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8-K


 

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): February 8, 2016
 _______________________________________________ 
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, 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))
 

 

Item 2.02 — Results of Operations and Financial Condition
On February 8, 2016, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the first fiscal quarter of the fiscal year ended September 30, 2016. 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 such as constant currency results ("constant currency"). Management believes that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our Mexico Pawn and Grupo Finmart operations, which are denominated in Mexican pesos. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our business. Management provides 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, its 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 first quarter of fiscal 2016 earnings conference call (to be held on February 9, 2016) has been posted in the Investor Relations section of the Company’s website at www.ezcorp.com.
Item 9.01 — Financial Statements and Exhibits
(d)
Exhibits.
99.1
Press Release, dated February 8, 2016, announcing EZCORP, Inc.’s results of operations and financial condition for the first fiscal quarter of the fiscal year ended September 30, 2016.





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:
February 8, 2016
 
 
 
By:
 
/s/ David McGuire
 
 
 
 
 
 
 
David McGuire
 
 
 
 
 
 
 
Deputy Chief Financial Officer and Chief Accounting Officer




EXHIBIT INDEX
Exhibit
No.
  
Description of Exhibit
 
 
 
99.1
  
Press Release, dated February 8, 2016, announcing EZCORP, Inc.’s results of operations and financial condition for the first fiscal quarter of the fiscal year ended September 30, 2016.


Exhibit


Exhibit 99.1

EZCORP Announces First Quarter Fiscal 2016 Results
Pawn loans outstanding ("PLO") up 6% on a constant currency basis1 (5% on a GAAP basis)
Same store PLO up 3% on a constant currency basis1 (2% on a GAAP basis)
Quality loan growth based on consistent redemption rate and increasing portfolio yield
Strong merchandise margin expansion to 39%, a 500 basis point increase YOY
Annualized return on pawn earning assets increased to 151%, a 900 basis point increase YOY
Reviewing strategic options for Grupo Finmart, to be completed by end of Q3FY16
Austin, Texas (February 8, 2016) — EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn loans in the United States and Mexico and consumer loans in Mexico, today announced results for its first quarter ended December 31, 2015.
CEO COMMENTARY AND OUTLOOK
Stuart Grimshaw, EZCORP’s Chief Executive Officer, said, “In July 2015, we announced significant strategic changes in our company’s direction which included a refocus on our pawn operations in both the United States and Mexico. With the goal of increasing both our market share and efficiency, our stated path to making that a reality was to serve and satisfy our customers beyond their expectations. This quarter’s results reflect encouraging progress in meeting those expectations with growth in our customer transactions as well as the expansion in our portfolio of pawn loans, while improving the return on investment on our earning assets.”
Mr. Grimshaw continued, “Today, we also announced that we are undertaking a strategic review of Grupo Finmart. Clearly we are disappointed in the financial performance, which is affected by changes in the industry dynamics as well as the business environment over the past several quarters. With a view to maximizing our long term shareholder value, initiatives are underway for the short term while the longer term strategic options are being evaluated.”
1Note: In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles ("GAAP"), we provide certain other non-GAAP financial information such as constant currency results ("constant currency") where indicated. The average Mexican peso to U.S. dollar exchange rate as of December 31, 2015 was 17.3 to 1, compared to 14.7 to 1 in the prior year. The average Mexican peso to U.S. dollar exchange rate for the current three-month period ended December 31, 2015 was 16.8 to 1, compared to 13.9 to 1 in the comparable prior-year period. See additional information at the end of this release regarding non-GAAP financial measures.
CONSOLIDATED RESULTS
•
For the quarter ended December 31, 2015, net loss from continuing operations attributable to EZCORP was $7.2 million (-$0.13 per share), compared to net income of $4.7 million ($0.09 per share) in the prior-year quarter. This year-over-year difference reflects continued improvement in our U.S. and Mexico pawn businesses (as discussed below) that was more than offset by continued challenges in Grupo Finmart.
•
Total revenues for the quarter were $198.5 million, 7% lower than the prior-year quarter, primarily due to lower scrapping revenues and lower consumer loan fees and interest income in Grupo Finmart. On a constant currency basis, total revenues were 3% lower year-over-year.
•
Net revenues for the quarter were $111.5 million, a 5% decrease from the prior-year quarter, reflecting an increase in bad debt reserves discussed below. On a constant currency basis, net revenues decreased 2%.
•
Operating expenses increased 19% on a constant currency basis (14% on a GAAP basis) reflecting costs associated with the prior-period restatements, restructuring, reversal of stock compensation costs in the prior-year quarter as a result of forfeitures, and store-level bonus programs during fiscal 2016 to better incentivize performance.




•
Annualized return on pawn earning assets (defined as average annual merchandise and scrap sales gross profit and pawn service charges ("PSC") yield on pawn loans and inventory balances outstanding) increased to 151% in the current quarter versus 142% in the prior-year quarter.
OPERATING METRICS
U.S. Pawn
•
Core pawn revenue increased 3% YOY driven by growth in PSC and merchandise sales.
•
We posted our first same store PLO growth since Q4FY14: up 0.5% YOY in the December 2015 quarter, an improvement from -6% YOY in the September 2015 quarter, and -11% YOY in the June 2015 quarter.
•
Quality loan growth continued with PLO increasing 4%.
•
Strong merchandise gross margin expansion to 40% from 34%.
•
Aged inventory reduction to 11% of total inventory from 16%.
Mexico Pawn
•
Core pawn revenue increased 8% YOY on a constant currency basis (11% decrease on a GAAP basis), primarily driven by 22% growth in PSC revenue on a constant currency basis (1% increase on a GAAP basis).
•
Same store PLO increased 34% on a constant currency basis (14% increase on a GAAP basis), the sixth consecutive quarter with double-digit same store loan growth on a constant currency basis (same store YOY loan growth has both increased and decreased on a GAAP basis over the same periods).
•
Strong merchandise margin expansion to 35% from 31%.
•
Aged inventory reduction to 3% of total inventory from 16%.
Grupo Finmart
•
Segment loss of $19.5 million on a constant currency basis ($16.9 million on a GAAP basis) compared to a segment loss of $8.2 million on a GAAP basis in the prior-year quarter. The increase in the segment loss was primarily attributable to an 87% increase on a constant currency basis (55% increase on a GAAP basis) in bad debt expense, driven predominately by industry-wide delays in payment timing.
•
We reserve for a loan at 100% of principal and accrued interest if no payment is received within a consecutive 180-day period. The bad debt expense included $2.1 million received in collections in the current quarter on loans that were fully reserved.
•
In response to the payment and collections challenges, we are refocusing our operations on higher quality, shorter term loans with the lowest risk convenios.
•
Operations expense increased 40% YOY on a constant currency basis (16% on a GAAP basis), driven by an increase in commissions and investments in the senior management team. We have initiated a cost reduction program to better align the expense structure with the revenue performance.
•
In light of the changing industry dynamics and business environment, we have initiated a review of all strategic options for Grupo Finmart, to be completed by the end of Q3FY16, with a view toward maximizing long-term shareholder value.
CONFERENCE CALL
EZCORP will host a conference call on Tuesday, February 9, 2016 at 7:30 a.m. Central Time to discuss our first quarter results. Analysts and institutional investors may participate on the conference call by dialing (888) 734-0328, Conference ID: 43999396, International dialing (678) 894-3054. 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 call.
ABOUT EZCORP
EZCORP is a leading provider of pawn loans in the United States and Mexico and consumer loans in Mexico. At our pawn stores, we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers. 




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





EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended December 31,
 
2015
 
2014
 
 
 
 
 
(Unaudited)
 
(in thousands, except per share amounts)
Revenues:
 
 
 
Merchandise sales
$
108,584

 
$
109,639

Jewelry scrapping sales
9,621

 
18,534

Pawn service charges
66,594

 
64,927

Consumer loan fees and interest
13,188

 
18,971

Other revenues
467

 
655

Total revenues
198,454

 
212,726

Merchandise cost of goods sold
66,259

 
72,478

Jewelry scrapping cost of goods sold
8,076

 
14,675

Consumer loan bad debt
12,603

 
8,515

Net revenues
111,516

 
117,058

Operating expenses:
 
 
 
Operations
85,606

 
80,087

Administrative
19,983

 
12,552

Depreciation and amortization
8,059

 
8,008

Loss on sale or disposal of assets
33

 
256

Restructuring
1,692

 
22

Total operating expenses
115,373


100,925

Operating (loss) income
(3,857
)
 
16,133

Interest expense
9,192

 
12,034

Interest income
(140
)
 
(531
)
Equity in net income of unconsolidated affiliate
(2,055
)
 
(2,194
)
Other expense
870

 
759

(Loss) income from continuing operations before income taxes
(11,724
)
 
6,065

Income tax (benefit) expense
(3,696
)
 
3,264

(Loss) income from continuing operations, net of tax
(8,028
)
 
2,801

(Loss) income from discontinued operations, net of tax
(238
)
 
6,877

Net (loss) income
(8,266
)
 
9,678

Net loss from continuing operations attributable to redeemable noncontrolling interest
(792
)
 
(1,934
)
Net (loss) income attributable to EZCORP, Inc.
$
(7,474
)

$
11,612

 
 
 
 
Basic (loss) earnings per share attributable to EZCORP, Inc.:
 
 
 
Continuing operations
$
(0.13
)
 
$
0.09

Discontinued operations
—

 
0.13

Basic earnings (loss) per share
$
(0.13
)
 
$
0.22

 
 
 
 
Diluted (loss) earnings per share attributable to EZCORP, Inc.:
 
 
 
Continuing operations
$
(0.13
)
 
$
0.09

Discontinued operations
—

 
0.13

Diluted (loss) earnings per share
$
(0.13
)
 
$
0.22

 
 
 
 
Weighted-average shares outstanding:
 
 
 
Basic
54,895

 
53,650

Diluted
54,895

 
53,698

 
 
 
 
Net (loss) income from continuing operations attributable to EZCORP, Inc.
$
(7,236
)
 
$
4,735

Income from discontinued operations attributable to EZCORP, Inc.
(238
)
 
6,877

Net (loss) income attributable to EZCORP, Inc.
$
(7,474
)
 
$
11,612





EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
December 31,
2015
 
December 31,
2014
 
September 30,
2015
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
22,781

 
$
77,599

 
$
59,124

Restricted cash
16,157

 
60,218

 
15,137

Pawn loans
157,905

 
150,930

 
159,964

Consumer loans, net
32,175

 
61,347

 
36,533

Pawn service charges receivable, net
31,342

 
30,241

 
30,852

Consumer loan fees and interest receivable, net
12,827

 
13,199

 
19,802

Inventory, net
132,980

 
132,659

 
124,084

Prepaid income taxes
5,929

 
36,580

 
7,945

Income taxes receivable
35,131

 
16,243

 
37,230

Prepaid expenses and other current assets
25,296

 
34,075

 
21,076

Total current assets
472,523

 
613,091

 
511,747

Investment in unconsolidated affiliate
53,404

 
99,219

 
56,182

Property and equipment, net
69,963

 
104,353

 
75,594

Restricted cash, non-current
2,667

 
4,310

 
2,883

Goodwill
326,201

 
337,498

 
327,460

Intangible assets, net
40,443

 
49,523

 
41,263

Non-current consumer loans, net
71,502

 
78,362

 
75,824

Deferred tax asset, net
73,655

 
28,189

 
69,121

Other assets, net
35,482

 
77,352

 
42,985

Total assets
$
1,145,840

 
$
1,391,897

 
$
1,203,059

 
 
 
 
 
 
Liabilities, temporary equity and stockholders’ equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Current maturities of long-term debt
$
75,586

 
$
74,832

 
$
74,345

Current capital lease obligations
—

 
258

 
—

Accounts payable and other accrued expenses
87,219

 
81,417

 
107,871

Other current liabilities
6,470

 
6,000

 
15,384

Customer layaway deposits
10,138

 
5,133

 
10,470

Total current liabilities
179,413

 
167,640

 
208,070

Long-term debt, less current maturities
281,545

 
374,600

 
297,166

Deferred gains and other long-term liabilities
5,917

 
8,446

 
6,157

Total liabilities
466,875

 
550,686

 
511,393

Commitments and contingencies


 


 


Temporary equity:
 
 
 
 
 
Class A Non-voting Common Stock, subject to possible redemption at $10.06 per share; 1,168,456 shares issued and outstanding at redemption value as of December 31, 2015 and September 30, 2015; and none as of December 31, 2014
11,696

 
—

 
11,696

Redeemable noncontrolling interest
2,379

 
18,550

 
3,235

Total temporary equity
14,075

 
18,550

 
14,931

Stockholders’ equity:
 
 
 
 
 
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of December 31, 2015 and 2014 and September 30, 2015; issued and outstanding: 50,756,171 as of December 31, 2015; 50,680,358 as of December 31, 2014; and 50,726,289 as of September 30, 2015
508

 
506

 
507

Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171
30

 
30

 
30

Additional paid-in capital
309,562

 
329,443

 
307,080

Retained earnings
415,663

 
521,198

 
423,137

Accumulated other comprehensive loss
(60,873
)
 
(28,516
)
 
(54,019
)
EZCORP, Inc. stockholders’ equity
664,890

 
822,661

 
676,735

Total liabilities, temporary equity and stockholders’ equity
$
1,145,840

 
$
1,391,897

 
$
1,203,059





EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended December 31,
 
2015
 
2014
 
 
 
 
 
(Unaudited)
 
(in thousands)
Operating activities:
 
 
 
Net (loss) income
$
(8,266
)
 
$
9,678

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
8,090

 
9,030

Amortization of debt discount and consumer loan premium, net
2,362

 
1,982

Consumer loan loss provision
9,691

 
7,590

Deferred income taxes
(4,534
)
 
1,498

Restructuring
1,692

 
—

Amortization of deferred financing costs
833

 
1,633

Amortization of prepaid commissions
4,023

 
3,013

Other adjustments
(1,966
)
 
(176
)
Loss on sale or disposal of assets
33

 
324

Stock compensation expense (benefit)
833

 
(2,458
)
Income from investment in unconsolidated affiliate
(2,055
)
 
(2,194
)
Changes in operating assets and liabilities:
 
 
 
Service charges and fees receivable
6,381

 
(3,361
)
Inventory
(2,107
)
 
509

Prepaid expenses, other current assets and other assets
(5,739
)
 
(7,824
)
Accounts payable and other accrued expenses and deferred gains and other long-term liabilities
(12,707
)
 
(13,955
)
Customer layaway deposits
(310
)
 
(2,895
)
Restricted cash
147

 
(933
)
Prepaid income taxes and income taxes receivable
4,074

 
3,903

Payments of restructuring charges
(4,943
)
 
(2,285
)
Dividends from unconsolidated affiliate
—

 
2,407

Net cash (used in) provided by operating activities
(4,468
)
 
5,486

Investing activities:
 
 
 
Loans made
(173,162
)
 
(223,748
)
Loans repaid
106,372

 
166,771

Recovery of pawn loan principal through sale of forfeited collateral
58,566

 
69,886

Additions to property and equipment
(1,166
)
 
(8,954
)
Investment in unconsolidated affiliate
—

 
(12,140
)
Proceeds from sale of assets
27

 
—

Net cash used in investing activities
(9,363
)
 
(8,185
)
Financing activities:
 
 
 
Payout of deferred and contingent consideration
(8,915
)
 
(6,000
)
Proceeds from settlement of forward currency contracts
3,557

 
2,313

Change in restricted cash
(1,261
)
 
(795
)
Proceeds from bank borrowings, net of debt issuance costs
14,302

 
66,560

Payments on bank borrowings and capital lease obligations
(29,358
)
 
(34,650
)
Net cash (used in) provided by financing activities
(21,675
)
 
27,428

Effect of exchange rate changes on cash and cash equivalents
(837
)
 
(2,455
)
Net (decrease) increase in cash and cash equivalents
(36,343
)
 
22,274

Cash and cash equivalents at beginning of period
59,124

 
55,325

Cash and cash equivalents at end of period
$
22,781

 
$
77,599

 
 
 
 
Non-cash investing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
65,629

 
$
66,699





EZCORP, Inc.
SELECTED OPERATING SEGMENT RESULTS (UNAUDITED)
U.S. Pawn
The following table presents selected summary financial data from continuing operations for the U.S. Pawn segment:
 
Three Months Ended December 31,
 
Percentage Change
 
2015
 
2014
 
 
 
 
 
 
 
 
(in thousands)
 
 
Net revenues:
 
 
 
 
 
Pawn service charges
$
58,621

 
$
57,035

 
3
 %
 
 
 
 
 
 
Merchandise sales
91,994

 
89,442

 
3
 %
Merchandise sales gross profit
36,533

 
30,825

 
19
 %
Gross margin on merchandise sales
40
%
 
34
%
 
18
 %
 
 
 
 
 
 
Jewelry scrapping sales
9,600

 
17,007

 
(44
)%
Jewelry scrapping sales gross profit
1,540

 
3,674

 
(58
)%
Gross margin on jewelry scrapping sales
16
%
 
22
%
 
(27
)%
 
 
 
 
 
 
Other revenues
193

 
184

 
5
 %
Net revenues
96,887

 
91,718

 
6
 %
 
 
 
 
 
 
Segment operating expenses:
 
 
 
 

Operations
63,545

 
59,507

 
7
 %
Depreciation and amortization
3,560

 
3,452

 
3
 %
Segment operating contribution
29,782

 
28,759

 
4
 %
 
 
 
 
 
 
Other segment expenses (income)
983

 
(8
)
 
*

Segment contribution
$
28,799

 
$
28,767

 
—
 %
 
 
 
 
 
 
Other data:
 
 
 
 


Net earning assets — continuing operations
$
258,798

 
$
251,317

 
3
 %
Inventory turnover — general merchandise
2.5

 
2.6

 
(4
)%
Inventory turnover — jewelry
1.2

 
1.1

 
9
 %
Average monthly ending pawn loan balance per store (a)
$
276

 
$
274

 
1
 %
Average annual yield on pawn loans outstanding
163
%
 
161
%
 
200bps

Pawn loan redemption rate
83
%
 
83
%
 
0bps

*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.




Mexico Pawn
The following table presents selected summary financial data from continuing operations for the Mexico Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currency of the Mexican peso. See “Non-GAAP Financial Information” below.
 
Three Months Ended December 31,
 
Percentage Change GAAP
 
Percentage Change Constant Currency
 
2015
 
2015 Constant Currency (a)
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
(in USD thousands)
 
 
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Pawn service charges
$
7,973

 
$
9,636

 
$
7,892

 
1
 %
 
22
 %
 
 
 
 
 
 
 
 
 
 
Merchandise sales
16,586

 
20,046

 
19,580

 
(15
)%
 
2
 %
Merchandise sales gross profit
5,788

 
6,996

 
6,096

 
(5
)%
 
15
 %
Gross margin on merchandise sales
35
%
 
35
%
 
31
%
 
13
 %
 
13
 %
 
 
 
 
 
 
 
 
 
 
Jewelry scrapping sales
—

 
—

 
1,407

 
(100
)%
 
(100
)%
Jewelry scrapping sales gross profit
—

 
—

 
146

 
(100
)%
 
(100
)%
Gross margin on jewelry scrapping sales
*

 
*

 
10
%
 
*

 
*

 
 
 
 
 
 
 
 
 
 
Other revenues
191

 
231

 
240

 
(20
)%
 
(4
)%
Net revenues
13,952

 
16,863

 
14,374

 
(3
)%
 
17
 %
 
 
 
 
 
 
 
 
 
 
Segment operating expenses:
 
 
 
 
 
 
 
 
 
Operations
11,193

 
13,528

 
10,520

 
6
 %
 
29
 %
Depreciation and amortization
801

 
968

 
1,244

 
(36
)%
 
(22
)%
Segment operating contribution
1,958

 
2,367

 
2,610

 
(25
)%
 
(9
)%
 
 
 
 
 
 
 
 
 
 
Other segment expenses (b)
522

 
475

 
695

 
(25
)%
 
(32
)%
Segment contribution
$
1,436

 
$
1,892

 
$
1,915

 
(25
)%
 
(1
)%
 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Net earning assets — continuing operations
$
32,074

 
$
37,747

 
$
31,764

 
1
 %
 
19
 %
Inventory turnover
2.4

 
2.4

 
2.7

 
(11
)%
 
(11
)%
Average monthly ending pawn loan balance per store (c)
$
69

 
$
81

 
$
63

 
10
 %
 
29
 %
Average annual yield on pawn loans outstanding
195
%
 
194
%
 
199
%
 
-400bps

 
-500bps

Pawn loan redemption rate
78
%
 
78
%
 
77
%
 
100bps

 
100bps

*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
For income statement items, the average closing daily exchange rate for the applicable period was used. For balance sheet items, the end of the period rate for the applicable period end was used.
(b)
The three-month period ended December 31, 2015 constant currency balance excludes $0.1 million of net foreign currency transaction losses resulting from movement in exchange rates. The net foreign currency transaction losses for the three-month period ended December 31, 2014 were $0.4 million and are not excluded from the above results.
(c)
Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.




Grupo Finmart
The table below presents selected summary financial data from continuing operations for the Grupo Finmart segment, including constant currency results, after translation to U.S. dollars from its functional currency of the Mexican peso. See “Non-GAAP Financial Information” below.
 
Three Months Ended December 31,
 
Percentage Change GAAP
 
Percentage Change Constant Currency
 
2015
 
2015 Constant Currency (a)
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
Consumer loan fees and interest
$
10,814

 
$
13,070

 
$
16,315

 
(34
)%
 
(20
)%
Other revenues
83

 
100

 
56

 
48
 %
 
79
 %
Total revenues
10,897

 
13,170

 
16,371

 
(33
)%
 
(20
)%
Consumer loan bad debt
11,991

 
14,493

 
7,740

 
55
 %
 
87
 %
Net revenues
(1,094
)
 
(1,323
)
 
8,631

 
*

 
*

 
 
 
 
 
 
 
 
 
 
Segment expenses (income):
 
 
 
 
 
 
 
 
 
Operations
9,588

 
11,588

 
8,288

 
16
 %
 
40
 %
Depreciation and amortization
517

 
625

 
566

 
(9
)%
 
10
 %
Interest expense
5,065

 
6,122

 
8,281

 
(39
)%
 
(26
)%
Interest income
(131
)
 
(158
)
 
(481
)
 
(73
)%
 
(67
)%
Other expense (b)
768

 
—

 
174

 
*

 
(100
)%
Segment loss
$
(16,901
)
 
$
(19,500
)
 
$
(8,197
)
 
*

 
*

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Net earning assets — continuing operations
$
101,519

 
$
119,475

 
$
115,186

 
(12
)%
 
4
 %
Consumer loan originations (c)
$
15,970

 
$
19,302

 
$
21,897

 
(27
)%
 
(12
)%
Consumer loan bad debt as a percentage of gross average consumer loan balance (d)
12
%
 
12
%
 
6
%
 
100
 %
 
100
 %
*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
For income statement items, the average closing daily exchange rate for the applicable period was used. For balance sheet items, the end of the period rate for the applicable period end was used.
(b)
The three-month period ended December 31, 2015 constant currency balance excludes a $0.8 million of net foreign currency transaction losses resulting from movement in exchange rates. The net foreign currency transaction losses for the three-month period ended December 31, 2014 were $0.2 million and are not excluded from the above results.
(c)
Constant currency result is calculated as the average monthly consumer loan origination balance translated at the average closing daily exchange rate for the applicable period.
(d)
Represents consumer loan bad debt expense during the applicable period as a percentage of the average monthly consumer loan balance during the applicable period. Constant currency consumer loan balance is calculated using the end of period rate for each month.




EZCORP, Inc.
STORE COUNT ACTIVITY
 
Three Months Ended December 31, 2015
 
Company-owned Stores
 
 
 
U.S. Pawn
 
Mexico Pawn
 
Grupo Finmart
 
Other International
 
Consolidated
 
Franchises
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2015
522

 
237

*
53

 
27

 
839

 
1

New locations opened
—

 
1

 
—

 
—

 
1

 
—

Locations sold, combined or closed
(6
)
 
(1
)
 
(7
)
 
—

 
(14
)
 
—

As of December 31, 2015
516

 
237

 
46

 
27

 
826

 
1

*
Includes five buy/sell stores.
 
Three Months Ended December 31, 2014
 
Company-owned Stores
 
 
 
U.S. Pawn
 
Mexico Pawn
 
Grupo Finmart
 
Other International
 
Consolidated
 
Franchises
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2014
504

 
261

 
53

 
39

 
857

 
5

New locations opened
5

 
1

 
—

 
—

 
6

 
—

Locations sold, combined or closed
—

 
—

 
—

 
—

 
—

 
(1
)
As of December 31, 2014
509

 
262

 
53

 
39

 
863

 
4

 NON-GAAP FINANCIAL INFORMATION
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"). We use constant currency results to evaluate results of the Mexico Pawn and Grupo Finmart segment operations, which are denominated in Mexican pesos and believe that presentation of constant currency results is meaningful and useful in understanding the activities and business metrics of our Mexico Pawn and Grupo Finmart operations and reflect an additional way of viewing aspects of our business that, when viewed with its 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. 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 to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations. For condensed consolidated balance sheet items, the average Mexican peso to U.S. dollar exchange rate as of December 31, 2015 of 17.3 to 1 was used, compared to the end of period rate as of December 31, 2014 of 14.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average Mexican peso to U.S. dollar exchange rate for the current three-month period ended December 31, 2015 was 16.8 to 1 as compared to the prior year three-month period ended December 31, 2014 rate of 13.9 to 1. Constant currency results, where presented, also exclude foreign currency gain or loss and the related foreign currency derivative gain or loss impact.




The following information provides reconciliations of certain non-GAAP financial measures presented in this press release to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Miscellaneous Non-GAAP Financial Measures
 
Dollar Amount
 
Percentage Change YOY
 
 
 
 
 
(in thousands)
Consolidated pawn loans outstanding
$
157,905

 
5
 %
Currency exchange rate fluctuations
2,561

 
 
Constant currency consolidated pawn loans outstanding
$
160,466

 
6
 %
 
 
 
 
Same store consolidated pawn loans outstanding
$
151,393

 
2
 %
Currency exchange rate fluctuations
2,532

 
 
Constant currency same store consolidated pawn loans outstanding
$
153,925

 
3
 %
 
 
 
 
Consolidated revenue
$
198,454

 
(7
)%
Currency exchange rate fluctuations
7,436

 
 
Constant currency consolidated revenue
$
205,890

 
(3
)%
 
 
 
 
Consolidated net revenue
$
111,516

 
(5
)%
Currency exchange rate fluctuations
2,682

 
 
Constant currency consolidated net revenue
$
114,198

 
(2
)%
 
 
 
 
Consolidated operating expenses
$
115,373

 
14
 %
Currency exchange rate fluctuations
4,825

 
 
Constant currency consolidated operating expenses
$
120,198

 
19
 %
 
 
 
 
Mexico Pawn core pawn revenue
$
24,559

 
(11
)%
Currency exchange rate fluctuations
5,123

 
 
Constant currency Mexico Pawn core pawn revenue
$
29,682

 
8
 %
 
 
 
 
Mexico Pawn service charge revenue
$
7,973

 
1
 %
Currency exchange rate fluctuations
1,663

 
 
Constant currency Mexico Pawn core pawn revenue
$
9,636

 
22
 %
 
 
 
 
Same store Mexico Pawn loans outstanding
$
14,324

 
14
 %
Currency exchange rate fluctuations
2,532

 
 
Constant currency same store Mexico Pawn loans outstanding
$
16,856

 
34
 %
 
 
 
 
Grupo Finmart segment loss
$
(16,901
)
 
(106
)%
Currency exchange rate fluctuations
(2,599
)
 
 
Constant currency Grupo Finmart segment loss
$
(19,500
)
 
(138
)%
 
 
 
 
Grupo Finmart operations expenses
$
9,588

 
16
 %
Currency exchange rate fluctuations
2,000

 
 
Constant currency Grupo Finmart operations expenses
$
11,588

 
40
 %