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EZCORP Reports Second Quarter Fiscal Year 2020 Results

May 11, 2020

AUSTIN, Texas--(BUSINESS WIRE)-- EZCORP, Inc. (NASDAQ: EZPW) today announced results for its second quarter ended March 31, 2020.

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.

“These are difficult times for our people, our customers, the communities we are in and for all of us as we try to understand and manage the impacts of the COVID-19 pandemic. We remain focused on the health and safety of our people and customers and ensuring we are there to help them manage their way through this crisis. Given the challenges in this environment, we are pleased to report that EZCORP entered this crisis in a position of strength, with fiscal second quarter revenue ahead of last year, and a strong and growing cash balance that positions us exceptionally to serve our customers’ needs,” said EZCORP Chief Executive Officer Stuart Grimshaw.

HIGHLIGHTS FOR SECOND QUARTER OF FISCAL 2020

  • Total revenues for the quarter were up 4% to $223.3 million, and up 5% on an adjusted basis¹. Revenue growth was driven by strong retail demand during the tax refund season and continuing into March with early impacts of the COVID-19 crisis as customers purchased items for working and schooling from home. This drove an increase in cash from retain sales and a decrease in loan demand. Pawn loans outstanding at the end of the quarter were down 7.5% from the prior-year quarter (4.6% reduction on a constant currency basis). Since the end of March, the decline in loan balances has accelerated and is continuing.
  • Operations expenses declined by 2% to $88.4 million (down 1% to $88.7 million on an adjusted basis) as a result of expense control measures and even though total store count grew by 3%.
  • Income before taxes was $(34.1) million, a decrease of $39.1 million from the prior-year quarter, including a non-cash asset impairment charge of $47.1 million (pre-tax) discussed below. On an adjusted basis income before income taxes was $16.7 million, an increase of 12% from the prior year. Diluted earnings per share was $(0.74), a decrease of $(0.80) from the prior-year quarter. On an adjusted basis, diluted earnings per share was $0.17, a decrease of 15% from the prior year.
  • Second quarter fiscal 2020 results include a non-cash asset impairment charge of $47.1 million (pre-tax), or $0.85 per diluted share, primarily related to impairment of goodwill in our U.S. Pawn and Latin America Pawn reporting units. While the bulk of our stores (93% at March 31, 2020) have remained open, many of our stores in our GPMX countries (Guatemala, El Salvador, Honduras and Peru) have been closed. Prior to the store closures in March, the GPMX business was performing well, with profits before tax ahead of plan.
  • Our cash position remains strong at $193.7 million as of March 31, 2020, up 35% from $143 million at the end of the first quarter. We maintain a flexible debt profile with no restrictive covenants or near-term maturities. Since March 31, 2020 our cash balance has grown to greater than $250 million as loan demand continues to show weakness and retail sales continue to show strength.
  • Ongoing inventory management efforts negatively impacted the merchandise sales margin by approximately 200 basis points to 34%. In the U.S. Pawn segment, adjusted merchandise sales margin was relatively steady at 36.3%, and aged general merchandise dropped 10% to 6.5% of inventory, as inventory turns increased from 1.9x to 2.0x. While stores in Mexico have remained open, the Latin America Pawn segment has been impacted by closures at GPMX, with large portions of Guatemala and Honduras closed, and all stores in El Salvador and Peru closed since March. As of April 30, 2020, 18% of our Guatemala stores and 38% of our Honduras stores remain closed, and all stores in El Salvador and Peru remain closed. Despite our continued focus on opportunities in aged general merchandise, Latin America aged inventory increased to 11% of total inventory on a constant currency basis. In the Latin America Pawn segment, we opened nine stores in the second quarter and expect to open approximately ten additional stores during the remainder of fiscal 2020. The Latin America Pawn store count has increased by 27 net new stores, or 6%, over the last twelve months.
  • Since initiating our stock repurchase program in December 2019, we have repurchased approximately 943,000 shares of Class A Common Stock for $5.2 million. On March 20, 2020, we suspended further repurchases under our program in order to preserve current liquidity due to uncertainties related to the COVID-19 pandemic.

     

Mr. Grimshaw continued, "In the midst of unprecedented uncertainty and volatility, we are taking the right actions to preserve and enhance our liquidity and position ourselves to emerge positively from this crisis. The health and safety of our team and customers are of paramount importance, and we continue to support our colleagues in every way possible. I am incredibly proud of our amazing team of people. They are dealing with this crisis with strength and are committed to serving our customers, who count on our being there for them every day.

“We are supporting our customers and giving them more choices by introducing innovative and flexible measures to support transactions, highlighted by offering remote loan extensions on our Lana application and the introduction of a convenient curbside pawn offering.

“Stepping back, our results for the fiscal second quarter reinforce the uniqueness and resiliency of our business. Revenues and EBITDA were healthy, driven by strong sales and expense controls, and supported by long-term funding and a strong cash position. Our business provides liquidity and vital financial services to many people, and as such is deemed essential, resulting in virtually all of our stores (93% overall and 98% in the US and Mexico) being open to serve our customers.

“Strong retail demand in the U.S. and Latin America has continued into April as a result of government stimulus funding programs. These programs have also resulted in a lower loan demand, and heightened repayments, than we would typically experience at this time of year, consistent with what is being seen across the industry. Looking ahead, our recession-resilient business remains positioned to perform as loan demand returns. While the timing of the rebound in loan demand remains uncertain, we are seeing a more challenging economic backdrop both here and across Latin America, which we believe will lead to accelerating demand for pawn loans over time.

“Additionally, we are leveraging our differentiated point of sale system to optimize lending decisions, inventory management, customer experience, and ultimately drive higher returns on assets. The future remains difficult to predict; however, we believe we have positioned the company well to successfully navigate our way through this crisis. In the immediate period, we will continue to focus on the health and safety of both our employees and our customers and finding new and innovative ways to satisfy our customers’ needs.”

CONSOLIDATED RESULTS

 

Three Months Ended March 31

in millions, except per share amounts

 

As Reported

 

Adjusted1

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

Total Revenues

$

223.3

 

 

$

214.7

 

 

$

224.4

 

 

$

213.6

 

Net Revenues

$

127.4

 

 

$

127.7

 

 

$

127.9

 

 

$

127.7

 

(Loss) Income from Continuing Operations, Before Tax

$

(34.1

)

 

$

5.0

 

 

$

16.7

 

 

$

14.9

 

Net (Loss) Income from Continuing Operations

$

(40.9

)

 

$

2.7

 

 

$

9.3

 

 

$

10.3

 

Diluted Earnings Per Share from Continuing Operations

$

(0.74

)

 

$

0.06

 

 

$

0.17

 

 

$

0.19

 

Adjusted EBITDA1

$

(21.4

)

 

$

17.6

 

 

$

26.1

 

 

$

22.9

 

  • Total revenues grew 4% to $223.3 million. PSC was down 2% to $80.2 million largely reflecting lower average PLO for the quarter. On an adjusted basis, PSC was flat in spite of a lower average PLO balance for the quarter due to a reduction in new loans made in the second half of March attributable to the early impacts of COVID-19. Since the end of March, demand for new loans remains weak, which will be reflected in declining PSC in future periods.
  • Merchandise sales grew 7% and scrap sales were up 14%.
  • Net revenues were flat versus the prior-year quarter at $127.4 million. Consolidated merchandise sales gross profit increased 1% to $44.1 million, with a 7% increase in merchandise sales offset by higher cost of goods sold. Ongoing efforts to optimize inventory impacted merchandise margins, down approximately 200 basis points to 34%.
  • Consolidated operations expenses decreased 2%. Total store count increased 3%, consisting of a net 29 stores acquired or opened since the end of the prior-year quarter. Administrative expense decreased 2% to $14.6 million.
  • Gross interest expense decreased $2.7 million reflecting the June 2019 repayment of $195.0 million of cash convertible debt. Gross interest income decreased $2.2 million due to collections on notes receivable since the prior-year period.
  • Second quarter fiscal 2020 results include a pre-tax asset impairment charge of $47.1 million, or $0.85 per diluted share, primarily related to impairment of goodwill in our U.S. Pawn and Latin America reporting units.

     

SEGMENT RESULTS

U.S. Pawn

  • Total revenue was up 4.5% reflecting 6% growth in merchandise sales.
  • PSC remained flat on a year-over-year basis, as a higher yield was offset by a lower average PLO balance for the quarter. PLO per store ended the period at $238,000, down 12% compared to the average of $271,000 for the prior-year period, due to a reduction in new loans made in the second half of March attributable to the early impacts of COVID-19.
  • Merchandise margins declined from 36.9% a year ago to 36.3%, as we continued to focus on inventory management. Aged inventory was down to 6.5% from 7.2% in the prior year. Jewelry scrapping gross profit increased 38%, with related margins up 220 basis points to 19.2% on higher gold prices.
  • Net revenues increased 2% to $100.8 million, while segment contribution decreased 28% to $20.4 million primarily as a result of a $10.0 million goodwill asset impairment charge. Excluding that impairment charge, segment contribution increased $1.9 million, or 7.0%, to $30.4 million.
  • EBITDA was $33.1 million, a increase of $1.7 million or 5.4% from the prior-year quarter, with the margin expanding by approximately 110 basis points to 32.9%. Adjusted EBITDA was up 5% year-over-year, reflecting higher merchandise sales gross profits, with merchandise sales up 6% versus the prior-year quarter.

Latin America Pawn

  • Net revenues decreased 8% to $25.8 million (down 6% to $26.3 million on a constant currency basis) largely reflecting lower PSC and merchandise gross profits due in part to COVID-19 related closures in Latin America.
  • PSC decreased 7% to $18.5 million (down 6% to $18.9 million on a constant currency basis), PSC revenue was flat year-over-year, as a higher average PLO balance for the quarter was offset by a lower yield, reflecting reduced activity and limited originations.
  • Ending PLO decreased 11% to $38.1 million (up 1% to $43.2 million on a constant currency basis). Same-store PLO was down 0.5%, largely reflecting continuing social welfare programs in Mexico as well as the impact of COVID-19-driven headwinds.
  • Merchandise sales growth remained strong, up 11%, to $27.4 million (14% or $28.0 million on a constant currency basis). Merchandise margins declined to 25.2% reflecting ongoing efforts to reduce aged inventory.
  • Operations expense remained relatively flat, up 1% to $18.5 million compared to prior-year quarter.
  • Latin America Pawn added nine de novo stores in the quarter. New store openings typically pressure earnings in the short term as they ramp up but drive higher profitability over time.
  • Segment loss decreased to $(30.1) million from $9.5 million in the prior year quarter. Excluding the goodwill and intangible asset impairment of $35.9 million recorded in the current quarter, segment contribution decreased $3.7 million, or 39%, to $5.8 million (44% on a constant currency basis) primarily reflecting lower PSC revenues and merchandise gross profits. Latin America Pawn results and the impairment charge reflect the impact of COVID-19, including a significant decline in pawn loan balances due to changes in typical customer behavior and mandated store closures at GPMX, with large portions of Guatemala and Honduras closed, and our stores in El Salvador and Peru completely closed since March. The decline in pawn loan balances has continued into April. As of April 30, 2020, 18% of our Guatemala stores and 38% of our Honduras stores remain closed, and our stores in El Salvador and Peru remain closed.

     

CONFERENCE CALL

EZCORP will host a conference call on Tuesday, May 12, 2020, at 7:00 am Central Time to discuss second quarter results. Analysts and institutional investors may participate on the conference call by dialing (833) 579-0921, Conference ID: 4169917, or internationally by dialing (778) 560-2579. 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, current or future litigation and risks associated with the COVID-19 pandemic. For a discussion of these and other factors affecting the company’s business and prospects, see the company’s annual, quarterly and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

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

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

(Unaudited)

 

(in thousands, except per share amounts)

Revenues:

 

 

 

 

 

 

 

Merchandise sales

$

129,830

 

 

$

121,260

 

 

$

256,558

 

 

$

242,284

 

Jewelry scrapping sales

11,878

 

 

10,380

 

 

21,406

 

 

19,661

 

Pawn service charges

80,222

 

 

81,799

 

 

164,947

 

 

165,318

 

Other revenues

1,353

 

 

1,291

 

 

2,807

 

 

3,162

 

Total revenues

223,283

 

 

214,730

 

 

445,718

 

 

430,425

 

Merchandise cost of goods sold

85,776

 

 

77,800

 

 

169,852

 

 

154,912

 

Jewelry scrapping cost of goods sold

9,617

 

 

8,833

 

 

17,371

 

 

16,883

 

Other cost of revenues

525

 

 

407

 

 

1,061

 

 

891

 

Net revenues

127,365

 

 

127,690

 

 

257,434

 

 

257,739

 

Operating expenses:

 

 

 

 

 

 

 

Operations

88,372

 

 

89,766

 

 

178,997

 

 

180,642

 

Administrative

14,620

 

 

14,964

 

 

32,109

 

 

28,129

 

Impairment of goodwill and intangible assets

47,060

 

 

 

 

47,060

 

 

 

Depreciation and amortization

7,762

 

 

7,012

 

 

15,495

 

 

13,860

 

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

261

 

 

(823

)

 

1,005

 

 

3,619

 

Total operating expenses

158,075

 

 

110,919

 

 

274,666

 

 

226,250

 

Operating (loss) income

(30,710

)

 

16,771

 

 

(17,232

)

 

31,489

 

Interest expense

5,881

 

 

8,589

 

 

11,210

 

 

17,380

 

Interest income

(941

)

 

(3,126

)

 

(1,784

)

 

(6,465

)

Equity in net (income) loss of unconsolidated affiliates

(1,184

)

 

(431

)

 

4,713

 

 

688

 

Impairment of investment in unconsolidated affiliates

 

 

6,451

 

 

 

 

19,725

 

Other (income) expense

(361

)

 

269

 

 

(290

)

 

(117

)

(Loss) income from continuing operations before income taxes

(34,105

)

 

5,019

 

 

(31,081

)

 

278

 

Income tax expense

6,749

 

 

2,360

 

 

8,508

 

 

1,279

 

(Loss) income from continuing operations, net of tax

(40,854

)

 

2,659

 

 

(39,589

)

 

(1,001

)

Loss from discontinued operations, net of tax

(20

)

 

(18

)

 

(47

)

 

(201

)

Net (loss) income

(40,874

)

 

2,641

 

 

(39,636

)

 

(1,202

)

Net loss attributable to noncontrolling interest

 

 

(753

)

 

 

 

(1,230

)

Net (loss) income attributable to EZCORP, Inc.

$

(40,874

)

 

$

3,394

 

 

$

(39,636

)

 

$

28

 

 

 

 

 

 

 

 

 

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

$

(0.74

)

 

$

0.06

 

 

$

(0.71

)

 

$

 

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

$

(0.74

)

 

$

0.06

 

 

$

(0.71

)

 

$

 

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

55,448

 

 

55,445

 

 

55,557

 

 

55,236

 

Weighted-average diluted shares outstanding

55,522

 

 

55,463

 

 

55,608

 

 

55,247

 

EZCORP, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

March 31,
2020

 

March 31,
2019

 

September 30,
2019

 

 

 

 

 

 

 

(Unaudited)

 

 

Assets:

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

193,729

 

 

$

347,786

 

 

$

157,567

 

Restricted cash

4,000

 

 

 

 

4,875

 

Pawn loans

160,179

 

 

173,138

 

 

199,058

 

Pawn service charges receivable, net

27,304

 

 

27,097

 

 

31,802

 

Inventory, net

173,251

 

 

173,348

 

 

179,355

 

Notes receivable, net

3,728

 

 

23,450

 

 

7,182

 

Prepaid expenses and other current assets

23,629

 

 

32,984

 

 

25,921

 

Total current assets

585,820

 

 

777,803

 

 

605,760

 

Investments in unconsolidated affiliates

27,993

 

 

29,387

 

 

34,516

 

Property and equipment, net

58,787

 

 

67,518

 

 

67,357

 

Lease right-of-use asset

206,839

 

 

 

 

 

Goodwill

257,222

 

 

296,881

 

 

300,527

 

Intangible assets, net

64,043

 

 

58,503

 

 

68,044

 

Notes receivable, net

1,132

 

 

8,509

 

 

1,117

 

Deferred tax asset, net

6,251

 

 

10,119

 

 

1,998

 

Other assets

5,045

 

 

4,395

 

 

4,383

 

Total assets

$

1,213,132

 

 

$

1,253,115

 

 

$

1,083,702

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt, net

$

267

 

 

$

192,901

 

 

$

214

 

Accounts payable, accrued expenses and other current liabilities

53,152

 

 

58,696

 

 

77,957

 

Customer layaway deposits

13,060

 

 

13,564

 

 

12,915

 

Lease liability

44,076

 

 

 

 

 

Total current liabilities

110,555

 

 

265,161

 

 

91,086

 

Long-term debt, net

244,288

 

 

232,733

 

 

238,380

 

Deferred tax liability, net

2,540

 

 

9,012

 

 

1,985

 

Lease liability

171,006

 

 

 

 

 

Other long-term liabilities

7,190

 

 

6,450

 

 

7,302

 

Total liabilities

535,579

 

 

513,356

 

 

338,753

 

Commitments and contingencies (Note 10)

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding: 52,097,590 as of March 31, 2020; 52,475,070 as of March 31, 2019; and 52,565,064 as of September 30, 2019

521

 

 

524

 

 

526

 

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

406,171

 

 

402,505

 

 

407,628

 

Retained earnings

347,004

 

 

386,650

 

 

389,163

 

Accumulated other comprehensive loss

(76,173

)

 

(49,950

)

 

(52,398

)

Total equity

677,553

 

 

739,759

 

 

744,949

 

Total liabilities and equity

$

1,213,132

 

 

$

1,253,115

 

 

$

1,083,702

 

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months Ended March 31,

 

2020

 

2019

 

 

 

 

 

(Unaudited)

 

(in thousands)

Operating activities:

 

 

 

Net loss

$

(39,636

)

 

$

(1,202

)

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

 

 

 

Depreciation and amortization

15,495

 

 

13,860

 

Amortization of debt discount and deferred financing costs

6,493

 

 

11,225

 

Amortization of lease right-of-use asset

22,752

 

 

 

Accretion of notes receivable discount and deferred compensation fee

(546

)

 

(2,492

)

Deferred income taxes

(3,698

)

 

358

 

Impairment of goodwill and intangible assets

47,060

 

 

 

Impairment of investment in unconsolidated affiliate

 

 

19,725

 

Other adjustments

1,810

 

 

1,265

 

Reserve on jewelry scrap receivable

 

 

3,646

 

Stock compensation expense

2,722

 

 

4,697

 

Loss from investment in unconsolidated affiliates

4,713

 

 

688

 

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

 

 

 

Service charges and fees receivable

4,027

 

 

3,797

 

Inventory

(1,281

)

 

421

 

Prepaid expenses, other current assets and other assets

(2,791

)

 

(3,590

)

Accounts payable, accrued expenses and other liabilities

(37,799

)

 

(409

)

Customer layaway deposits

538

 

 

1,810

 

Income taxes

1,412

 

 

(3,176

)

Net cash provided by operating activities

21,271

 

 

50,623

 

Investing activities:

 

 

 

Loans made

(351,050

)

 

(353,537

)

Loans repaid

229,054

 

 

225,695

 

Recovery of pawn loan principal through sale of forfeited collateral

158,792

 

 

142,656

 

Additions to property and equipment, net

(12,160

)

 

(13,863

)

Acquisitions, net of cash acquired

 

 

(627

)

Principal collections on notes receivable

4,000

 

 

14,591

 

Net cash provided by investing activities

28,636

 

 

14,915

 

Financing activities:

 

 

 

Taxes paid related to net share settlement of equity awards

(1,458

)

 

(3,288

)

Payout of deferred consideration

(175

)

 

 

Proceeds from borrowings, net of issuance costs

(109

)

 

1,066

 

Payments on borrowings

(355

)

 

(509

)

Repurchase of common stock

(5,159

)

 

 

Net cash used in financing activities

(7,256

)

 

(2,731

)

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

(7,364

)

 

(599

)

Net increase in cash, cash equivalents and restricted cash

35,287

 

 

62,208

 

Cash, cash equivalents and restricted cash at beginning of period

162,442

 

 

285,578

 

Cash, cash equivalents and restricted cash at end of period

$

197,729

 

 

$

347,786

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

Pawn loans forfeited and transferred to inventory

$

156,468

 

 

$

151,211

 

EZCORP, Inc.

OPERATING SEGMENT RESULTS

(Unaudited and in thousands)

 

Three Months Ended March 31, 2020

 

U.S. Pawn

 

Latin
America
Pawn

 

Lana

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

102,447

 

 

$

27,383

 

 

$

 

 

$

 

 

$

129,830

 

 

$

 

 

$

129,830

 

Jewelry scrapping sales

9,659

 

 

2,219

 

 

 

 

 

 

11,878

 

 

 

 

11,878

 

Pawn service charges

61,700

 

 

18,522

 

 

 

 

 

 

80,222

 

 

 

 

80,222

 

Other revenues

31

 

 

25

 

 

3

 

 

1,294

 

 

1,353

 

 

 

 

1,353

 

Total revenues

173,837

 

 

48,149

 

 

3

 

 

1,294

 

 

223,283

 

 

 

 

223,283

 

Merchandise cost of goods sold

65,286

 

 

20,490

 

 

 

 

 

 

85,776

 

 

 

 

85,776

 

Jewelry scrapping cost of goods sold

7,800

 

 

1,817

 

 

 

 

 

 

9,617

 

 

 

 

9,617

 

Other cost of revenues

 

 

37

 

 

 

 

488

 

 

525

 

 

 

 

525

 

Net revenues

100,751

 

 

25,805

 

 

3

 

 

806

 

 

127,365

 

 

 

 

127,365

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations

67,619

 

 

18,469

 

 

724

 

 

1,560

 

 

88,372

 

 

 

 

88,372

 

Administrative

 

 

 

 

 

 

 

 

 

 

14,620

 

 

14,620

 

Depreciation and amortization

2,711

 

 

1,940

 

 

377

 

 

23

 

 

5,051

 

 

2,711

 

 

7,762

 

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

 

 

(123

)

 

 

 

 

 

(123

)

 

384

 

 

261

 

Interest expense

 

 

402

 

 

 

 

154

 

 

556

 

 

5,325

 

 

5,881

 

Interest income

 

 

(369

)

 

 

 

 

 

(369

)

 

(572

)

 

(941

)

Equity in net income of unconsolidated affiliates

 

 

 

 

 

 

(1,184

)

 

(1,184

)

 

 

 

(1,184

)

Impairment of goodwill and intangible assets

10,000

 

 

35,936

 

 

 

 

1,124

 

 

47,060

 

 

 

 

47,060

 

Other (income) expense

 

 

(309

)

 

 

 

20

 

 

(289

)

 

(72

)

 

(361

)

Segment contribution (loss)

$

20,421

 

 

$

(30,141

)

 

$

(1,098

)

 

$

(891

)

 

$

(11,709

)

 

 

 

 

Loss from continuing operations before income taxes

 

 

 

 

 

 

 

 

$

(11,709

)

 

$

(22,396

)

 

$

(34,105

)

 

 

Three Months Ended March 31, 2019

 

U.S. Pawn

 

Latin
America
Pawn

 

Lana

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

96,632

 

 

$

24,628

 

 

$

 

 

$

 

 

$

121,260

 

 

$

 

 

$

121,260

 

Jewelry scrapping sales

7,916

 

 

2,464

 

 

 

 

 

 

10,380

 

 

 

 

10,380

 

Pawn service charges

61,798

 

 

20,001

 

 

 

 

 

 

81,799

 

 

 

 

81,799

 

Other revenues

43

 

 

25

 

 

 

 

1,223

 

 

1,291

 

 

 

 

1,291

 

Total revenues

166,389

 

 

47,118

 

 

 

 

1,223

 

 

214,730

 

 

 

 

214,730

 

Merchandise cost of goods sold

60,928

 

 

16,872

 

 

 

 

 

 

77,800

 

 

 

 

77,800

 

Jewelry scrapping cost of goods sold

6,571

 

 

2,262

 

 

 

 

 

 

8,833

 

 

 

 

8,833

 

Other cost of revenues

 

 

 

 

 

 

407

 

 

407

 

 

 

 

407

 

Net revenues

98,890

 

 

27,984

 

 

 

 

816

 

 

127,690

 

 

 

 

127,690

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations

67,475

 

 

18,223

 

 

1,523

 

 

2,545

 

 

89,766

 

 

 

 

89,766

 

Administrative

 

 

 

 

 

 

 

 

 

 

14,964

 

 

14,964

 

Depreciation and amortization

2,982

 

 

1,495

 

 

 

 

77

 

 

4,554

 

 

2,458

 

 

7,012

 

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

(1

)

 

(838

)

 

 

 

16

 

 

(823

)

 

 

 

(823

)

Interest expense

 

 

50

 

 

 

 

132

 

 

182

 

 

8,407

 

 

8,589

 

Interest income

 

 

(431

)

 

 

 

 

 

(431

)

 

(2,695

)

 

(3,126

)

Equity in net income of unconsolidated affiliates

 

 

 

 

 

 

(431

)

 

(431

)

 

 

 

(431

)

Impairment of investment in unconsolidated affiliates

 

 

 

 

 

 

6,451

 

 

6,451

 

 

 

 

6,451

 

Other expense (income)

 

 

29

 

 

 

 

262

 

 

291

 

 

(22

)

 

269

 

Segment contribution (loss)

$

28,434

 

 

$

9,456

 

 

$

(1,523

)

 

$

(8,236

)

 

$

28,131

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

 

 

$

28,131

 

 

$

(23,112

)

 

$

5,019

 

 

Six Months Ended March 31, 2020

 

U.S. Pawn

 

Latin
America
Pawn

 

Lana

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

197,801

 

 

$

58,757

 

 

$

 

 

$

 

 

$

256,558

 

 

$

 

 

$

256,558

 

Jewelry scrapping sales

15,776

 

 

5,630

 

 

 

 

 

 

21,406

 

 

 

 

21,406

 

Pawn service charges

125,790

 

 

39,157

 

 

 

 

 

 

164,947

 

 

 

 

164,947

 

Other revenues

67

 

 

50

 

 

4

 

 

2,686

 

 

2,807

 

 

 

 

2,807

 

Total revenues

339,434

 

 

103,594

 

 

4

 

 

2,686

 

 

445,718

 

 

 

 

445,718

 

Merchandise cost of goods sold

126,650

 

 

43,202

 

 

 

 

 

 

169,852

 

 

 

 

169,852

 

Jewelry scrapping cost of goods sold

12,555

 

 

4,816

 

 

 

 

 

 

17,371

 

 

 

 

17,371

 

Other cost of revenues

 

 

37

 

 

 

 

1,024

 

 

1,061

 

 

 

 

1,061

 

Net revenues

200,229

 

 

55,539

 

 

4

 

 

1,662

 

 

257,434

 

 

 

 

257,434

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations

135,678

 

 

38,452

 

 

2,074

 

 

2,793

 

 

178,997

 

 

 

 

178,997

 

Administrative

 

 

 

 

 

 

 

 

 

 

32,109

 

 

32,109

 

Depreciation and amortization

5,576

 

 

3,829

 

 

389

 

 

57

 

 

9,851

 

 

5,644

 

 

15,495

 

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

 

 

(95

)

 

 

 

 

 

(95

)

 

1,100

 

 

1,005

 

Interest expense

 

 

430

 

 

(36

)

 

324

 

 

718

 

 

10,492

 

 

11,210

 

Interest income

 

 

(757

)

 

 

 

 

 

(757

)

 

(1,027

)

 

(1,784

)

Equity in net loss of unconsolidated affiliates

 

 

 

 

 

 

4,713

 

 

4,713

 

 

 

 

4,713

 

Impairment of goodwill and intangible assets

10,000

 

 

35,936

 

 

1,124

 

 

 

 

47,060

 

 

 

 

47,060

 

Other (income) expense

 

 

(242

)

 

 

 

19

 

 

(223

)

 

(67

)

 

(290

)

Segment contribution (loss)

$

48,975

 

 

$

(22,014

)

 

$

(3,547

)

 

$

(6,244

)

 

$

17,170

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

 

 

$

17,170

 

 

$

(48,251

)

 

$

(31,081

)

 

Six Months Ended March 31, 2019

 

U.S. Pawn

 

Latin
America
Pawn

 

Lana

 

Other
International

 

Total
Segments

 

Corporate
Items

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales

$

191,735

 

 

$

50,549

 

 

$

 

 

$

 

 

$

242,284

 

 

$

 

 

$

242,284

 

Jewelry scrapping sales

14,468

 

 

5,193

 

 

 

 

 

 

19,661

 

 

 

 

19,661

 

Pawn service charges

126,023

 

 

39,295

 

 

 

 

 

 

165,318

 

 

 

 

165,318

 

Other revenues

91

 

 

67

 

 

 

 

3,004

 

 

3,162

 

 

 

 

3,162

 

Total revenues

332,317

 

 

95,104

 

 

 

 

3,004

 

 

430,425

 

 

 

 

430,425

 

Merchandise cost of goods sold

120,076

 

 

34,836

 

 

 

 

 

 

154,912

 

 

 

 

154,912

 

Jewelry scrapping cost of goods sold

12,081

 

 

4,802

 

 

 

 

 

 

16,883

 

 

 

 

16,883

 

Other cost of revenues

 

 

 

 

 

 

891

 

 

891

 

 

 

 

891

 

Net revenues

200,160

 

 

55,466

 

 

 

 

2,113

 

 

257,739

 

 

 

 

257,739

 

Segment and corporate expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations

135,435

 

 

36,419

 

 

3,613

 

 

5,175

 

 

180,642

 

 

 

 

180,642

 

Administrative

 

 

 

 

 

 

 

 

 

 

28,129

 

 

28,129

 

Depreciation and amortization

6,017

 

 

2,917

 

 

 

 

118

 

 

9,052

 

 

4,808

 

 

13,860

 

Loss on sale or disposal of assets and other

2,852

 

 

751

 

 

 

 

16

 

 

3,619

 

 

 

 

3,619

 

Interest expense

 

 

79

 

 

 

 

204

 

 

283

 

 

17,097

 

 

17,380

 

Interest income

 

 

(850

)

 

 

 

 

 

(850

)

 

(5,615

)

 

(6,465

)

Equity in net loss of unconsolidated affiliates

 

 

 

 

 

 

688

 

 

688

 

 

 

 

688

 

Impairment of investment in unconsolidated affiliates

 

 

 

 

 

 

19,725

 

 

19,725

 

 

 

 

19,725

 

Other (income) expense

 

 

(97

)

 

 

 

284

 

 

187

 

 

(304

)

 

(117

)

Segment contribution (loss)

$

55,856

 

 

$

16,247

 

 

$

(3,613

)

 

$

(24,097

)

 

$

44,393

 

 

 

 

 

Income from continuing operations before income taxes

 

 

 

 

 

 

 

 

$

44,393

 

 

$

(44,115

)

 

$

278

 

 

 

Three Months Ended March 31, 2020

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of December 31, 2019

512

 

484

 

22

 

1,018

New locations opened

 

9

 

 

9

As of March 31, 2020

512

 

493

 

22

 

1,027

 

Three Months Ended March 31, 2019

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

As of December 31, 2018

508

 

462

 

27

 

997

New locations opened

 

4

 

 

4

Locations sold, combined or closed

 

 

(3

)

 

(3

)

As of March 31, 2019

508

 

466

 

24

 

998

 

Six Months Ended March 31, 2020

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of September 30, 2019

512

 

480

 

22

 

1,014

New locations opened

 

13

 

 

13

As of March 31, 2020

512

 

493

 

22

 

1,027

 

Six Months Ended March 31, 2019

 

U.S. Pawn

 

Latin America
Pawn

 

Other
International

 

Consolidated

 

 

 

 

 

 

 

 

As of September 30, 2018

508

 

453

 

27

 

988

New locations opened

 

8

 

 

8

Locations acquired

 

5

 

 

5

Locations sold, combined or closed

 

 

(3

)

 

(3

)

As of March 31, 2019

508

 

466

 

24

 

998

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, Guatemalan quetzals 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 local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. 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. Our statement of operations constant currency results 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. The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the three and six months ended March 31 were as follows:

 

 

March 31,

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2020

 

2019

 

2020

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

Mexican peso

 

23.8

 

 

19.4

 

 

20.0

19.2

 

19.6

 

19.5

Guatemalan quetzal

 

7.6

 

 

7.6

 

 

7.5

7.6

 

7.5

 

7.6

Honduran lempira

 

24.4

 

 

24.3

 

 

24.3

24.2

 

24.3

 

24.1

Peruvian sol

 

3.4

 

 

3.3

 

 

3.4

3.3

 

3.3

 

3.3

Miscellaneous Non-GAAP Financial Measures

 

2020 Q2

2019 Q2

 

 

(in millions)

Net income

$

(40.9

)

$

2.6

 

Loss from discontinued operations, net of tax

 

Interest expense

5.9

8.6

 

Interest income

(0.9

)

(3.1

)

Income tax expense

6.7

2.4

 

Depreciation and amortization

7.8

7.0

 

Adjusted EBITDA

$

(21.4

)

$

17.6

 

 

Income from
Continuing
Operations,
Before Tax

 

Tax
Effect

 

Net Income
from
Continuing
Operations

 

Adjusted
EBITDA

 

Continuing
Operations
Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2020 Q2 reported

$

(34.1

)

 

$

(6.8

)

 

$

(40.9

)

 

$

(21.4

)

 

$

(0.74

)

Termination of non-core software project

0.5

 

 

(0.1

)

 

0.4

 

 

0.5

 

 

0.01

 

Lobbying expense

0.2

 

 

 

 

0.2

 

 

0.2

 

 

 

Currency exchange rate fluctuations

(0.3

)

 

 

 

(0.3

)

 

(0.3

)

 

(0.01

)

Non-recurring tax expense

 

 

1.9

 

 

1.9

 

 

 

 

0.03

 

Non-cash net interest expense

3.3

 

 

(0.7

)

 

2.6

 

 

 

 

0.05

 

Impairment of goodwill and intangible assets

$

47.1

 

 

$

(1.7

)

 

$

45.4

 

 

$

47.1

 

 

$

0.83

 

2020 Q2 adjusted

$

16.7

 

 

$

(7.4

)

 

$

9.3

 

 

$

26.1

 

 

$

0.17

 

 

 

Income from
Continuing
Operations,
Before Tax

 

Tax
Effect

 

Net Income
from
Continuing
Operations

 

Adjusted
EBITDA

 

Continuing
Operations
Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2019 Q2 reported

$

5.0

 

 

$

(2.3

)

 

$

2.7

 

 

$

17.6

 

 

$

0.06

 

Acquisition costs

0.1

 

 

 

 

0.1

 

 

0.1

 

 

 

Impairment on CCV investment

6.5

 

 

(1.5

)

 

5.0

 

 

6.5

 

 

0.09

 

Adjustment for Republic Metals Corporation reserve

(0.8

)

 

0.2

 

 

(0.6

)

 

(0.8

)

 

(0.01

)

Deconsolidation of previously consolidated subsidiary

0.3

 

 

(0.1

)

 

0.2

 

 

0.3

 

 

 

Settlement of GPMX PSC-related indemnification claim

(1.1

)

 

0.3

 

 

(0.8

)

 

(1.1

)

 

(0.01

)

Non-cash net interest expense

4.5

 

 

(1.1

)

 

3.4

 

 

 

 

0.06

 

Board of director search fees

0.4

 

 

(0.1

)

 

0.3

 

 

0.4

 

 

0.01

 

2019 Q2 adjusted*

$

14.9

 

 

$

(4.6

)

 

$

10.3

 

 

$

23.0

 

 

$

0.20

 

* During the first quarter of fiscal 2020, we revised the financial information our chief operating decision maker (currently our chief executive officer) reviews for operational decision-making purposes to include the separate financial results of our Lana business. Our historical segment results have been recast to conform to current presentation including the removal of discretionary strategic investment in digital platform costs in historically adjusted results. We additionally recast certain other adjustments to conform to restated historical results.

2020 Q2:

U.S. Dollar Amount

 

Percentage
Change YOY

 

 

 

 

 

(in millions)

 

 

Consolidated revenue (three months ended March 31, 2020)

$

 

223.3

 

 

4

%

Currency exchange rate fluctuations

 

1.1

 

 

 

Constant currency consolidated revenue (three months ended March 31, 2020)

$

 

224.4

 

 

5

%

 

 

 

 

Consolidated net revenue (three months ended March 31, 2020)

$

 

127.4

 

 

%

Currency exchange rate fluctuations

 

0.5

 

 

 

Constant currency consolidated net revenue (three months ended March 31, 2020)

$

 

127.9

 

 

%

 

 

 

 

Latin America Pawn net revenue (three months ended March 31, 2020)

$

 

25.8

 

 

(8

)%

Currency exchange rate fluctuations

 

0.5

 

 

 

Constant currency Latin America Pawn net revenue (three months ended March 31, 2020)

$

 

26.3

 

 

(6

)%

 

 

 

 

Latin America Pawn PLO

$

 

38.1

 

 

(11

)%

Currency exchange rate fluctuations

 

5.0

 

 

 

Constant currency Latin America Pawn PLO

$

 

43.1

 

 

1

%

 

 

 

 

Latin America Pawn PSC revenues (three months ended March 31, 2020)

$

 

18.5

 

 

(7

)%

Currency exchange rate fluctuations

 

0.4

 

 

 

Constant currency Latin America Pawn PSC revenues (three months ended March 31, 2020)

$

 

18.9

 

 

(6

)%

 

 

 

 

Latin America Pawn merchandise sales (three months ended March 31, 2020)

$

 

27.4

 

 

11

%

Currency exchange rate fluctuations

 

0.6

 

 

 

Constant currency Latin America Pawn merchandise sales (three months ended March 31, 2020)

$

 

28.0

 

 

14

%

 

 

 

 

Latin America Pawn segment profit before tax (three months ended March 31, 2020)

$

 

(30.1

)

 

(419

)%

Currency exchange rate fluctuations

 

(1.6

)

 

 

Constant currency Latin America Pawn segment profit before tax (three months ended March 31, 2020)

$

 

(31.7

)

 

(436

)%

 

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

Source: EZCORP, Inc.

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