false0000876523 0000876523 2019-07-31 2019-07-31


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): July 31, 2019 (July 31, 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: (512314-3400
_______________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
 
 
 
 
 
 
Class A Non-voting Common Stock, par value $.01 per share
 
EZPW
 
NASDAQ Stock Market
 (NASDAQ Global Select Market)
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:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
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
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 July 31, 2019, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended June 30, 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 third quarter 2019 earnings conference call (to be held on August 1, 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:
July 31, 2019
 
 
 
By:
 
/s/ David McGuire
 
 
 
 
 
 
 
David McGuire
 
 
 
 
 
 
 
Deputy Chief Financial Officer and Chief Accounting Officer




FY2014Q1EZCORPA01A04A46.JPG
EZCORP Reports Third Quarter Fiscal Year 2019 Results
Austin, Texas (July 31, 2019) — 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.
Contact:
Email: Investor_Relations@ezcorp.com
Phone: (512) 314-2220

1Adjusted 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.
2“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 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
)%