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EZCORP Reports Third Quarter Fiscal Year 2019 Results

Jul 31, 2019

AUSTIN, Texas--(BUSINESS WIRE)-- EZCORP, Inc. (NASDAQ: EZPW) today announced results for its third quarter ended June 30, 2019.

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.

HIGHLIGHTS FOR THIRD QUARTER OF FISCAL 2019

  • Total revenues for the quarter were up 1% to $202.5 million. Included in the GAAP results is a discrete $6.1 million adjustment in Latin America to correct the calculation of certain transaction tax liabilities in prior periods ($4.6 million of which reduced merchandise sales and $1.5 million of which increased interest expense). Adjusted1 total revenues increased 4% to $206.9 million, driven by continued growth in key pawn operating metrics including pawn loans outstanding (PLO), pawn service charges (PSC) and merchandise sales, across U.S. and Latin America.
  • Income before tax was $3.5 million, down 78%, and diluted earnings per share were $0.06, down 76%. These year-over-year comparisons were impacted primarily by a favorable litigation settlement in the prior-year quarter, the inclusion in the current quarter of costs related to certain growth investments, and other discrete items. Excluding those items and adjusting for constant currency2, adjusted income before tax was $15.0 million, up 16%, and adjusted diluted earnings per share were $0.18, up 13%.
  • Cash and cash equivalents ended the current quarter at $138.9 million, after the retirement of $195.0 million of convertible notes in June 2019 using cash on hand and continued investment in growth initiatives. During the quarter, the company completed the acquisition of seven pawn stores in Nevada for $7.0 million and collected another $7.3 million of principal under the Alpha Credit / Grupo Finmart notes.

     

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Stuart Grimshaw commented, "Current quarter activities delivered solid operating results highlighted by ongoing momentum across all geographies. Steady growth in PLO and slightly improving yields, reflecting the health of the loan balance, drove strong growth in our primary net revenue component, PSC. On an adjusted basis, EBITDA and EPS growth accelerated as a result of rising operating leverage during the quarter.

“We remain focused on longer-term strategic initiatives centered on best serving our customers’ need for cash, expanding our footprint both here in the U.S. and across Latin America via de novo store growth and capitalizing on higher-return M&A opportunities, and proactively investing in differentiated digital engagement and data analytics programs. We are doing this while maintaining financial flexibility to fund growth to enhance long-term shareholder value. Focusing on efficient and effective capital deployment, we recently acquired seven pawn stores expanding our presence in Nevada, opened four Latin America de novo stores in the quarter and retired a material tranche of convertible debt with cash on hand.”

CONSOLIDATED RESULTS

Three Months Ended June 30
in thousands, except per share amounts

 

   

As Reported

 

Adjusted1

 

   

2019

 

2018

 

2019

 

2018

 

   

 

 

 

 

 

 

 

Total Revenues

   

$

 

202,465

 

 

$

 

199,612

 

 

$

 

206,917

 

 

$

 

199,612

 

Net Revenues

   

$

 

115,853

 

 

$

 

114,742

 

 

$

 

120,382

 

 

$

 

114,742

 

Income from Continuing Operations, Before Tax

   

$

 

3,459

 

 

$

 

15,506

 

 

$

 

14,979

 

 

$

 

12,924

 

Net Income from Continuing Operations

   

$

 

3,361

 

 

$

 

14,004

 

 

$

 

10,094

 

 

$

 

9,512

 

Diluted Earnings Per Share from Continuing Operations

   

$

 

0.06

 

 

$

 

0.25

 

 

$

 

0.18

 

 

$

 

0.16

 

Adjusted EBITDA1

   

$

 

17,373

 

 

$

 

24,666

 

 

$

 

23,334

 

 

$

 

19,588

 

  • Net revenues were up 1% to $115.9 million on both a GAAP and constant currency basis. Adjusted net revenues increased 5% to $120.4 million. PLO growth of 4% (based on ending balance) and 7% (based on average balances), combined with a slight improvement in yields drove a 9% increase in PSC to $79.0 million. Consolidated merchandise sales gross profit declined 11% to $33.6 million on a 1% decrease in merchandise sales. Adjusted sales gross profit improved 1% to $38.1 million and sales margins decreased 90 basis points to 35.2%, reflecting the effective liquidation of aged general merchandise in U.S. Pawn from 7% to 6% in the current quarter.
  • Consolidated operations expenses rose 2% to $84.7 million on both a GAAP and constant currency basis. Total store count also increased 2%, consisting of a net 18 stores acquired or opened since the prior year quarter (19 new and acquired stores in Latin America and seven acquired stores in the U.S., net of eight store closures in Canada and the U.S.). Same store operations expense increased 1% primarily due to labor and benefit cost increases, including reduced vacancies and increased staffing for expanded stores, an increase in robbery losses in Mexico, and other smaller items.
  • Administrative expense increased 13%, or $1.8 million to $15.1 million principally as a result of a $1.3 million strategic investment in the development of the Evergreen customer-centric digital platform. Another $2.9 million related to this project was capitalized in the quarter, based on the nature of the specific work performed.
  • The company’s global pawn businesses (consisting of U.S. Pawn and Latin America Pawn) generated consolidated segment contribution of $25.7 million, down 14% from the prior year quarter. On an adjusted basis, global pawn generated consolidated segment contribution of $31.7 million, up 6%.
  • Contribution from the Other International segment improved $1.2 million to $0.9 million.
  • Net interest expense increased $3.6 million. Excluding the $1.5 million of interest related to the transaction tax adjustment, net interest expense increased $2.1 million driven by additional debt issued in May 2018 and lower interest income on the declining balance of notes receivable from Alpha Credit as principal collections are received monthly, offset by the June 2019 repayment of our $195.0 million cash convertible senior notes.

     

SEGMENT RESULTS

U.S. Pawn

  • Same store PSC rose 6%, with ending PLO per store of $289,000, up 3% on a year-over-year basis. The growth reflected disciplined lending practices and a focus on meeting customers' need for cash.
  • Merchandise margins remained strong at 37%. The 60 basis point margin reduction from the prior-year quarter reflects effective liquidation of aged general merchandise inventory, reduced during the quarter from 7% to 6%. Jewelry scrapping net revenues decreased $0.2 million on $3.9 million lower scrap proceeds, reflecting lower current market prices for scrap diamonds and an effort to sell more jewelry in store rather than to refiners at lower margins. Scrap margins improved 250 basis points to 16%.
  • U.S. Pawn's net revenues rose 3% to $92.0 million, with flat combined operating expenses and depreciation, resulting in an 11% increase in segment contribution to $23.6 million.

Latin America Pawn

  • Net revenues declined 3% to $23.2 million ($23.3 million on a constant currency basis). Adjusted net revenues increased 16% to $27.7 million reflecting growth in new, acquired and same stores.
  • PSC rose 20% to $20.3 million on both a GAAP and a constant currency basis, reflecting an 18% increase in average PLO for the quarter. Ending PLO grew 6% to $41.7 million (up 4% to $41.0 million on a constant currency basis), with ending PLO per store of $89,000, up 2%.
  • Merchandise sales decreased 4%, or $0.8 million (4% or $1.0 million constant currency). On an adjusted basis, merchandise sales increased 17%, or $3.6 million and gross margin on merchandise sales declined 100 basis points to 29%.
  • Operations expense increased 22% to $18.3 million, including stores acquired or opened since the prior-year quarter and stores expanded or relocated, for which the revenue improvement is expected to lag the incremental costs. Same store operations expense increased 12%, primarily as a result of store licensing requirements recently enacted in Mexico, an increase in robbery losses and related security costs, and labor costs that increased at a rate slightly lower than the total revenue growth.
  • The company added four de novo stores in the quarter. New stores drive attractive long-term profit enhancement but create a short-term drag on earnings as they ramp. Acquired stores are generally less efficient than our same stores until fully integrated, but typically are accretive in their first full quarter of ownership.
  • Segment contribution decreased 76% to $2.1 million (72% on a constant currency basis). Adjusted segment contribution decreased 4% to $8.0 million as a result of new and acquired stores, recently expanded and relocated stores, and the operations expense increase previously described combined with administrative costs to support the growth.

     

CONFERENCE CALL

EZCORP will host a conference call on Thursday, August 1, 2019, at 7:30am Central Time to discuss first quarter results. Analysts and institutional investors may participate on the conference call by dialing (877) 201-0168, Conference ID: 3967714, or internationally by dialing (647) 788-4901. The conference call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay of the conference call will be available online at http://investors.ezcorp.com/ shortly after the end of the call.

ABOUT EZCORP

Formed in 1989, EZCORP has grown into a leading provider of pawn 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. We are dedicated to satisfying the short-term cash needs of consumers who are both cash and credit constrained, focusing on an industry-leading customer experience. EZCORP is traded on NASDAQ under the symbol EZPW and is a member of the Russell 2000 Index, S&P SmallCap 600 Index, S&P 1000 Index and Nasdaq Composite Index.

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.

1

 

“Adjusted basis, which is a nonGAAP measure, excludes certain items. For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “NonGAAP Financial Information” at the end of this release.

2

 

“Constant currency” basis, which is a nonGAAP measure, excludes the impact of foreign currency exchange rate fluctuations. For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “NonGAAP Financial Information” at the end of this release.

 

 

EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2019

 

2018

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

(in thousands, except per share amounts)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Merchandise sales

 

$

 

103,902

 

 

$

 

104,737

 

 

 

$

 

346,186

 

 

$

 

333,270

 

 

Jewelry scrapping sales

 

 

18,212

 

 

 

20,428

 

 

 

 

37,873

 

 

 

44,166

 

 

Pawn service charges

 

 

78,980

 

 

 

72,544

 

 

 

 

244,298

 

 

 

222,597

 

 

Other revenues

 

 

1,371

 

 

 

1,903

 

 

 

 

4,533

 

 

 

6,147

 

 

Total revenues

 

 

202,465

 

 

 

199,612

 

 

 

 

632,890

 

 

 

606,180

 

 

Merchandise cost of goods sold

 

 

70,271

 

 

 

66,896

 

 

 

 

225,183

 

 

 

210,283

 

 

Jewelry scrapping cost of goods sold

 

 

15,765

 

 

 

17,625

 

 

 

 

32,648

 

 

 

37,536

 

 

Other cost of revenues

 

 

576

 

 

 

349

 

 

 

 

1,467

 

 

 

1,273

 

 

Net revenues

 

 

115,853

 

 

 

114,742

 

 

 

 

373,592

 

 

 

357,088

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Operations

 

 

84,727

 

 

 

82,932

 

 

 

 

261,756

 

 

 

248,758

 

 

Administrative

 

 

15,053

 

 

 

13,268

 

 

 

 

46,795

 

 

 

39,688

 

 

Depreciation and amortization

 

 

7,254

 

 

 

6,124

 

 

 

 

21,114

 

 

 

18,298

 

 

Loss on sale or disposal of assets and other

 

 

24

 

 

 

314

 

 

 

 

3,643

 

 

 

453

 

 

Total operating expenses

 

 

107,058

 

 

 

102,638

 

 

 

 

333,308

 

 

 

307,197

 

 

Operating income

 

 

8,795

 

 

 

12,104

 

 

 

 

40,284

 

 

 

49,891

 

 

Interest expense

 

 

9,832

 

 

 

7,394

 

 

 

 

27,212

 

 

 

19,070

 

 

Interest income

 

 

(3,172

)

 

 

(4,358

)

 

 

 

(9,637

)

 

 

(12,896

)

 

Equity in net income of unconsolidated affiliates

 

 

(1,320

)

 

 

(1,151

)

 

 

 

(632

)

 

 

(3,477

)

 

Impairment of investment in unconsolidated affiliates

 

 

 

 

 

 

 

19,725

 

 

 

 

Other income

 

 

(4

)

 

 

(5,287

)

 

 

 

(121

)

 

 

(5,473

)

 

Income from continuing operations before income taxes

 

 

3,459

 

 

 

15,506

 

 

 

 

3,737

 

 

 

52,667

 

 

Income tax expense

 

 

98

 

 

 

1,502

 

 

 

 

1,377

 

 

 

14,710

 

 

Income from continuing operations, net of tax

 

 

3,361

 

 

 

14,004

 

 

 

 

2,360

 

 

 

37,957

 

 

(Loss) income from discontinued operations, net of tax

 

 

(203

)

 

 

91

 

 

 

 

(404

)

 

 

(631

)

 

Net income

 

 

3,158

 

 

 

14,095

 

 

 

 

1,956

 

 

 

37,326

 

 

Net loss attributable to noncontrolling interest

 

 

 

 

(359

)

 

 

 

(1,230

)

 

 

(1,348

)

 

Net income attributable to EZCORP, Inc.

 

$

 

3,158

 

 

$

 

14,454

 

 

 

$

 

3,186

 

 

$

 

38,674

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to EZCORP, Inc. — continuing operations

 

$

 

0.06

 

 

$

 

0.26

 

 

 

$

 

0.06

 

 

$

 

0.72

 

 

Diluted earnings per share attributable to EZCORP, Inc. — continuing operations

 

$

 

0.06

 

 

$

 

0.25

 

 

 

$

 

0.06

 

 

$

 

0.69

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

 

 

55,445

 

 

 

54,464

 

 

 

 

55,306

 

 

 

54,453

 

 

Weighted-average diluted shares outstanding

 

 

55,487

 

 

 

57,954

 

 

 

 

55,327

 

 

 

57,080

 

 
   

EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

 

 

June 30,
2019

 

June 30,
2018

 

September 30,
2018

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Assets:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

138,922

 

 

$

 

284,493

 

 

$

 

285,311

 

Pawn loans

 

 

190,299

 

 

 

183,054

 

 

 

198,463

 

Pawn service charges receivable, net

 

 

29,847

 

 

 

26,439

 

 

 

30,959

 

Inventory, net

 

 

175,802

 

 

 

151,145

 

 

 

166,997

 

Notes receivable, net

 

 

16,166

 

 

 

37,906

 

 

 

34,199

 

Prepaid expenses and other current assets

 

 

37,365

 

 

 

43,708

 

 

 

33,456

 

Total current assets

 

 

588,401

 

 

 

726,745

 

 

 

749,385

 

Investments in unconsolidated affiliates

 

 

30,922

 

 

 

61,056

 

 

 

49,500

 

Property and equipment, net

 

 

66,214

 

 

 

71,587

 

 

 

73,649

 

Goodwill

 

 

300,700

 

 

 

294,335

 

 

 

299,248

 

Intangible assets, net

 

 

63,646

 

 

 

59,678

 

 

 

54,923

 

Notes receivable, net

 

 

10,912

 

 

 

13,432

 

 

 

3,226

 

Deferred tax asset, net

 

 

3,956

 

 

 

6,146

 

 

 

7,986

 

Other assets

 

 

4,472

 

 

 

3,575

 

 

 

3,863

 

Total assets

 

$

 

1,069,223

 

 

$

 

1,236,554

 

 

$

 

1,241,780

 

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current maturities of long-term debt, net

 

$

 

215

 

 

$

 

195,796

 

 

$

 

190,181

 

Accounts payable, accrued expenses and other current liabilities

 

 

59,981

 

 

 

61,595

 

 

 

57,958

 

Customer layaway deposits

 

 

12,750

 

 

 

11,938

 

 

 

11,824

 

Total current liabilities

 

 

72,946

 

 

 

269,329

 

 

 

259,963

 

Long-term debt, net

 

 

235,449

 

 

 

222,897

 

 

 

226,702

 

Deferred tax liability, net

 

 

7,522

 

 

 

4,285

 

 

 

8,817

 

Other long-term liabilities

 

 

5,990

 

 

 

7,458

 

 

 

6,890

 

Total liabilities

 

 

321,907

 

 

 

503,969

 

 

 

502,372

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding: 52,475,070 as of June 30, 2019; 51,494,246 as of June 30, 2018; and 51,614,746 as of September 30, 2018

 

 

524

 

 

 

515

 

 

 

516

 

Class B Voting Common Stock, convertible, par value $.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171

 

 

30

 

 

 

30

 

 

 

30

 

Additional paid-in capital

 

 

404,880

 

 

 

395,428

 

 

 

397,927

 

Retained earnings

 

 

389,808

 

 

 

388,014

 

 

 

386,622

 

Accumulated other comprehensive loss

 

 

(47,926

)

 

 

(47,712

)

 

 

(42,356

)

EZCORP, Inc. stockholders’ equity

 

 

747,316

 

 

 

736,275

 

 

 

742,739

 

Noncontrolling interest

 

 

 

 

(3,690

)

 

 

(3,331

)

Total equity

 

 

747,316

 

 

 

732,585

 

 

 

739,408

 

Total liabilities and equity

 

$

 

1,069,223

 

 

$

 

1,236,554

 

 

$

 

1,241,780

 

 

EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Nine Months Ended June 30,

 

 

2019

 

2018

 

 

 

 

 

 

 

(Unaudited)

 

 

(in thousands)

Operating activities:

 

 

 

 

Net income

 

$

 

1,956

 

 

$

 

37,326

 

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

 

 

 

 

Depreciation and amortization

 

 

21,114

 

 

 

18,298

 

Amortization of debt discount and deferred financing costs

 

 

16,613

 

 

 

12,126

 

Accretion of notes receivable discount and deferred compensation fee

 

 

(3,788

)

 

 

(7,222

)

Deferred income taxes

 

 

5,003

 

 

 

3,135

 

Impairment of investment in unconsolidated affiliate

 

 

19,725

 

 

 

Other adjustments

 

 

1,875

 

 

 

1,948

 

Reserve on jewelry scrap receivable

 

 

3,646

 

 

 

Stock compensation expense

 

 

7,036

 

 

 

8,216

 

Income from investment in unconsolidated affiliates

 

 

(632

)

 

 

(3,477

)

Changes in operating assets and liabilities, net of business acquisitions:

 

 

 

 

Service charges and fees receivable

 

 

1,301

 

 

 

2,609

 

Inventory

 

 

1,377

 

 

 

988

 

Prepaid expenses, other current assets and other assets

 

 

(4,194

)

 

 

(3,356

)

Accounts payable, accrued expenses and other liabilities

 

 

(1,477

)

 

 

(4,624

)

Customer layaway deposits

 

 

949

 

 

 

935

 

Income taxes, net of excess tax benefit from stock compensation

 

 

(5,527

)

 

 

2,419

 

Net cash provided by operating activities

 

 

64,977

 

 

 

69,321

 

Investing activities:

 

 

 

 

Loans made

 

 

(542,512

)

 

 

(512,914

)

Loans repaid

 

 

328,079

 

 

 

318,636

 

Recovery of pawn loan principal through sale of forfeited collateral

 

 

211,979

 

 

 

202,078

 

Additions to property and equipment, net

 

 

(24,568

)

 

 

(33,917

)

Acquisitions, net of cash acquired

 

 

(8,116

)

 

 

(93,165

)

Investment in unconsolidated affiliate

 

 

 

 

(14,036

)

Principal collections on notes receivable

 

 

21,900

 

 

 

16,210

 

Net cash used in investing activities

 

 

(13,238

)

 

 

(117,108

)

Financing activities:

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(3,288

)

 

 

(311

)

Proceeds from borrowings, net of issuance costs

 

 

1,064

 

 

 

170,496

 

Payments on borrowings

 

 

(195,877

)

 

 

(28

)

Net cash (used in) provided by financing activities

 

 

(198,101

)

 

 

170,157

 

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

 

 

(294

)

 

 

(1,493

)

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

 

 

(146,656

)

 

 

120,877

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

285,578

 

 

 

163,868

 

Cash, cash equivalents and restricted cash at end of period

 

$

 

138,922

 

 

$

 

284,745

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

Pawn loans forfeited and transferred to inventory

 

$

 

221,940

 

 

$

 

197,163

 

 

 

EZCORP, Inc.
OPERATING SEGMENT RESULTS
(Unaudited and in thousands)

   

 

 

Three Months Ended June 30, 2019

 

 

U.S. Pawn

 

Latin
America
Pawn

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

 

$

 

83,904

 

 

$

 

19,998

 

 

$

 

 

 

$

 

103,902

 

 

$

 

 

 

$

 

103,902

 

Jewelry scrapping sales

 

 

13,889

 

 

 

4,323

 

 

 

 

 

18,212

 

 

 

 

 

18,212

 

Pawn service charges

 

 

58,635

 

 

 

20,345

 

 

 

 

 

78,980

 

 

 

 

 

78,980

 

Other revenues

 

 

34

 

 

 

67

 

 

 

1,270

 

 

 

1,371

 

 

 

 

 

1,371

 

Total revenues

 

 

156,462

 

 

 

44,733

 

 

 

1,270

 

 

 

202,465

 

 

 

 

 

202,465

 

Merchandise cost of goods sold

 

 

52,855

 

 

 

17,416

 

 

 

 

 

70,271

 

 

 

 

 

70,271

 

Jewelry scrapping cost of goods sold

 

 

11,599

 

 

 

4,166

 

 

 

 

 

15,765

 

 

 

 

 

15,765

 

Other cost of revenues

 

 

 

 

 

 

576

 

 

 

576

 

 

 

 

 

576

 

Net revenues

 

 

92,008

 

 

 

23,151

 

 

 

694

 

 

 

115,853

 

 

 

 

 

115,853

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Operations

 

 

65,449

 

 

 

18,284

 

 

 

994

 

 

 

84,727

 

 

 

 

 

84,727

 

Administrative

 

 

 

 

 

 

 

 

 

 

15,053

 

 

 

15,053

 

Depreciation and amortization

 

 

2,934

 

 

 

1,626

 

 

 

72

 

 

 

4,632

 

 

 

2,622

 

 

 

7,254

 

Loss (gain) on sale or disposal of assets and
other

 

 

4

 

 

 

(8

)

 

 

6

 

 

 

2

 

 

 

22

 

 

 

24

 

Interest expense

 

 

 

 

1,491

 

 

 

76

 

 

 

1,567

 

 

 

8,265

 

 

 

9,832

 

Interest income

 

 

 

 

(376

)

 

 

 

 

(376

)

 

 

(2,796

)

 

 

(3,172

)

Equity in net income of unconsolidated affiliates

 

 

 

 

 

 

(1,320

)

 

 

(1,320

)

 

 

 

 

(1,320

)

Other (income) expense

 

 

 

 

34

 

 

 

6

 

 

 

40

 

 

 

(44

)

 

 

(4

)

Segment contribution

 

$

 

23,621

 

 

$

 

2,100

 

 

$

 

860

 

 

$

 

26,581

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

 

$

 

26,581

 

 

$

 

(23,122

)

 

$

 

3,459

 

 

 

 

Three Months Ended June 30, 2018

 

 

U.S. Pawn

 

Latin
America
Pawn

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

 

$

83,898

 

 

$

20,839

 

 

$

 

 

$

104,737

 

 

$

 

 

$

104,737

 

Jewelry scrapping sales

 

17,813

 

 

2,615

 

 

 

 

20,428

 

 

 

 

20,428

 

Pawn service charges

 

55,536

 

 

17,008

 

 

 

 

72,544

 

 

 

 

72,544

 

Other revenues

 

55

 

 

245

 

 

1,603

 

 

1,903

 

 

 

 

1,903

 

Total revenues

 

157,302

 

 

40,707

 

 

1,603

 

 

199,612

 

 

 

 

199,612

 

Merchandise cost of goods sold

 

52,340

 

 

14,556

 

 

 

 

66,896

 

 

 

 

66,896

 

Jewelry scrapping cost of goods sold

 

15,329

 

 

2,296

 

 

 

 

17,625

 

 

 

 

17,625

 

Other cost of revenues

 

 

 

 

 

349

 

 

349

 

 

 

 

349

 

Net revenues

 

89,633

 

 

23,855

 

 

1,254

 

 

114,742

 

 

 

 

114,742

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Operations

 

65,257

 

 

14,997

 

 

2,678

 

 

82,932

 

 

 

 

82,932

 

Administrative

 

 

 

 

 

 

 

 

 

13,268

 

 

13,268

 

Depreciation and amortization

 

3,010

 

 

951

 

 

48

 

 

4,009

 

 

2,115

 

 

6,124

 

Loss on sale or disposal of assets and other

 

74

 

 

26

 

 

 

 

100

 

 

214

 

 

314

 

Interest expense

 

 

 

3

 

 

 

 

3

 

 

7,391

 

 

7,394

 

Interest income

 

 

 

(672

)

 

 

 

(672

)

 

(3,686

)

 

(4,358

)

Equity in net income of unconsolidated affiliates

 

 

 

 

 

(1,151

)

 

(1,151

)

 

 

 

(1,151

)

Other income

 

 

 

(103

)

 

 

 

(103

)

 

(5,184

)

 

(5,287

)

Segment contribution (loss)

 

$

21,292

 

 

$

8,653

 

 

$

(321

)

 

$

29,624

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

 

$

29,624

 

 

$

(14,118

)

 

$

15,506

 

   

 

 

Nine Months Ended June 30, 2019

 

 

U.S. Pawn

 

Latin
America
Pawn

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

 

$

275,639

 

 

$

70,547

 

 

$

 

 

$

346,186

 

 

$

 

 

$

346,186

 

Jewelry scrapping sales

 

28,357

 

 

9,516

 

 

 

 

37,873

 

 

 

 

37,873

 

Pawn service charges

 

184,658

 

 

59,640

 

 

 

 

244,298

 

 

 

 

244,298

 

Other revenues

 

125

 

 

134

 

 

4,274

 

 

4,533

 

 

 

 

4,533

 

Total revenues

 

488,779

 

 

139,837

 

 

4,274

 

 

632,890

 

 

 

 

632,890

 

Merchandise cost of goods sold

 

172,931

 

 

52,252

 

 

 

 

225,183

 

 

 

 

225,183

 

Jewelry scrapping cost of goods sold

 

23,680

 

 

8,968

 

 

 

 

32,648

 

 

 

 

32,648

 

Other cost of revenues

 

 

 

 

 

1,467

 

 

1,467

 

 

 

 

1,467

 

Net revenues

 

292,168

 

 

78,617

 

 

2,807

 

 

373,592

 

 

 

 

373,592

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Operations

 

200,884

 

 

54,703

 

 

6,169

 

 

261,756

 

 

 

 

261,756

 

Administrative

 

 

 

 

 

 

 

 

 

46,795

 

 

46,795

 

Depreciation and amortization

 

8,951

 

 

4,543

 

 

190

 

 

13,684

 

 

7,430

 

 

21,114

 

Loss on sale or disposal of assets and
other

 

2,856

 

 

743

 

 

22

 

 

3,621

 

 

22

 

 

3,643

 

Interest expense

 

 

 

1,570

 

 

280

 

 

1,850

 

 

25,362

 

 

27,212

 

Interest income

 

 

 

(1,226

)

 

 

 

(1,226

)

 

(8,411

)

 

(9,637

)

Equity in net income of unconsolidated affiliates

 

 

 

 

 

(632

)

 

(632

)

 

 

 

(632

)

Impairment of investment in unconsolidated affiliates

 

 

 

 

 

19,725

 

 

19,725

 

 

 

 

19,725

 

Other (income) expense

 

 

 

(63

)

 

290

 

 

227

 

 

(348

)

 

(121

)

Segment contribution (loss)

 

$

79,477

 

 

$

18,347

 

 

$

(23,237

)

 

$

74,587

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

 

$

74,587

 

 

$

(70,850

)

 

$

3,737

 

   

 

 

Nine Months Ended June 30, 2018

 

 

U.S. Pawn

 

Latin
America
Pawn

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

 

$

 

270,145

 

 

$

 

63,125

 

 

$

 

 

 

$

 

333,270

 

 

$

 

 

 

$

 

333,270

 

Jewelry scrapping sales

 

 

34,515

 

 

 

9,651

 

 

 

 

 

44,166

 

 

 

 

 

44,166

 

Pawn service charges

 

 

174,180

 

 

 

48,417

 

 

 

 

 

222,597

 

 

 

 

 

222,597

 

Other revenues

 

 

205

 

 

 

588

 

 

 

5,354

 

 

 

6,147

 

 

 

 

 

6,147

 

Total revenues

 

 

479,045

 

 

 

121,781

 

 

 

5,354

 

 

 

606,180

 

 

 

 

 

606,180

 

Merchandise cost of goods sold

 

 

166,965

 

 

 

43,318

 

 

 

 

 

210,283

 

 

 

 

 

210,283

 

Jewelry scrapping cost of goods sold

 

 

28,683

 

 

 

8,853

 

 

 

 

 

37,536

 

 

 

 

 

37,536

 

Other cost of revenues

 

 

 

 

 

 

1,273

 

 

 

1,273

 

 

 

 

 

1,273

 

Net revenues

 

 

283,397

 

 

 

69,610

 

 

 

4,081

 

 

 

357,088

 

 

 

 

 

357,088

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Operations

 

 

196,635

 

 

 

44,847

 

 

 

7,276

 

 

 

248,758

 

 

 

 

 

248,758

 

Administrative

 

 

 

 

 

 

 

 

 

 

39,688

 

 

 

39,688

 

Depreciation and amortization

 

 

9,340

 

 

 

2,712

 

 

 

142

 

 

 

12,194

 

 

 

6,104

 

 

 

18,298

 

Loss on sale or disposal of assets and other

 

 

197

 

 

 

31

 

 

 

 

 

228

 

 

 

225

 

 

 

453

 

Interest expense

 

 

 

 

6

 

 

 

 

 

6

 

 

 

19,064

 

 

 

19,070

 

Interest income

 

 

 

 

(2,072

)

 

 

 

 

(2,072

)

 

 

(10,824

)

 

 

(12,896

)

Equity in net income of unconsolidated affiliates

 

 

 

 

 

 

(3,477

)

 

 

(3,477

)

 

 

 

 

(3,477

)

Other (income) expense

 

 

(3

)

 

 

11

 

 

 

(118

)

 

 

(110

)

 

 

(5,363

)

 

 

(5,473

)

Segment contribution

 

$

 

77,228

 

 

$

 

24,075

 

 

$

 

258

 

 

$

 

101,561

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

 

$

 

101,561

 

 

$

 

(48,894

)

 

$

 

52,667

 

   

 

EZCORP, Inc.
STORE COUNT ACTIVITY
(Unaudited)

 

 

 

Three Months Ended June 30, 2019

 

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

 

As of March 31, 2019

 

508

 

 

466

 

 

24

 

 

998

 

New locations opened

 

 

 

4

 

 

 

 

4

 

Locations acquired

 

7

 

 

 

 

 

 

7

 

Locations sold, combined or closed

 

(1

)

 

 

 

(2

)

 

(3

)

As of June 30, 2019

 

514

 

 

470

 

 

22

 

 

1,006

 

 

 

Three Months Ended June 30, 2018

 

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

 

As of March 31, 2018

 

510

 

 

387

 

 

27

 

 

924

 

New locations opened

 

 

 

2

 

 

 

 

2

 

Locations acquired

 

 

 

63

 

 

 

 

63

 

Locations sold, combined or closed

 

 

 

(1

)

 

 

 

(1

)

As of June 30, 2018

 

510

 

 

451

 

 

27

 

 

988

 

 

 

Nine Months Ended June 30, 2019

 

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

 

As of September 30, 2018

 

508

 

 

453

 

 

27

 

 

988

 

New locations opened

 

 

 

12

 

 

 

 

12

 

Locations acquired

 

7

 

 

5

 

 

 

 

12

 

Locations sold, combined or closed

 

(1

)

 

 

 

(5

)

 

(6

)

As of June 30, 2019

 

514

 

 

470

 

 

22

 

 

1,006

 

 

 

Nine Months Ended June 30, 2018

 

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

 

As of September 30, 2017

 

513

 

 

246

 

 

27

 

 

786

 

New locations opened

 

 

 

10

 

 

 

 

10

 

Locations acquired

 

 

 

196

 

 

 

 

196

 

Locations sold, combined or closed

 

(3

)

 

(1

)

 

 

 

(4

)

As of June 30, 2018

 

510

 

 

451

 

 

27

 

 

988

 

 

Non-GAAP Financial Information (Unaudited)

In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency basis ("constant currency"). We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos and other Latin American currencies. We believe that presentation of constant currency results is meaningful and useful in understanding the activities and business metrics of our Latin America 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, Guatemalan quetzals, Honduran lempiras and Peruvian sols 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 on a monthly basis during the appropriate period for statement of operations items. The end-of-period and approximate average exchange rates for each currency as compared to U.S. dollars as of and for the three and nine months ended June 30, 2019 and 2018 were as follows:

 

 

June 30,

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Mexican peso

 

19.2

 

 

19.9

 

 

19.1

 

 

19.4

 

 

19.4

 

 

19.0

 

Guatemalan quetzal

 

7.5

 

 

7.4

 

 

7.5

 

 

7.3

 

 

7.6

 

 

7.3

 

Honduran lempira

 

24.3

 

 

23.9

 

 

24.2

 

 

23.6

 

 

24.1

 

 

23.5

 

Peruvian sol

 

3.3

 

 

3.3

 

 

3.3

 

 

3.2

 

 

3.3

 

 

3.2

 

The constant currency results of our statement of operations reflect the monthly exchange rate fluctuations and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss. We have experienced a prolonged weakening of the Mexican peso to the U.S. dollar and may continue to experience further weakening in future reporting periods, which may adversely impact our future operating results when stated on a GAAP basis.

 

Miscellaneous Non-GAAP Financial Measures

   

 

 

2019 Q3

 

2018 Q3

 

 

 

 

 

 

 

(in millions)

Net income

 

$

3.2

 

 

$

14.1

 

Loss from discontinued operations, net of tax

 

0.2

 

 

 

Interest expense

 

9.8

 

 

7.4

 

Interest income

 

(3.2

)

 

(4.4

)

Income tax expense

 

0.1

 

 

1.5

 

Depreciation and amortization

 

7.3

 

 

6.1

 

Adjusted EBITDA

 

$

17.4

 

 

$

24.7

 

   

 

 

Consolidated
Revenues

 

Consolidated
Net Revenues

 

Consolidated
Sales Gross
Profit

 

Consolidated
Sales Gross
Profit Margin

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

2019 Q3 reported

 

$

 

202.5

 

 

$

 

115.9

 

 

$

 

33.6

 

 

32.4

%

Discrete transaction tax adjustment

 

 

4.6

 

 

 

4.6

 

 

 

4.6

 

 

 

Currency exchange rate fluctuations

 

 

(0.2

)

 

 

(0.1

)

 

 

(0.1

)

 

 

2019 Q3 adjusted

 

$

 

206.9

 

 

$

 

120.4

 

 

$

 

38.1

 

 

35.2

%

 

 

U.S.
Pawn

 

Latin America
Pawn

 

Total

 

Percentage
Change YOY

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

2019 Q3 reported segment contribution

 

$

 

23.6

 

 

$

 

2.1

 

 

$

 

25.7

 

 

(14.0

)%

Discrete transaction tax adjustment

 

 

 

 

6.0

 

 

 

6.0

 

 

 

2019 Q3 adjusted segment contribution

 

$

 

23.6

 

 

$

 

8.1

 

 

$

 

31.7

 

 

6.0

%

 

 

Latin America
Pawn Net
Revenues

 

Latin America
Pawn Merchandise
Sales

 

Latin America Pawn Sales
Gross Profit

 

Consolidated
Sales Gross
Profit Margin

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

2019 Q3 reported

 

$

23.2

 

 

$

20.0

 

 

$

2.6

 

 

13

%

Discrete transaction tax adjustment

 

4.6

 

 

4.6

 

 

4.6

 

 

 

Currency exchange rate fluctuations

 

(0.1

)

 

(0.2

)

 

(0.1

)

 

 

2019 Q3 adjusted

 

$

27.7

 

 

$

24.4

 

 

$

7.1

 

 

29

%

 

 

Income from
Continuing
Operations,
Before Tax

 

Tax
Effect

 

Net Income
from
Continuing
Operations

 

Adjusted
EBITDA

 

Continuing
Operations
Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2019 Q3 reported

 

$

 

3.5

 

 

$

 

(0.1

)

 

$

 

3.4

 

 

$

 

17.4

 

 

$

 

0.06

 

Discrete transaction tax adjustment

 

 

6.1

 

 

 

(1.9

)

 

 

4.2

 

 

 

4.5

 

 

 

0.08

 

Non-recurring income tax benefit

 

 

 

 

(1.8

)

 

 

(1.8

)

 

 

 

 

(0.03

)

Currency exchange rate fluctuations

 

 

(0.1

)

 

 

 

 

(0.1

)

 

 

 

 

Non-cash net interest expense

 

 

4.1

 

 

 

(0.8

)

 

 

3.3

 

 

 

 

 

0.05

 

Discretionary strategic investment in digital platform

 

 

1.4

 

 

 

(0.3

)

 

 

1.1

 

 

 

1.4

 

 

 

0.02

 

2019 Q3 adjusted

 

$

 

15.0

 

 

$

 

(4.9

)

 

$

 

10.1

 

 

$

 

23.3

 

 

$

 

0.18

 

 

 

Income from
Continuing
Operations,
Before Tax

 

Tax
Effect

 

Net Income
from
Continuing
Operations

 

Adjusted
EBITDA

 

Continuing
Operations
Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2018 Q3 reported

 

$

 

15.5

 

 

$

 

(1.5

)

 

$

 

14.0

 

 

$

 

24.7

 

 

$

 

0.25

 

Gain on litigation settlement, net of tax impact

 

 

(5.2

)

 

 

1.6

 

 

 

(3.6

)

 

 

(5.2

)

 

 

(0.07

)

Non-recurring income tax benefit

 

 

 

 

(3.3

)

 

 

(3.3

)

 

 

 

 

(0.06

)

Acquisition expenses, net of tax impact

 

 

0.1

 

 

 

 

 

0.1

 

 

 

0.1

 

 

 

Non-cash net interest expense

 

 

2.5

 

 

 

(0.2

)

 

 

2.3

 

 

 

 

 

0.04

 

2018 Q3 adjusted

 

$

 

12.9

 

 

$

 

(3.4

)

 

$

 

9.5

 

 

$

 

19.6

 

 

$

 

0.16

 

2019 Q3:

 

U.S. Dollar
Amount

 

Percentage Change
YOY

 

 

 

 

 

 

 

(in millions)

 

 

Latin America Pawn PLO

 

$

 

41.7

 

 

6 %

Currency exchange rate fluctuations

 

 

(0.7

)

 

 

Constant currency Latin America Pawn PLO

 

$

 

41.0

 

 

4%

 

 

 

 

 

Consolidated operations expenses (three months ended June 30, 2019)

 

$

 

84.7

 

 

2%

Currency exchange rate fluctuations

 

 

 

 

Constant currency consolidated operations expenses (three months ended June 30, 2019)

 

$

 

84.7

 

 

2%

 

 

 

 

 

Latin America Pawn PSC revenues (three months ended June 30, 2019)

 

$

 

20.3

 

 

20%

Currency exchange rate fluctuations

 

 

 

 

Constant currency Latin America Pawn PSC revenues (three months ended June 30, 2019)

 

$

 

20.3

 

 

20%

 

 

 

 

 

Latin America Pawn merchandise sales (three months ended June 30, 2019)

 

$

 

20.0

 

 

(4)%

Currency exchange rate fluctuations (three months ended June 30, 2019)

 

 

0.1

 

 

 

Constant currency Latin America Pawn merchandise sales (three months ended June 30, 2019)

 

$

 

20.1

 

 

(4)%

 

 

 

 

 

Latin America Pawn segment profit before tax (three months ended June 30, 2019)

 

$

 

2.1

 

 

(76)%

Currency exchange rate fluctuations

 

 

0.3

 

 

 

Constant currency Latin America Pawn segment profit before tax (three months ended June 30, 2019)

 

$

 

2.4

 

 

(72)%

 

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

Source: EZCORP, Inc.

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