidated net revenue (twelve months ended September 30, 2017)$439.3  3%
    
Consolidated PSC revenue (twelve months ended September 30, 2017)$273.1  4%
Currency exchange rate fluctuations2.2   
Constant currency consolidated PSC revenue (twelve months ended September 30, 2017)$275.3  5%
    
Mexico Pawn PLO$21.1  20%
Currency exchange rate fluctuations(1.3)  
Constant currency Mexico Pawn PLO$19.8  13%
    
Mexico Pawn PSC revenue (three months ended September 30, 2017)$10.1  22%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.4)  
Constant currency Mexico Pawn PSC revenue (three months ended September 30, 2017)$9.7  16%
    
Mexico Pawn merchandise sales (three months ended September 30, 2017)$16.4  10%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.8)  
Constant currency Mexico Pawn merchandise sales (three months ended September 30, 2017)$15.6  4%
    
Mexico Pawn same store merchandise sales (three months ended September 30, 2017)$15.9  7%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.8)  
Constant currency Mexico Pawn same store merchandise sales (three months ended September 30, 2017)$15.1  1%
    
Mexico Pawn PSC revenue (twelve months ended September 30, 2017)$34.6  9%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)2.2   
Constant currency Mexico Pawn PSC revenue (twelve months ended September 30, 2017)$36.8  15%
    
Mexico Pawn merchandise sales (twelve months ended September 30, 2017)$63.0  4%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)4.6   
Constant currency Mexico Pawn merchandise sales (twelve months ended September 30, 2017)$67.6  12%
    
Mexico Pawn same store merchandise sales (twelve months ended September 30, 2017)$61.0  3%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)4.6   
Constant currency Mexico Pawn same store merchandise sales (twelve months ended September 30, 2017)$65.6  10%
    
Mexico Pawn segment profit before tax (twelve months ended September 30, 2017)$18.7  119%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)0.9   
Constant currency Mexico Pawn segment profit before tax (twelve months ended September 30, 2017)$19.6  130%

 

Source: EZCORP, Inc.
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