UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________________________________________ 
FORM 8-K
_______________________________________________________ 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2019 (May 8, 2019)
 _______________________________________________ 
EZCORP, Inc.
(Exact name of registrant as specified in its charter)
 _______________________________________________________ 

Delaware
 
0-19424
 
74-2540145
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
2500 Bee Cave Road, Bldg One, Suite 200, Rollingwood, Texas 78746
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (512) 314-3400
_______________________________________________________ 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





Item 2.02 — Results of Operations and Financial Condition
On May 8, 2019, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended March 31, 2019. A copy of that press release is attached as Exhibit 99.1.
In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), we provide certain other non-GAAP financial information on a constant currency basis ("constant currency") and adjusted basis. 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 believe that presentation of adjusted results, including adjustments for non-cash interest income and expenses, discrete equity method investment charges, start up and acquisition related costs, reserves related to a refiner, tax effects, and other, are meaningful and useful in understanding the activities and business metrics of our operations exclusive of certain non-core operating variances and other infrequent charges.
We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. 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.
The information set forth under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference in any filing made by EZCORP under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 7.01 — Regulation FD Disclosure
A copy of the presentation materials that management will review during the company’s second quarter 2019 earnings conference call (to be held on May 9, 2019) will be posted in the Investor Relations section of the company’s website at www.ezcorp.com .
Item 9.01 — Financial Statements and Exhibits
(d)
Exhibits.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
EZCORP, INC.
 
 
 
 
 
 
 
 
Date:
May 8, 2019
 
 
 
By:
 
/s/ David McGuire
 
 
 
 
 
 
 
David McGuire
 
 
 
 
 
 
 
Deputy Chief Financial Officer and Chief Accounting Officer




FY2014Q1EZCORPA01A04A28.JPG
EZCORP Reports Second Quarter Fiscal Year 2019 Results
Austin, Texas (May 8, 2019) — EZCORP, Inc. (NASDAQ: EZPW) today announced results for its second quarter ended March 31, 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 SECOND QUARTER OF FISCAL 2019
Strong revenue growth, up 6% to $214.7 million, reflects the company's long-standing focus on best meeting customers' need for cash. Growth in pawn loans outstanding (PLO), pawn service charges (PSC) and merchandise sales in U.S. and Latin America pawn segments contributed to improvement in key pawn operating metrics during the quarter.
PLO, the most influential driver of revenue and profitability, expanded  9%  to  $173.1 million , and PSC rose  10%  to $81.8 million .
U.S. Pawn segment same store PLO and PSC each rose 5% , driving total ending PLO of $130.6 million and PSC of $61.8 million.
Latin America Pawn total PLO grew  20%  to  $42.6 million  (up  27%  to $44.7 million on a constant currency basis 1 ). Same store PLO increased  4%  ( 9% higher on a constant currency basis). PSC rose 33% to $20.0 million (increasing 37% to $20.6 million on a constant currency basis).
Income before tax of $5.0 million and diluted earnings per share of $0.06 were each down 71%, impacted by non-cash charges of $6.5 million as well as growth investments and other discrete costs. Excluding those items and adjusting for constant currency, adjusted 2 income before tax was $16.6 million, down 10%, and adjusted diluted earnings per share was flat to the prior-year quarter at $0.22.
The company continued investing to sustain strong competitive advantages, including ongoing progress on developing a new customer-centric digital platform, predictive product and customer analytics, and upgrading its point-of-sale and other systems. Capital and other expenditures related directly to growth initiatives totaled $7.0 million in the quarter.
Cash and cash equivalents ended the current quarter at $347.8 million , providing liquidity to retire the $195.0 million cash convertible notes due in June 2019 and continue investment in the company's growth. Fiscal year-to-date operating cash flow increased 11% to $50.6 million and the company collected another $14.6 million of principal under the Alpha Credit / Grupo Finmart notes receivable.
CEO COMMENTARY AND OUTLOOK
Chief Executive Officer Stuart Grimshaw commented, "Fundamental trends remain healthy, with strong PLO growth driving accelerated revenue for the quarter compared to prior year levels. Rising demand for pawn loans and stable yields bode well for the near-term trajectory of PSC, while our proactive investing initiatives centered on digital engagement and data analytics position us well to increasingly differentiate our services and enhance profitable client acquisition and retention over time.
“As our liquidity and free cash flow continue to build, we maintain financial flexibility to de-lever the balance sheet and enhance our organic growth through incremental acquisitions, assuming our strict strategic and financial criteria are met. We remain committed to delivering accretive, sustainable growth - regardless of the broader economic environment - across multiple avenues to drive long-term shareholder value.”





CONSOLIDATED RESULTS

Three Months Ended March 31
in thousands, except per share amounts
 
As Reported
 
Adjusted 2
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Total Revenues
$
214,730

 
$
202,398

 
$
215,028

 
$
202,398

Income from Continuing Operations, Before Tax
$
5,019

 
$
17,504

 
$
16,591

 
$
18,518

Net Income from Continuing Operations
$
2,659

 
$
11,707

 
$
11,648

 
$
12,450

Diluted Earnings Per Share
$
0.06

 
$
0.21

 
$
0.22

 
$
0.22

Adjusted EBITDA 2
$
17,494

 
$
25,516

 
$
24,586

 
$
25,272

With total revenues up $12.3 million, or 6%, on growth in both pawn service charges and merchandise sales, income from continuing operations before tax decreased $12.5 million from the prior year quarter on a GAAP basis and $1.9 million on an adjusted basis, including the effect of expenses at new and same stores. Included in the unadjusted year-over-year change in results is a $6.5 million non-cash impairment on an equity investment and $0.4 million lower income from this investment, a $3.9 million increase in net interest expense primarily from debt issued in May 2018, the effect of 77 net new and acquired stores that do not yet fully reflect the company’s historical store performance, additional investment in the company’s Evergreen customer-centric digital platform, and other operating and administrative expense growth. While consolidated merchandise sales gross profit increased $0.7 million, related sales margins decreased 130 basis points to 35.8%, reflecting both the effective liquidation of aged general merchandise in U.S. Pawn from 9% to 7% and a greater portion of total sales derived from Latin America, where average margins are lower due to the concentration in general merchandise.
Ending and average PLO grew 9% , driving a 10%  increase in PSC and a  6%  improvement in net revenues to  $127.7 million  (up 7% to $128.5 million on a constant currency basis). Consolidated merchandise sales gross profit grew  2%  to  $43.5 million on a  5%  rise in merchandise sales. On a constant currency basis, PSC expanded 11% and merchandise sales gross profit improved 2%.
Consolidated operations expenses rose  7%  to  $88.2 million  (up 8% to $88.8 million on a constant currency basis) from a net increase of 74 stores acquired or opened since the prior year quarter (79 new and acquired stores in Latin America net of five closures in the U.S. and Canada) and increases in same stores. Same store operations expense increased 5% primarily due to labor and benefit cost increases, including reduced vacancies, an increase in robbery losses in the period and other smaller items. The company expects operating efficiencies to increasingly take hold as acquired stores are further integrated and new stores season and build scale.
Administrative expense increased 24% to $16.5 million principally as a result of a $1.5 million strategic investment that is not capitalizable related to the development of the Evergreen customer-centric digital platform, which remains pre-revenue. Another $1.0 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 $37.9 million, up 18% from the prior year quarter. Included in this is a $0.8 million recovery from a refiner that was fully reserved in the first fiscal quarter of 2019 and a $1.1 million PSC-related indemnification claim settlement from the previous owners of GPMX. On an adjusted basis, consolidated global pawn segment contribution increased 2%, or $0.8 million, to $36.2 million.
Non-cash charges consisted of a $6.5 million impairment to the carrying value of the company's investment in Cash Converters International Limited, an unconsolidated affiliate, based on its share price at the end of the period. The current quarter equity in underlying earnings of this investment decreased $0.4 million from the prior year quarter.
Net interest expense increased $3.9 million, driven by additional debt issued in May 2018, and lower interest income on the declining balance of notes receivable as principal collections are received monthly. The cash convertible senior notes expected to be repaid in June 2019 represent $3.6 million of total interest expense in the current quarter.




SEGMENT RESULTS
U.S. Pawn
Same store PLO and PSC both rose 5% , with ending PLO per store of $257,000, up 6% on a year-over-year basis. The growth reflected disciplined lending practices, a focus on meeting customers' need for cash and stronger performance from stores affected by hurricanes in the prior-year quarter.
Same store sales improved 2% and merchandise margins remained strong at 37% . Aged general merchandise inventory was reduced during the quarter from 9% to 7%.
U.S. Pawn's revenue rose 3%  to  $166.4 million , with a 3% rise in combined operating expenses and depreciation to $70.5 million, resulting in a 1% increase in segment contribution to $28.4 million . Adjusted segment contribution decreased 1% to $28.4 million. Operating expense growth was primarily attributable to increased labor and benefit costs including vacancy reduction and higher robbery losses.
Latin America Pawn
Latin America Pawn's PLO grew  20%  to  $42.6 million  (up  27%  to $44.7 million on a constant currency basis). Same store PLO increased  4%  ( 9% on a constant currency basis), with ending PLO per store of $91,000, up 32%.
The company added four stores in the quarter. Pawn store count in Latin America has expanded 20% in the last 12 months to a total of 466 stores, with 68 acquired and 11 opened. 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.
Net revenues grew  27%  to  $28.0 million  (up 31% to $28.8 million on a constant currency basis). PSC rose  33%  to  $20.0 million (increasing 37% to $20.6 million on a constant currency basis). PSC in the current period includes $1.1 million attributable to settling certain PSC-related indemnification claims with the previous owners of GPMX.
Operations expense increased 21% to $18.2 million primarily from 79 stores acquired or opened since the prior year quarter and increases in same stores. Same store operations expense increased 10%, primarily as a result of incremental administrative and professional fees incurred to support the integration of previous acquisitions and enhance the administrative staff, as well as an increase in robbery losses.
Segment contribution increased 39% to $9.5 million  ( $9.7 million on a constant currency basis). Adjusted segment contribution increased 20% to $7.8 million, excluding foreign currency impacts and other discrete costs, as well as the $0.8 million recovery from a refiner that was fully reserved in the first fiscal quarter of 2019 and a $1.1 million PSC-related indemnification claim settlement from the previous owners of GPMX.
CORRECTIONS TO PRIOR PERIOD FINANCIAL STATEMENTS
During the current quarter, the company identified errors in its previously reported financial statements during the ordinary course of account reviews and subsequent investigation of related accounts. None of the identified errors was material to any previously reported period. These have now been corrected in all periods presented. The errors relate primarily to the overstatement of historical balances of pawn service charges receivable resulting from errors in the configuration of information technology reports. Compared to amounts previously reported, the corrections reduced income from continuing operations, net of tax by $0.2 million (no change to diluted earnings per share) and $0.3 million ($0.01 diluted earnings per share) in the three and six- month periods ended March 31, 2018. In the first quarter of fiscal 2019 included in the current year-to-date results, the correction increased previously reported income from continuing operations, net of tax by $0.9 million ($0.01 diluted earnings per share). Prior to correction, these errors resulted in an overstatement of October 1, 2017 beginning retained earnings of $3.8 million. Greater detail on this is included in Note 1 to our Condensed Consolidated Financial Statements on Form 10-Q.




CONFERENCE CALL
EZCORP will host a conference call on Thursday, May 9, 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: 2278077, 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.
Contact:
Email: Investor_Relations@ezcorp.com
Phone: (512) 314-2220

1 “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.
2 Adjusted basis, which is a non-GAAP measure, excludes certain items. 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,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
(Unaudited)
 
(in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Merchandise sales
$
121,260

 
$
114,945

 
$
242,284

 
$
228,533

Jewelry scrapping sales
10,380

 
11,525

 
19,661

 
23,738

Pawn service charges
81,799

 
74,031

 
165,318

 
150,053

Other revenues
1,291

 
1,897

 
3,162

 
4,244

Total revenues
214,730

 
202,398

 
430,425

 
406,568

Merchandise cost of goods sold
77,800

 
72,220

 
154,912

 
143,387

Jewelry scrapping cost of goods sold
8,833

 
9,574

 
16,883

 
19,911

Other cost of revenues
407

 
347

 
891

 
924

Net revenues
127,690

 
120,257

 
257,739

 
242,346

Operating expenses:
 
 
 
 
 
 
 
Operations
88,243

 
82,180

 
177,029

 
165,826

Administrative
16,487

 
13,341

 
31,742

 
26,420

Depreciation and amortization
7,012

 
6,451

 
13,860

 
12,174

(Gain) loss on sale or disposal of assets and other
(823
)
 
100

 
3,619

 
139

Total operating expenses
110,919

 
102,072

 
226,250

 
204,559

Operating income
16,771

 
18,185

 
31,489

 
37,787

Interest expense
8,589

 
5,829

 
17,380

 
11,676

Interest income
(3,126
)
 
(4,268
)
 
(6,465
)
 
(8,538
)
Equity in net (income) loss of unconsolidated affiliates
(431
)
 
(876
)
 
688

 
(2,326
)
Impairment of investment in unconsolidated affiliates
6,451

 

 
19,725

 

Other expense (income)
269

 
(4
)
 
(117
)
 
(186
)
Income from continuing operations before income taxes
5,019

 
17,504

 
278

 
37,161

Income tax expense
2,360

 
5,797

 
1,279

 
13,208

Income (loss) from continuing operations, net of tax
2,659

 
11,707

 
(1,001
)
 
23,953

Loss from discontinued operations, net of tax
(18
)
 
(500
)
 
(201
)
 
(722
)
Net income (loss)
2,641

 
11,207

 
(1,202
)
 
23,231

Net loss attributable to noncontrolling interest
(753
)
 
(374
)
 
(1,230
)
 
(989
)
Net income attributable to EZCORP, Inc.
$
3,394

 
$
11,581

 
$
28

 
$
24,220

 
 
 
 
 
 
 
 
Basic earnings per share attributable to EZCORP, Inc. — continuing operations
$
0.06

 
$
0.22

 
$

 
$
0.46

Diluted earnings per share attributable to EZCORP, Inc. — continuing operations
$
0.06

 
$
0.21

 
$

 
$
0.44

 
 
 
 
 
 
 
 
Weighted-average basic shares outstanding
55,445

 
54,464

 
55,236

 
54,447

Weighted-average diluted shares outstanding
55,463

 
57,624

 
55,247

 
56,642







EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
March 31,
2019
 
March 31,
2018
 
September 30,
2018
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
347,786

 
$
159,216

 
$
285,311

Pawn loans
173,138

 
159,410

 
198,463

Pawn service charges receivable, net
27,097

 
24,130

 
30,959

Inventory, net
173,348

 
158,642

 
166,997

Notes receivable, net
23,450

 
38,091

 
34,199

Prepaid expenses and other current assets
32,984

 
29,533

 
33,456

Total current assets
777,803

 
569,022

 
749,385

Investment in unconsolidated affiliates
29,387

 
46,509

 
49,500

Property and equipment, net
67,518

 
64,833

 
73,649

Goodwill
296,881

 
290,884

 
299,248

Intangible assets, net
58,503

 
45,728

 
54,923

Notes receivable, net
8,509

 
18,660

 
3,226

Deferred tax asset, net
10,119

 
15,087

 
7,986

Other assets
4,395

 
19,773

 
3,863

Total assets
$
1,253,115

 
$
1,070,496

 
$
1,241,780

 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Current maturities of long-term debt, net
$
192,901

 
$
103,287

 
$
190,181

Accounts payable, accrued expenses and other current liabilities
58,696

 
60,538

 
57,958

Customer layaway deposits
13,564

 
12,225

 
11,824

Total current liabilities
265,161

 
176,050

 
259,963

Long-term debt, net
232,733

 
198,338

 
226,702

Deferred tax liability, net
9,012

 
2,525

 
8,817

Other long-term liabilities
6,450

 
9,359

 
6,890

Total liabilities
513,356

 
386,272

 
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 March 31, 2019; 51,494,246 as of March 31, 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
402,505

 
353,698

 
397,927

Retained earnings
386,650

 
373,560

 
386,622

Accumulated other comprehensive loss
(49,950
)
 
(40,247
)
 
(42,356
)
EZCORP, Inc. stockholders’ equity
739,759

 
687,556

 
742,739

Noncontrolling interest

 
(3,332
)
 
(3,331
)
Total equity
739,759

 
684,224

 
739,408

Total liabilities and equity
$
1,253,115

 
$
1,070,496

 
$
1,241,780







EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six Months Ended March 31,
 
2019
 
2018
 
 
 
 
 
(Unaudited)
 
(in thousands)
Operating activities:
 
 
 
Net (loss) income
$
(1,202
)
 
$
23,231

Adjustments to reconcile net (loss) income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
13,860

 
12,174

Amortization of debt discount and deferred financing costs
11,225

 
7,439

Accretion of notes receivable discount and deferred compensation fee
(2,492
)
 
(5,032
)
Deferred income taxes
358

 
2,801

Impairment of investment in unconsolidated affiliate
19,725

 

Other adjustments
1,265

 
1,081

Reserve on jewelry scrap receivable
3,646

 

Stock compensation expense
4,697

 
5,534

Loss (income) from investment in unconsolidated affiliates
688

 
(2,326
)
Changes in operating assets and liabilities, net of business acquisitions:
 
 
 
Service charges and fees receivable
3,797

 
4,644

Inventory
421

 
(628
)
Prepaid expenses, other current assets and other assets
(3,590
)
 
(2,982
)
Accounts payable, accrued expenses and other liabilities
(409
)
 
(5,357
)
Customer layaway deposits
1,810

 
1,128

Income taxes, net of excess tax benefit from stock compensation
(3,176
)
 
3,937

Net cash provided by operating activities
50,623

 
45,644

Investing activities:
 
 
 
Loans made
(353,537
)
 
(330,732
)
Loans repaid
225,695

 
220,267

Recovery of pawn loan principal through sale of forfeited collateral
142,656

 
134,870

Additions to property and equipment, net
(13,863
)
 
(19,251
)
Acquisitions, net of cash acquired
(627
)
 
(63,780
)
Principal collections on notes receivable
14,591

 
9,152

Net cash provided by (used in) investing activities
14,915

 
(49,474
)
Financing activities:
 
 
 
Taxes paid related to net share settlement of equity awards
(3,288
)
 
(311
)
Proceeds from borrowings, net of issuance costs
1,066

 

Payments on borrowings
(509
)
 

Net cash used in financing activities
(2,731
)
 
(311
)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
(599
)
 
(238
)
Net increase (decrease) in cash, cash equivalents and restricted cash
62,208

 
(4,379
)
Cash, cash equivalents and restricted cash at beginning of period
285,578

 
163,868

Cash, cash equivalents and restricted cash at end of period
$
347,786

 
$
159,489

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
151,211

 
$
134,952






EZCORP, Inc.
OPERATING SEGMENT RESULTS
(Unaudited and in thousands)
 
Three Months Ended March 31, 2019
   
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
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

 
2,545

 
88,243

 

 
88,243

Administrative

 

 

 

 
16,487

 
16,487

Depreciation and amortization
2,982

 
1,495

 
77

 
4,554

 
2,458

 
7,012

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

 
(839
)
 
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)
$
28,433

 
$
9,457

 
$
(8,236
)
 
$
29,654

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
29,654

 
$
(24,635
)
 
$
5,019





 
Three Months Ended March 31, 2018
   
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Merchandise sales
$
94,753

 
$
20,192

 
$

 
$
114,945

 
$

 
$
114,945

Jewelry scrapping sales
8,177

 
3,348

 

 
11,525

 

 
11,525

Pawn service charges
59,027

 
15,004

 

 
74,031

 

 
74,031

Other revenues
76

 
174

 
1,647

 
1,897

 

 
1,897

Total revenues
162,033

 
38,718

 
1,647

 
202,398

 

 
202,398

Merchandise cost of goods sold
58,537

 
13,683

 

 
72,220

 

 
72,220

Jewelry scrapping cost of goods sold
6,512

 
3,062

 

 
9,574

 

 
9,574

Other cost of revenues

 

 
347

 
347

 

 
347

Net revenues
96,984

 
21,973

 
1,300

 
120,257

 

 
120,257

Segment and corporate expenses (income):
 
 
 
 
 
 
 
 
 
 
 
Operations
65,190

 
15,015

 
1,975

 
82,180

 

 
82,180

Administrative

 

 

 

 
13,341

 
13,341

Depreciation and amortization
3,531

 
916

 
47

 
4,494

 
1,957

 
6,451

Loss (gain) on sale or disposal of assets
107

 
(5
)
 

 
102

 
(2
)
 
100

Interest expense

 
2

 

 
2

 
5,827

 
5,829

Interest income

 
(763
)
 

 
(763
)
 
(3,505
)
 
(4,268
)
Equity in net income of unconsolidated affiliates

 

 
(876
)
 
(876
)
 

 
(876
)
O ther (income) expense
1

 
(1
)
 
(35
)
 
(35
)
 
31

 
(4
)
Segment contribution
$
28,155

 
$
6,809

 
$
189

 
$
35,153

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
35,153

 
$
(17,649
)
 
$
17,504







 
Six Months Ended March 31, 2019
   
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
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

 
5,175

 
177,029

 

 
177,029

Administrative

 

 

 

 
31,742

 
31,742

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

 
$
(24,097
)
 
$
48,006

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
48,006

 
$
(47,728
)
 
$
278







 
Six Months Ended March 31, 2018
   
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Merchandise sales
$
186,247

 
$
42,286

 
$

 
$
228,533

 
$

 
$
228,533

Jewelry scrapping sales
16,702

 
7,036

 

 
23,738

 

 
23,738

Pawn service charges
118,644

 
31,409

 

 
150,053

 

 
150,053

Other revenues
150

 
343

 
3,751

 
4,244

 

 
4,244

Total revenues
321,743

 
81,074

 
3,751

 
406,568

 

 
406,568

Merchandise cost of goods sold
114,625

 
28,762

 

 
143,387

 

 
143,387

Jewelry scrapping cost of goods sold
13,354

 
6,557

 

 
19,911

 

 
19,911

Other cost of revenues

 

 
924

 
924

 

 
924

Net revenues
193,764

 
45,755

 
2,827

 
242,346

 

 
242,346

Segment and corporate expenses (income):
 
 
 
 
 
 
 
 
 
 
 
Operations
131,378

 
29,850

 
4,598

 
165,826

 

 
165,826

Administrative

 

 

 

 
26,420

 
26,420

Depreciation and amortization
6,330

 
1,761

 
94

 
8,185

 
3,989

 
12,174

Loss on sale or disposal of assets
123

 
5

 

 
128

 
11

 
139

Interest expense

 
3

 

 
3

 
11,673

 
11,676

Interest income

 
(1,400
)
 

 
(1,400
)
 
(7,138
)
 
(8,538
)
Equity in net income of unconsolidated affiliates

 

 
(2,326
)
 
(2,326
)
 

 
(2,326
)
Other (income) expense
(3
)
 
114

 
(118
)
 
(7
)
 
(179
)
 
(186
)
Segment contribution
$
55,936

 
$
15,422

 
$
579

 
$
71,937

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
71,937

 
$
(34,776
)
 
$
37,161




























EZCORP, Inc.
STORE COUNT ACTIVITY
(Unaudited)
 
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

 
Three Months Ended March 31, 2018
 
U.S. Pawn
 
Latin America Pawn
 
Other International
 
Consolidated
 
 
 
 
 
 
 
 
As of December 31, 2017
513

 
383


27

 
923

New locations opened

 
4

 

 
4

Locations sold, combined or closed
(3
)
 

 

 
(3
)
As of March 31, 2018
510

 
387

 
27

 
924

 
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

 
Six Months Ended March 31, 2018
 
U.S. Pawn
 
Latin America Pawn
 
Other International
 
Consolidated
 
 
 
 
 
 
 
 
As of September 30, 2017
513

 
246

 
27

 
786

New locations opened

 
8

 

 
8

Locations acquired

 
133

 

 
133

Locations sold, combined or closed
(3
)
 

 

 
(3
)
As of March 31, 2018
510

 
387

 
27

 
924

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 six months ended  March 31, 2019  and  2018  were as follows:
 
 
March 31,
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Mexican peso
 
19.4

 
18.3

 
19.2

 
18.7

 
19.5

 
18.8

Guatemalan quetzal
 
7.6

 
7.3

 
7.6

 
7.3

 
7.6

 
7.2

Honduran lempira
 
24.3

 
23.5

 
24.2

 
23.5

 
24.1

 
23.4

Peruvian sol
 
3.3

 
3.2

 
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 Q2
 
2018 Q2
 
 
 
 
 
(in millions)
Net income
$
2.6

 
$
11.2

Loss from discontinued operations, net of tax

 
0.5

Interest expense
8.6

 
5.8

Interest income
(3.1
)
 
(4.3
)
Income tax expense
2.4

 
5.8

Depreciation and amortization
7.0

 
6.5

Adjusted EBITDA
$
17.5

 
$
25.5

 
Revenues
 
 
 
(in millions)
2019 Q2 reported
$
214.7

Settlement of GPMX PSC-related indemnification claim
(1.1
)
Currency exchange rate fluctuations
1.4

2019 Q2 adjusted
$
215.0

 
Income from Continuing Operations, Before Tax
 
Tax Effect
 
Net Income from Continuing Operations
 
Adjusted EBITDA
 
EPS
 
 
 
 
 
 
 
 
 
 
 
(in millions)
2019 Q2 reported
$
5.0

 
$
(2.3
)
 
$
2.7

 
$
17.5

 
$
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 recovery
(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
)
Currency exchange rate fluctuations
0.2

 
(0.1
)
 
0.1

 
0.2

 

Non-cash net interest expense
4.5

 
(1.1
)
 
3.4

 

 
0.06

Discretionary strategic investment in digital platform and board of director search fees
1.9

 
(0.4
)
 
1.5

 
1.9

 
0.03

2019 Q2 adjusted
$
16.6

 
$
(5.0
)
 
$
11.6

 
$
24.6

 
$
0.22





 
Income from Continuing Operations, Before Tax
 
Tax Effect
 
Net Income from Continuing Operations
 
Adjusted EBITDA
 
EPS
 
 
 
 
 
 
 
 
 
 
 
(in millions)
2018 Q2 reported
$
17.5

 
$
(5.8
)
 
$
11.7

 
$
25.5

 
$
0.21

Charge-off of aged assets
0.1

 

 
0.1

 
0.1

 

Impact from hurricane store operating expenses
(0.3
)
 
0.1

 
(0.2
)
 
(0.3
)
 

Non-cash net interest expense
1.2

 
(0.3
)
 
0.9

 

 
0.01

2018 Q2 adjusted
$
18.5

 
$
(6.0
)
 
$
12.5

 
$
25.3

 
$
0.22

 
U.S. Pawn
 
Latin America Pawn
 
Total
 
 
 
 
 
 
 
(in millions)
Segment contribution 2019 Q2
$
28.4

 
$
9.5

 
$
37.9

Adjustment for Republic Metals Corporation recovery

 
(0.8
)
 
(0.8
)
Settlement of GPMX PSC-related indemnification claim

 
(1.1
)
 
(1.1
)
Currency exchange rate fluctuations

 
0.2

 
0.2

Adjusted segment contribution 2019 Q2
$
28.4

 
$
7.8

 
$
36.2

 
U.S. Pawn
 
 
 
(in millions)
Segment contribution 2018 Q2
$
28.2

Charge-off of aged assets
0.1

Impact from hurricane store operating expenses
0.3

Adjusted segment contribution 2018 Q2
$
28.6





 2019 Q2:
U.S. Dollar Amount
 
Percentage Change YOY
 
 
 
 
 
(in millions)
 
 
Latin America Pawn PLO
$
42.6

 
20
%
Currency exchange rate fluctuations
2.1

 
 
Constant currency Latin America Pawn PLO
$
44.7

 
27
%
 
 
 
 
Latin America Pawn same store PLO
$
36.8

 
4
%
Currency exchange rate fluctuations
1.9

 
 
Constant currency Latin America Pawn same store PLO
$
38.7

 
9
%
 
 
 
 
Consolidated revenue (three months ended March 31, 2019)
$
214.7

 
6
%
Currency exchange rate fluctuations
1.4

 
 
Constant currency consolidated revenue (three months ended March 31, 2019)
$
216.1

 
7
%
 
 
 
 
Consolidated net revenue (three months ended March 31, 2019)
$
127.7

 
6
%
Currency exchange rate fluctuations
0.8

 
 
Constant currency consolidated net revenue (three months ended March 31, 2019)
$
128.5

 
7
%
 
 
 
 
Consolidated PSC revenue (three months ended March 31, 2019)
$
81.8

 
10
%
Currency exchange rate fluctuations
0.6

 
 
Constant currency consolidated PSC revenue (three months ended March 31, 2019)
$
82.4

 
11
%
 
 
 
 
Consolidated merchandise sales gross profit (three months ended March 31, 2019)
$
43.5

 
2
%
Currency exchange rate fluctuations
0.2

 
 
Constant currency consolidated merchandise sales gross profit (three months ended March 31, 2019)
$
43.7

 
2
%
 
 
 
 
Consolidated operations expenses (three months ended March 31, 2019)
$
88.2

 
7
%
Currency exchange rate fluctuations
0.6

 
 
Constant currency consolidated operations expenses (three months ended March 31, 2019)
$
88.8

 
8
%
 
 
 
 
Latin America Pawn net revenue (three months ended March 31, 2019)
$
28.0

 
27
%
Currency exchange rate fluctuations
0.8

 
 
Constant currency Latin America Pawn net revenue (three months ended March 31, 2019)
$
28.8

 
31
%
 
 
 
 
Latin America Pawn PSC revenue (three months ended March 31, 2019)
$
20.0

 
33
%
Currency exchange rate fluctuations
0.6

 
 
Constant currency Latin America Pawn PSC revenue (three months ended March 31, 2019)
$
20.6

 
37
%
 
 
 
 
Latin America Pawn segment profit before tax (three months ended March 31, 2019)
$
9.5

 
39
%
Currency exchange rate fluctuations
0.2

 
 
Constant currency Latin America Pawn segment profit before tax (three months ended March 31, 2019)
$
9.7

 
43
%