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): November 15, 2017 (November 15, 2017)
_______________________________________________
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 November 15, 2017, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended November 15, 2017. 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, including adjusted EBITDA and “constant currency” results solely for our Mexico Pawn operations. We use adjusted EBITDA to evaluate the operating and financial performance of the company and period-over-period growth. We derive the financial calculations of adjusted EBITDA, primarily by excluding from a comparable GAAP measure certain items we do not consider to be representative of our actual operating performance. We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn 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. 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, 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 fourth quarter 2017 earnings conference call (to be held on November 16, 2017) 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: | November 15, 2017 | By: | /s/ David McGuire | ||||
David McGuire | |||||||
Deputy Chief Financial Officer and Chief Accounting Officer | |||||||
EZCORP Announces Strong Fourth Quarter and Full Fiscal 2017 Earnings
EPS from continuing operations of $0.21 for the fourth quarter and $0.62 for the full fiscal year
Austin, Texas (November 15, 2017) — EZCORP, Inc. (NASDAQ: EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2017.
All amounts in this release are from EZCORP continuing operations and conform with U.S. generally accepted accounting principles (GAAP) unless otherwise noted. Comparisons are made to the same period in the prior year unless otherwise noted.
FOURTH QUARTER HIGHLIGHTS
• | Seventh consecutive quarter of year-over-year (YOY) earnings and profit growth. Earnings per share improved $0.52 to $0.21 in the fourth quarter and grew $0.77 to $0.62 in the full fiscal year. |
• | Net income from continuing operations improved $27.6 million to $10.1 million in the fourth quarter, and grew $41.0 million to $32.0 million in the full fiscal year. Adjusted EBITDA1 improved $19.1 million to $22.1 million in the fourth quarter, and grew 39%, or $24.6 million, to $88.5 million in the full fiscal year. |
• | Continue to lead the U.S. market in same store pawn loans outstanding (PLO) YOY growth. PLO increased 19% in Mexico (11% on a constant currency basis2). |
• | Operating contribution from the Mexico Pawn segment improved significantly — up 153% to $5.8 million. Highest growth segment now 20% of company’s total pawn profit contribution. |
• | Cash balance at September 30 up 150% to $164.4 million. |
• | Successfully completed $143.8 million offering of convertible notes, improving liquidity with an attractive coupon rate of 2.875% and seven-year term. |
• | Favorable restructuring of the notes receivable repayment arrangement with AlphaCredit improved the return and risk profile and increases future cash flow and profit. |
In October 2017, the company significantly expanded its footprint in the emerging Latin American pawn market by acquiring 112 pawn stores in Guatemala, El Salvador, Honduras and Peru for $60 million cash, with an additional $2.25 million earn-out possible based on post-acquisition performance. This acquisition will be accretive to earnings starting the first quarter of fiscal 2018 and provides a platform for further growth and expansion in the high growth rate region.
CEO COMMENTARY AND OUTLOOK
Chief Executive Officer Stuart Grimshaw said, “Even though our results were somewhat impacted by the hurricane activity in Texas and Florida, we are proud of our operating performance during the fourth quarter, which capped off a fiscal year that showed a dramatic turnaround on the bottom line. We delivered significant earnings growth in both the U.S and Mexico pawn segments during the quarter and the year, driven by continued execution on our strategic initiatives to create long-term profitable growth.
“First, we continue the diversification of our revenue base and operations, increasing our mix of business from Latin America. Our Mexico Pawn segment is our fastest growing business and is now providing 20% of our total pawn operating contribution. We added 10 new stores in Mexico during the year and see plenty of opportunity to open and acquire more. And we are increasing our presence in Latin America beyond Mexico. The recent acquisition of 112 pawn stores in four new countries expands our Latin American store base, which now comprises 41% of our total pawn stores. It provides compelling
1EBITDA is earnings before interest, taxes, depreciation and amortization. “Adjusted EBITDA” includes EBITDA attributable to continuing operations, further adjusted to exclude the estimated impact of the hurricanes that affected the Texas Gulf Coast and Florida in the fourth quarter, as well as certain other discrete items. See "Non-GAAP Financial Information" at the end of this release.
2In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (GAAP), we provide financial information on a “constant currency” and "adjusted EBITDA" basis, which excludes the impact of foreign currency exchange rate fluctuations, and provides a different way to view the operational results of our business, respectively. For additional information about the constant currency calculations, as well as a reconciliation of the constant currency financial measures to the comparable GAAP financial measures and calculation of our adjusted EBITDA, see “Non-GAAP Financial Information” at the end of this release.
opportunities for further growth through the expansion of general merchandise pawn loan and retail activities, the opening of new stores in attractive and under-penetrated markets, and the pursuit of complementary acquisitions in the region.
“Second, we are improving the experience customers have in our stores,” Grimshaw continued. “Our customers represent a large, underserved market. We are updating our technology, better training our field staff and refreshing our stores to meet their needs and exceed their expectations.
“Third, we’re strengthening our balance sheet and liquidity, reducing our corporate expenses, better analyzing and acting on customer data and process improvements, and optimizing loan values and merchandise pricing. These actions are expected to further increase our market share and profitability and provide us with the ability to continue to capitalize on attractive growth opportunities.”
CONSOLIDATED RESULTS
Temporary Impact of U.S. Hurricanes
During the fourth quarter, the U.S. Pawn segment was affected by Hurricanes Harvey and Irma resulting in the temporary closure of stores in the affected areas, all of which have since reopened. In addition to the loss of inventory and loan collateral and the damage to physical facilities, all totaling $1.0 million, the company estimates that the effects of the hurricanes include a reduction in U.S. pawn loan balances of $5.0 million as of September 30, 2017, with a resulting reduction in pawn service charge (PSC) revenues and merchandise sales gross profit. The company expects pawn loan demand to return to normal levels after the annual tax refund season in the U.S.
Three Months Ended September 30, 2017 Results
• | Despite the impacts of the hurricanes, net revenue improved 1% to $108.1 million (flat at $107.4 million on a constant currency basis), due largely to a 4% increase in PSC revenue (up 3% on a constant currency basis). Same store PLO was down 1% in the U.S. (up 3% in stores unaffected by the hurricanes). Same store PLO rose 19% in Mexico (up 11% in Mexico on a constant currency basis). Merchandise sales gross margins held at 35%, within the 35-38% target range. |
• | Continued discipline in cost control reduced operations expenses 2% to $78.3 million (down 3% to $77.8 million on a constant currency basis) and reduced corporate expenses 34% to $11.9 million. |
• | The company restructured the repayment of the remaining $60.9 million of principal from AlphaCredit, improving its risk and return profile, as well as significantly increasing future cash flow and profit. Under the restructured arrangement, the company expects to collect $32.6 million of principal in fiscal 2018 and $28.3 million in fiscal 2019. The restructured arrangement includes a higher interest rate and an incremental deferred compensation fee of up to $14.0 million to be received in 2019 and 2020. |
• | Interest expense includes a $5.3 million debt extinguishment charge offset by a $3.0 million pre-tax benefit from the restructuring of the AlphaCredit notes. The AlphaCredit note restructuring drove an additional one-time income tax benefit of $3.0 million in the quarter. |
• | Improvements in net revenues and cost discipline have increased operating leverage and the resulting bottom line. Earnings per share increased YOY for the seventh-consecutive quarter. EPS from continuing operations is $0.21, up from a loss of $0.31 a year ago. |
Fiscal Year Ended September 30, 2017
• | The continued focus on investment in customer experience increased net revenue 2% to $435.5 million (up 3% to $439.3 million on a constant currency basis), driven primarily by a 4% rise in PSC revenue (up 5% on a constant currency basis). Merchandise sales gross margins were down slightly to 36%, but within the 35-38% target range. |
• | Corporate expenses were down 22% to $53.3 million. The company remains on track to reduce corporate expenses to no more than $50 million in FY18. |
• | During the year and prior to the note restructuring, EZCORP collected a total of $34 million from AlphaCredit ($29.5 million in principal and $4.5 million in interest). |
• | Earnings per share from continuing operations reached $0.62, a significant turnaround from the loss of ($0.15) in the prior year. The strategic transformation initiatives achieved during fiscal 2017 set the stage for further success in fiscal 2018 and beyond. |
PAWN RESULTS
U.S. Pawn Segment
Three Months Ended September 30, 2017
• | PLO was down 1% in total and on a same store basis, to $148.1 million (up 3% in stores unaffected by the hurricanes). Changes in PLO resulted in PSC increasing 1% in total and 2% on a same-store basis to $61.0 million. |
• | The merchandise sales gross margin of 36% was consistent with the prior-year quarter and within the target range of 35-38%. Inventory aged over one year improved to 10% from 11%. |
• | Operations expenses decreased 3% to $65.5 million driven by cost control initiatives and lower variable compensation. |
• | Segment contribution increased 7% to $22.8 million. Initiatives are underway to continue improving long-term net revenue and profitability. These include investing in upgrading the POS system, enhancing product and customer data analytics, and enhancing the customer experience by refreshing stores. |
Fiscal Year Ended September 30, 2017
• | Driven by the impact of PLO outlined above, PSC rose 4% in total and on a same store basis to $238.4 million. |
• | Merchandise sales increased 1% in total and on a same store basis. The merchandise sales gross margin of 36% is within the 35-38% U.S. target. |
• | Operations expenses grew 2% to $260.0 million as a result of investment in customer facing labor and higher benefit claims. |
• | Segment contribution was up 3% to $103.5 million. |
Mexico Pawn Segment
Three Months Ended September 30, 2017
• | The company continues to experience significant growth in the Mexico Pawn segment, taking advantage of market opportunities primarily from its existing store footprint. PLO expanded 20% to $21.1 million (up 13% to $19.8 million on a constant currency basis), which drove a 22% increase in PSC to $10.1 million (up 16% to $9.7 million on a constant currency basis). |
• | Merchandise sales increased 10% in total and 7% on a same store basis (up 4% in total and 1% in same stores on a constant currency basis). The 30% merchandise sales gross margin was slightly above the prior-year quarter, while aged inventory balances decreased to 2% from 6% in the fiscal 2017 third quarter. |
• | Segment contribution increased 153% to $5.8 million (up 140% to $5.5 million on a constant currency basis) driven by an 18% improvement in net revenue, with only a 3% increase in operations expense due to continued discipline in cost control. |
• | The company opened four new stores in the fourth quarter, for a total of 10 in fiscal 2017. There is a significant runway for continued store openings and acquisitions, in addition to the growth potential of the existing store base. |
Fiscal Year Ended September 30, 2017
• | The PLO changes described above drove a 9% increase in PSC to $34.6 million (up 15% to $36.8 million on a constant currency basis). |
• | Merchandise sales grew 4% in total and 3% on a same store basis (up 12% in total and 10% in same stores on a constant currency basis). Merchandise margin was 32%, consistent with the prior year. |
• | Segment contribution yielded a 119% increase to $18.7 million (up 130% to $19.6 million on a constant currency basis) as a result of a 7% net revenue expansion while operations expenses dropped 6%. |
CONFERENCE CALL
EZCORP will host a conference call on Thursday, November 16, 2017, at 7:30 a.m. Central Time to discuss fourth quarter and fiscal year-end results. Analysts and institutional investors may participate by dialing (877) 201-0168, Conference ID: 8074459, international dialing (647) 788-4901. The call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay 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 Latin America. It also sells merchandise, primarily collateral forfeited from pawn lending operations, and used merchandise purchased from customers. EZCORP 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 news release contains forward-looking statements on the company’s strategy, initiatives and expected performance. These statements are based on management’s current expectations on the outcome and timing of future events. All statements other than historical facts-including those on the company's strategy, initiatives and future performance, which 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 here, due to a number of uncertainties and other factors. These include 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 EZCORP’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: jeff_christensen@ezcorp.com
Phone: (512) 437-3545
EZCORP, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
Three Months Ended September 30, | Fiscal Year Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited) | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Revenues: | |||||||||||||||
Merchandise sales | $ | 95,166 | $ | 97,166 | $ | 414,838 | $ | 409,107 | |||||||
Jewelry scrapping sales | 13,531 | 16,482 | 51,189 | 50,113 | |||||||||||
Pawn service charges | 71,097 | 68,603 | 273,080 | 261,800 | |||||||||||
Other revenues | 2,275 | 2,334 | 8,847 | 9,485 | |||||||||||
Total revenues | 182,069 | 184,585 | 747,954 | 730,505 | |||||||||||
Merchandise cost of goods sold | 61,685 | 63,540 | 266,525 | 258,271 | |||||||||||
Jewelry scrapping cost of goods sold | 11,736 | 13,768 | 43,931 | 42,039 | |||||||||||
Other cost of revenues | 555 | 416 | 1,988 | 1,965 | |||||||||||
Net revenues | 108,093 | 106,861 | 435,510 | 428,230 | |||||||||||
Operating expenses: | |||||||||||||||
Operations | 78,284 | 79,941 | 304,636 | 301,387 | |||||||||||
Administrative | 11,949 | 18,016 | 53,254 | 68,101 | |||||||||||
Depreciation and amortization | 5,415 | 6,120 | 23,661 | 26,542 | |||||||||||
Loss on sale or disposal of assets | 348 | 465 | 359 | 1,106 | |||||||||||
Restructuring | — | 11 | — | 1,921 | |||||||||||
Total operating expenses | 95,996 | 104,553 | 381,910 | 399,057 | |||||||||||
Operating income | 12,097 | 2,308 | 53,600 | 29,173 | |||||||||||
Interest expense | 10,956 | 4,463 | 27,803 | 16,477 | |||||||||||
Interest income | (5,194 | ) | (15 | ) | (12,103 | ) | (81 | ) | |||||||
Equity in net (income) loss of unconsolidated affiliate | (1,148 | ) | 5,881 | (4,916 | ) | 255 | |||||||||
Impairment of investments | — | 10,957 | — | 10,957 | |||||||||||
Other (income) expense | (129 | ) | 387 | (423 | ) | 1,202 | |||||||||
Income (loss) from continuing operations before income taxes | 7,612 | (19,365 | ) | 43,239 | 363 | ||||||||||
Income tax (benefit) expense | (2,457 | ) | (1,863 | ) | 11,206 | 9,361 | |||||||||
Income (loss) from continuing operations, net of tax | 10,069 | (17,502 | ) | 32,033 | (8,998 | ) | |||||||||
Income (loss) from discontinued operations, net of tax | 43 | 19,636 | (1,825 | ) | (79,432 | ) | |||||||||
Net income (loss) | 10,112 | 2,134 | 30,208 | (88,430 | ) | ||||||||||
Net loss attributable to noncontrolling interest | (1,298 | ) | (1,097 | ) | (1,650 | ) | (7,686 | ) | |||||||
Net income (loss) attributable to EZCORP, Inc. | $ | 11,410 | $ | 3,231 | $ | 31,858 | $ | (80,744 | ) | ||||||
Basic earnings per share attributable to EZCORP, Inc. — continuing operations | $ | 0.21 | $ | (0.31 | ) | $ | 0.62 | $ | (0.15 | ) | |||||
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations | $ | 0.21 | $ | (0.31 | ) | $ | 0.62 | $ | (0.15 | ) | |||||
Weighted-average basic shares outstanding | 54,298 | 53,991 | 54,260 | 54,427 | |||||||||||
Weighted-average diluted shares outstanding | 54,428 | 53,991 | 54,368 | 54,427 | |||||||||||
EZCORP, Inc. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Assets: | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 164,393 | $ | 65,737 | |||
Pawn loans | 169,242 | 167,329 | |||||
Pawn service charges receivable, net | 31,548 | 31,062 | |||||
Inventory, net | 154,411 | 140,224 | |||||
Notes receivable, net | 32,598 | 41,946 | |||||
Prepaid expenses and other current assets | 28,765 | 35,845 | |||||
Total current assets | 580,957 | 482,143 | |||||
Investment in unconsolidated affiliate | 43,319 | 37,128 | |||||
Property and equipment, net | 57,959 | 58,455 | |||||
Goodwill | 254,760 | 253,976 | |||||
Intangible assets, net | 32,420 | 30,681 | |||||
Notes receivable, net | 28,377 | 41,119 | |||||
Deferred tax asset, net | 16,856 | 35,303 | |||||
Other assets, net | 9,715 | 44,439 | |||||
Total assets | $ | 1,024,363 | $ | 983,244 | |||
Liabilities and equity: | |||||||
Current liabilities: | |||||||
Accounts payable, accrued expenses and other current liabilities | $ | 61,543 | $ | 84,285 | |||
Customer layaway deposits | 11,032 | 10,693 | |||||
Total current liabilities | 72,575 | 94,978 | |||||
Long-term debt, net | 284,807 | 283,611 | |||||
Other long-term liabilities | 7,055 | 10,450 | |||||
Total liabilities | 364,437 | 389,039 | |||||
Stockholders’ equity: | |||||||
Class A Non-Voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding: 51,427,832 as of September 30, 2017 and 51,129,144 as of September 30, 2016 | 514 | 511 | |||||
Class B Voting Common Stock, convertible, par value $.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171 | 30 | 30 | |||||
Additional paid-in capital | 348,532 | 318,723 | |||||
Retained earnings | 351,666 | 319,808 | |||||
Accumulated other comprehensive loss | (38,367 | ) | (44,089 | ) | |||
EZCORP, Inc. stockholders’ equity | 662,375 | 594,983 | |||||
Noncontrolling interest | (2,449 | ) | (778 | ) | |||
Total equity | 659,926 | 594,205 | |||||
Total liabilities and equity | $ | 1,024,363 | $ | 983,244 | |||
EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Fiscal Year Ended September 30, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Operating activities: | |||||||
Net income (loss) | $ | 30,208 | $ | (88,430 | ) | ||
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | |||||||
Depreciation and amortization | 23,661 | 28,651 | |||||
Amortization of debt discount and deferred financing costs | 12,303 | 12,375 | |||||
Amortization of prepaid commissions | — | 13,083 | |||||
Accretion of notes receivable discount | (3,788 | ) | — | ||||
Consumer loan loss provision | 1,988 | 27,917 | |||||
Deferred income taxes | 6,046 | 2,674 | |||||
Impairment of goodwill | — | 73,244 | |||||
Other adjustments | 17 | 7,289 | |||||
Gain on restructured notes receivable | (3,048 | ) | — | ||||
Gain on disposition of Grupo Finmart, net of loss on extinguishment | — | (32,172 | ) | ||||
Loss on extinguishment of debt and other | 5,250 | — | |||||
Loss on sale or disposal of assets | 359 | 1,106 | |||||
Stock compensation expense | 5,866 | 5,346 | |||||
Income from investment in unconsolidated affiliate | (4,916 | ) | 255 | ||||
Impairment of investments in unconsolidated affiliate | — | 10,957 | |||||
Changes in operating assets and liabilities: | |||||||
Service charges and fees receivable | (224 | ) | 7,677 | ||||
Inventory | 721 | (3,735 | ) | ||||
Prepaid expenses, other current assets and other assets | 5,166 | (15,397 | ) | ||||
Accounts payable, accrued expenses and other liabilities | (31,041 | ) | (26,297 | ) | |||
Customer layaway deposits | 241 | 329 | |||||
Income taxes, net of excess tax benefit from stock compensation | 3,027 | 37,334 | |||||
Dividends from unconsolidated affiliate | — | 2,197 | |||||
Net cash provided by operating activities | 51,836 | 64,403 | |||||
Investing activities: | |||||||
Loans made | (646,625 | ) | (676,375 | ) | |||
Loans repaid | 386,383 | 428,196 | |||||
Recovery of pawn loan principal through sale of forfeited collateral | 244,632 | 235,168 | |||||
Additions to property and equipment | (18,853 | ) | (9,550 | ) | |||
Acquisitions, net of cash acquired | (2,250 | ) | (6,000 | ) | |||
Proceeds from disposition of Grupo Finmart, net of cash disposed | — | 35,277 | |||||
Principal collections on notes receivable | 29,458 | — | |||||
Net cash (used in) provided by investing activities | (7,255 | ) | 6,716 | ||||
Financing activities: | |||||||
Taxes paid related to net share settlement of equity awards | (767 | ) | (172 | ) | |||
Payout of deferred consideration | — | (15,000 | ) | ||||
Proceeds from settlement of forward currency contracts | — | 3,557 | |||||
Change in restricted cash | — | 8,199 | |||||
Proceeds from borrowings, net of issuance costs | 139,506 | 64,133 | |||||
Payments on borrowings | (85,388 | ) | (112,123 | ) | |||
Repurchase of common stock | — | (11,750 | ) | ||||
Net cash provided by (used in) financing activities | 53,351 | (63,156 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 724 | (1,350 | ) | ||||
Net increase in cash and cash equivalents | 98,656 | 6,613 | |||||
Cash and cash equivalents at beginning of period | 65,737 | 59,124 | |||||
Cash and cash equivalents at end of period | $ | 164,393 | $ | 65,737 | |||
Non-cash investing and financing activities: | |||||||
Pawn loans forfeited and transferred to inventory | $ | 257,388 | $ | 249,316 | |||
Dividend reinvestment acquisition of additional ownership in unconsolidated affiliate | 1,153 | — | |||||
EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
Three Months Ended September 30, 2017 | |||||||||||||||||||||||
U.S. Pawn | Mexico Pawn | Other International | Total Segments | Corporate Items | Consolidated | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Merchandise sales | $ | 78,753 | $ | 16,410 | $ | 3 | $ | 95,166 | $ | — | $ | 95,166 | |||||||||||
Jewelry scrapping sales | 13,045 | 486 | — | 13,531 | — | 13,531 | |||||||||||||||||
Pawn service charges | 60,957 | 10,140 | — | 71,097 | — | 71,097 | |||||||||||||||||
Other revenues | 62 | 188 | 2,025 | 2,275 | — | 2,275 | |||||||||||||||||
Total revenues | 152,817 | 27,224 | 2,028 | 182,069 | — | 182,069 | |||||||||||||||||
Merchandise cost of goods sold | 50,240 | 11,445 | — | 61,685 | — | 61,685 | |||||||||||||||||
Jewelry scrapping cost of goods sold | 11,320 | 416 | — | 11,736 | — | 11,736 | |||||||||||||||||
Other cost of revenues | — | — | 555 | 555 | — | 555 | |||||||||||||||||
Net revenues | 91,257 | 15,363 | 1,473 | 108,093 | — | 108,093 | |||||||||||||||||
Segment and corporate expenses (income): | |||||||||||||||||||||||
Operations | 65,478 | 9,772 | 3,034 | 78,284 | — | 78,284 | |||||||||||||||||
Administrative | — | — | — | — | 11,949 | 11,949 | |||||||||||||||||
Depreciation and amortization | 2,684 | 765 | 47 | 3,496 | 1,919 | 5,415 | |||||||||||||||||
Loss on sale or disposal of assets | 252 | 69 | — | 321 | 27 | 348 | |||||||||||||||||
Interest expense | — | 2 | — | 2 | 10,954 | 10,956 | |||||||||||||||||
Interest income | — | (1,041 | ) | — | (1,041 | ) | (4,153 | ) | (5,194 | ) | |||||||||||||
Equity in net income of unconsolidated affiliate | — | — | (1,148 | ) | (1,148 | ) | — | (1,148 | ) | ||||||||||||||
Other income | (5 | ) | (8 | ) | (68 | ) | (81 | ) | (48 | ) | (129 | ) | |||||||||||
Segment contribution (loss) | $ | 22,848 | $ | 5,804 | $ | (392 | ) | $ | 28,260 | ||||||||||||||
Income from continuing operations before income taxes | $ | 28,260 | $ | (20,648 | ) | $ | 7,612 | ||||||||||||||||
EZCORP, Inc.
OPERATING SEGMENT RESULTS
Twelve Months Ended September 30, 2017 | |||||||||||||||||||||||
U.S. Pawn | Mexico Pawn | Other International | Total Segments | Corporate Items | Consolidated | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Merchandise sales | $ | 351,878 | $ | 62,957 | $ | 3 | $ | 414,838 | $ | — | $ | 414,838 | |||||||||||
Jewelry scrapping sales | 48,203 | 2,986 | — | 51,189 | — | 51,189 | |||||||||||||||||
Pawn service charges | 238,437 | 34,643 | — | 273,080 | — | 273,080 | |||||||||||||||||
Other revenues | 219 | 645 | 7,983 | 8,847 | — | 8,847 | |||||||||||||||||
Total revenues | 638,737 | 101,231 | 7,986 | 747,954 | — | 747,954 | |||||||||||||||||
Merchandise cost of goods sold | 223,475 | 43,050 | — | 266,525 | — | 266,525 | |||||||||||||||||
Jewelry scrapping cost of goods sold | 41,434 | 2,497 | — | 43,931 | — | 43,931 | |||||||||||||||||
Other cost of revenues | — | — | 1,988 | 1,988 | — | 1,988 | |||||||||||||||||
Net revenues | 373,828 | 55,684 | 5,998 | 435,510 | — | 435,510 | |||||||||||||||||
Segment and corporate expenses (income): | |||||||||||||||||||||||
Operations | 259,977 | 36,211 | 8,448 | 304,636 | — | 304,636 | |||||||||||||||||
Administrative | — | — | — | — | 53,254 | 53,254 | |||||||||||||||||
Depreciation and amortization | 10,171 | 2,675 | 191 | 13,037 | 10,624 | 23,661 | |||||||||||||||||
Loss on sale or disposal of assets | 198 | 134 | — | 332 | 27 | 359 | |||||||||||||||||
Interest expense | — | 9 | — | 9 | 27,794 | 27,803 | |||||||||||||||||
Interest income | — | (1,930 | ) | — | (1,930 | ) | (10,173 | ) | (12,103 | ) | |||||||||||||
Equity in net income of unconsolidated affiliate | — | — | (4,916 | ) | (4,916 | ) | — | (4,916 | ) | ||||||||||||||
Other income | (19 | ) | (69 | ) | (96 | ) | (184 | ) | (239 | ) | (423 | ) | |||||||||||
Segment contribution | $ | 103,501 | $ | 18,654 | $ | 2,371 | $ | 124,526 | |||||||||||||||
Income from continuing operations before income taxes | $ | 124,526 | $ | (81,287 | ) | $ | 43,239 | ||||||||||||||||
EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
Three Months Ended September 30, 2016 | |||||||||||||||||||||||
U.S. Pawn | Mexico Pawn | Other International | Total Segments | Corporate Items | Consolidated | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Merchandise sales | $ | 82,211 | $ | 14,955 | $ | — | $ | 97,166 | $ | — | $ | 97,166 | |||||||||||
Jewelry scrapping sales | 15,693 | 789 | — | 16,482 | — | 16,482 | |||||||||||||||||
Pawn service charges | 60,263 | 8,340 | — | 68,603 | — | 68,603 | |||||||||||||||||
Other revenues | 50 | 154 | 2,130 | 2,334 | — | 2,334 | |||||||||||||||||
Total revenues | 158,217 | 24,238 | 2,130 | 184,585 | — | 184,585 | |||||||||||||||||
Merchandise cost of goods sold | 52,980 | 10,560 | — | 63,540 | — | 63,540 | |||||||||||||||||
Jewelry scrapping cost of goods sold | 13,105 | 663 | — | 13,768 | — | 13,768 | |||||||||||||||||
Other cost of revenues | — | — | 416 | 416 | — | 416 | |||||||||||||||||
Net revenues | 92,132 | 13,015 | 1,714 | 106,861 | — | 106,861 | |||||||||||||||||
Segment and corporate expenses (income): | |||||||||||||||||||||||
Operations | 67,803 | 9,520 | 2,618 | 79,941 | — | 79,941 | |||||||||||||||||
Administrative | — | — | — | — | 18,016 | 18,016 | |||||||||||||||||
Depreciation and amortization | 2,753 | 680 | 55 | 3,488 | 2,632 | 6,120 | |||||||||||||||||
Loss on sale or disposal of assets | 162 | 53 | 4 | 219 | 246 | 465 | |||||||||||||||||
Restructuring | 11 | — | — | 11 | — | 11 | |||||||||||||||||
Interest expense | — | 6 | — | 6 | 4,457 | 4,463 | |||||||||||||||||
Interest income | — | (7 | ) | — | (7 | ) | (8 | ) | (15 | ) | |||||||||||||
Equity in net loss of unconsolidated affiliate | — | — | 5,881 | 5,881 | — | 5,881 | |||||||||||||||||
Impairment of investments | — | — | 10,957 | 10,957 | — | 10,957 | |||||||||||||||||
Other expense (income) | — | 465 | (1 | ) | 464 | (77 | ) | 387 | |||||||||||||||
Segment contribution (loss) | $ | 21,403 | $ | 2,298 | $ | (17,800 | ) | $ | 5,901 | ||||||||||||||
Loss from continuing operations before income taxes | $ | 5,901 | $ | (25,266 | ) | $ | (19,365 | ) | |||||||||||||||
EZCORP, Inc.
OPERATING SEGMENT RESULTS
Twelve Months Ended September 30, 2016 | |||||||||||||||||||||||
U.S. Pawn | Mexico Pawn | Other International | Total Segments | Corporate Items | Consolidated | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Merchandise sales | $ | 348,771 | $ | 60,331 | $ | 5 | $ | 409,107 | $ | — | $ | 409,107 | |||||||||||
Jewelry scrapping sales | 47,810 | 2,282 | 21 | 50,113 | — | 50,113 | |||||||||||||||||
Pawn service charges | 229,893 | 31,907 | — | 261,800 | — | 261,800 | |||||||||||||||||
Other revenues | 331 | 385 | 8,769 | 9,485 | — | 9,485 | |||||||||||||||||
Total revenues | 626,805 | 94,905 | 8,795 | 730,505 | — | 730,505 | |||||||||||||||||
Merchandise cost of goods sold | 217,268 | 41,002 | 1 | 258,271 | — | 258,271 | |||||||||||||||||
Jewelry scrapping cost of goods sold | 40,138 | 1,885 | 16 | 42,039 | — | 42,039 | |||||||||||||||||
Other cost of revenues | — | — | 1,965 | 1,965 | — | 1,965 | |||||||||||||||||
Net revenues | 369,399 | 52,018 | 6,813 | 428,230 | — | 428,230 | |||||||||||||||||
Segment and corporate expenses (income): | |||||||||||||||||||||||
Operations | 255,321 | 38,481 | 7,585 | 301,387 | — | 301,387 | |||||||||||||||||
Administrative | — | — | — | — | 68,101 | 68,101 | |||||||||||||||||
Depreciation and amortization | 12,242 | 2,965 | 218 | 15,425 | 11,117 | 26,542 | |||||||||||||||||
Loss on sale or disposal of assets | 664 | 169 | 4 | 837 | 269 | 1,106 | |||||||||||||||||
Restructuring | 993 | 543 | 202 | 1,738 | 183 | 1,921 | |||||||||||||||||
Interest expense | 125 | 109 | — | 234 | 16,243 | 16,477 | |||||||||||||||||
Interest income | (2 | ) | (30 | ) | — | (32 | ) | (49 | ) | (81 | ) | ||||||||||||
Equity in net income of unconsolidated affiliate | — | — | 255 | 255 | — | 255 | |||||||||||||||||
Impairment of investments | — | — | 10,957 | 10,957 | — | 10,957 | |||||||||||||||||
Other expense (income) | — | 1,273 | 2 | 1,275 | (73 | ) | 1,202 | ||||||||||||||||
Segment contribution (loss) | $ | 100,056 | $ | 8,508 | $ | (12,410 | ) | $ | 96,154 | ||||||||||||||
Income from continuing operations before income taxes | $ | 96,154 | $ | (95,791 | ) | $ | 363 | ||||||||||||||||
EZCORP, Inc.
STORE COUNT ACTIVITY (UNAUDITED)
Three Months Ended September 30, 2017 | |||||||||||
U.S. Pawn | Mexico Pawn | Other International | Consolidated | ||||||||
As of June 30, 2017 | 515 | 244 | 27 | 786 | |||||||
New locations opened | — | 4 | — | 4 | |||||||
Locations acquired | 2 | — | — | 2 | |||||||
Locations sold, combined or closed | (4 | ) | (2 | ) | — | (6 | ) | ||||
As of September 30, 2017 | 513 | 246 | 27 | 786 | |||||||
Three Months Ended September 30, 2016 | |||||||||||
U.S. Pawn | Mexico Pawn | Other International | Consolidated | ||||||||
As of June 30, 2016 | 522 | 238 | 27 | 787 | |||||||
New locations opened | — | 2 | — | 2 | |||||||
Locations acquired | — | — | — | — | |||||||
Locations sold, combined or closed | (2 | ) | (1 | ) | — | (3 | ) | ||||
As of September 30, 2016 | 520 | 239 | 27 | 786 | |||||||
Twelve Months Ended September 30, 2017 | |||||||||||
U.S. Pawn | Mexico Pawn | Other International | Consolidated | ||||||||
As of September 30, 2016 | 520 | 239 | 27 | 786 | |||||||
New locations opened | — | 10 | — | 10 | |||||||
Locations acquired | 2 | — | — | 2 | |||||||
Locations sold, combined or closed | (9 | ) | (3 | ) | — | (12 | ) | ||||
As of September 30, 2017 | 513 | 246 | 27 | 786 | |||||||
Twelve Months Ended September 30, 2016 | |||||||||||
U.S. Pawn | Mexico Pawn | Other International | Consolidated | ||||||||
As of September 30, 2015 | 522 | 237 | 27 | 786 | |||||||
New locations opened | — | 3 | — | 3 | |||||||
Locations sold, combined or closed | (8 | ) | (1 | ) | — | (9 | ) | ||||
As of September 30, 2016 | 520 | 239 | 27 | 786 | |||||||
Non-GAAP Financial Information (Unaudited)
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, including adjusted EBITDA and “constant currency” results solely for our Mexico Pawn operations. We use adjusted EBITDA to evaluate the operating and financial performance of the company and period-over-period growth. We derive the financial calculations of adjusted EBITDA, primarily by excluding from a comparable GAAP measure certain items we do not consider to be representative of our actual operating performance. We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos. We believe presenting constant currency results is meaningful and useful in understanding our Mexico Pawn operations, activities and business metrics. We provide non-GAAP financial data for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use non-GAAP information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to-not instead of or superior to-our GAAP financial statements. 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 here are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in Mexican pesos to U.S. dollars. We use the exchange rate from the prior-year comparable period, as opposed to the current period, to exclude the effects of foreign currency rate fluctuations. We use 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 exchange rate for September 30, 2017 and 2016 was 18.2 to 1 and 19.4 to 1, respectively. The approximate average exchange rate for the years ended September 30, 2017, 2016 and 2015 was 19.1 to 1, 17.9 to 1, and 15.1, respectively. However, our statement of operations constant currency results reflect the impact of monthly effects of exchange rates, so can’t be directly calculated from the above rates. Constant currency results also exclude the foreign currency gain or loss, and the related foreign currency derivative gain or loss impact. There has been a prolonged weakening of the Mexican peso to the U.S. dollar. We may continue to experience further weakening in future reporting periods, which may adversely affect our operating results when stated on a GAAP basis.
The following information reconciles certain non-GAAP financial measures presented in this news release to the most directly comparable financial measures calculated and presented in accordance with GAAP, for the three and 12 months ended September 30, 2017.
Adjusted EBITDA (Unaudited)
Three Months Ended September 30, | Fiscal Year Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Income (loss) from continuing operations, net of tax | $ | 10.1 | $ | (17.5 | ) | $ | 32.0 | $ | (9.0 | ) | |||||
Interest expense | 11.0 | 4.5 | 27.8 | 16.5 | |||||||||||
Interest income | (5.2 | ) | — | (12.1 | ) | (0.1 | ) | ||||||||
Income taxes | (2.5 | ) | (1.9 | ) | 11.2 | 9.4 | |||||||||
Depreciation and amortization | 5.4 | 6.1 | 23.7 | 26.5 | |||||||||||
Estimated impact of natural disasters | 2.9 | — | 2.9 | — | |||||||||||
Acquisition costs | 0.8 | — | 1.2 | — | |||||||||||
Impairment of investments | — | 11.0 | — | 11.0 | |||||||||||
Restatement related costs | — | — | — | 6.2 | |||||||||||
Mexico buy/sell stores | — | 0.9 | — | 4.2 | |||||||||||
Other* | (0.4 | ) | (0.1 | ) | 1.8 | (0.8 | ) | ||||||||
Adjusted EBITDA | $ | 22.1 | $ | 3.0 | $ | 88.5 | $ | 63.9 | |||||||
* Other items include foreign currency impacts and strategic plan costs as well as a one-time legal credit in fiscal 2016.
Other Miscellaneous Non-GAAP Financial Measures (Unaudited)
U.S. Dollar Amount | Percentage Change YOY | |||||
(in millions) | ||||||
Mexico Pawn same store PLO | $ | 20.7 | 19 | % | ||
Currency exchange rate fluctuations | (1.3 | ) | ||||
Constant currency Mexico Pawn same store PLO | $ | 19.4 | 11 | % | ||
Mexico Pawn segment profit before tax (three months ended September 30, 2017) | $ | 5.8 | 153 | % | ||
Currency exchange rate fluctuations (three months ended September 30, 2017) | (0.3 | ) | ||||
Constant currency Mexico Pawn segment profit before tax (three months ended September 30, 2017) | $ | 5.5 | 140 | % | ||
Consolidated net revenue (three months ended September 30, 2017) | $ | 108.1 | 1 | % | ||
Currency exchange rate fluctuations | (0.7 | ) | ||||
Constant currency consolidated net revenue (three months ended September 30, 2017) | $ | 107.4 | — | % | ||
Consolidated PSC revenue (three months ended September 30, 2017) | $ | 71.1 | 4 | % | ||
Currency exchange rate fluctuations | (0.5 | ) | ||||
Constant currency consolidated PSC revenue (three months ended September 30, 2017) | $ | 70.6 | 3 | % | ||
Consolidated operations expenses (three months ended September 30, 2017) | $ | 78.3 | (2 | )% | ||
Currency exchange rate fluctuations (three months ended September 30, 2017) | (0.5 | ) | ||||
Constant currency consolidated operations expenses (three months ended September 30, 2017) | $ | 77.8 | 3 | % | ||
Consolidated net revenue (twelve months ended September 30, 2017) | $ | 435.5 | 2 | % | ||
Currency exchange rate fluctuations | 3.8 | |||||
Constant currency consolidated net revenue (twelve months ended September 30, 2017) | $ | 439.3 | 3 | % | ||
Consolidated PSC revenue (twelve months ended September 30, 2017) | $ | 273.1 | 4 | % | ||
Currency exchange rate fluctuations | 2.2 | |||||
Constant currency consolidated PSC revenue (twelve months ended September 30, 2017) | $ | 275.3 | 5 | % | ||
Mexico Pawn PLO | $ | 21.1 | 20 | % | ||
Currency exchange rate fluctuations | (1.3 | ) | ||||
Constant currency Mexico Pawn PLO | $ | 19.8 | 13 | % | ||
Mexico Pawn PSC revenue (three months ended September 30, 2017) | $ | 10.1 | 22 | % | ||
Currency exchange rate fluctuations (three months ended September 30, 2017) | (0.4 | ) | ||||
Constant currency Mexico Pawn PSC revenue (three months ended September 30, 2017) | $ | 9.7 | 16 | % | ||
Mexico Pawn merchandise sales (three months ended September 30, 2017) | $ | 16.4 | 10 | % | ||
Currency exchange rate fluctuations (three months ended September 30, 2017) | (0.8 | ) | ||||
Constant currency Mexico Pawn merchandise sales (three months ended September 30, 2017) | $ | 15.6 | 4 | % | ||
Mexico Pawn same store merchandise sales (three months ended September 30, 2017) | $ | 15.9 | 7 | % | ||
Currency exchange rate fluctuations (three months ended September 30, 2017) | (0.8 | ) | ||||
Constant currency Mexico Pawn same store merchandise sales (three months ended September 30, 2017) | $ | 15.1 | 1 | % | ||
Mexico Pawn PSC revenue (twelve months ended September 30, 2017) | $ | 34.6 | 9 | % | ||
Currency exchange rate fluctuations (twelve months ended September 30, 2017) | 2.2 | |||||
Constant currency Mexico Pawn PSC revenue (twelve months ended September 30, 2017) | $ | 36.8 | 15 | % | ||
Mexico Pawn merchandise sales (twelve months ended September 30, 2017) | $ | 63.0 | 4 | % | ||
Currency exchange rate fluctuations (twelve months ended September 30, 2017) | 4.6 | |||||
Constant currency Mexico Pawn merchandise sales (twelve months ended September 30, 2017) | $ | 67.6 | 12 | % | ||
Mexico Pawn same store merchandise sales (twelve months ended September 30, 2017) | $ | 61.0 | 3 | % | ||
Currency exchange rate fluctuations (twelve months ended September 30, 2017) | 4.6 | |||||
Constant currency Mexico Pawn same store merchandise sales(twelve months ended September 30, 2017) | $ | 65.6 | 10 | % | ||
Mexico Pawn segment profit before tax (twelve months ended September 30, 2017) | $ | 18.7 | 119 | % | ||
Currency exchange rate fluctuations (twelve months ended September 30, 2017) | 0.9 | |||||
Constant currency Mexico Pawn segment profit before tax (twelve months ended September 30, 2017) | $ | 19.6 | 130 | % | ||