View:
Download DOC
Download PDF
Download XLS
Document


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): January 30, 2019 (January 30, 2019)
 _______________________________________________ 
EZCORP, Inc.
(Exact name of registrant as specified in its charter)
 _______________________________________________________ 

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

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




Item 2.02 — Results of Operations and Financial Condition
On January 30, 2019, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended December 31, 2018. 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 first quarter 2019 earnings conference call (to be held on January 31, 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:
January 30, 2019
 
 
 
By:
 
/s/ David McGuire
 
 
 
 
 
 
 
David McGuire
 
 
 
 
 
 
 
Deputy Chief Financial Officer and Chief Accounting Officer


Exhibit


https://cdn.kscope.io/215b0a20a0aedf464cda729673740345-fy2014q1ezcorpa01a04a24.jpg
EZCORP Reports First Quarter Fiscal Year 2019 Results
Austin, Texas (January 30, 2019) — EZCORP, Inc. (NASDAQ: EZPW) today announced results for its first quarter ended December 31, 2018.
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 FIRST QUARTER OF FISCAL 2019
•
Exceptional pawn operating performance:
–
Strong growth in pawn loans outstanding (PLO), pawn service charges (PSC) and revenue in Latin America and U.S. pawn segments contributed to exceptional pawn operating performance during the quarter.
–
PLO, the most influential driver of revenue and profitability, expanded 10% to $194.0 million, and PSC rose 10% to $83.7 million.
–
U.S. Pawn segment same store PLO rose 7% to $155.0 million, and same store PSC increased 8% to $59.7 million.
–
Latin America Pawn total PLO grew 26% to $39.0 million (up 27% to $39.5 million on a constant currency basis1). Same store PLO increased 10% (11% higher on a constant currency basis).
•
Non-cash charges of $20.6 million, as well as discretionary growth investments and other discrete costs, contributed to a loss before tax of $5.6 million, or ($0.07) per share. Excluding those items, adjusted2 income before tax was $22.5 million and adjusted diluted earnings per share improved 15% to $0.31.
•
The Company continued investing to sustain strong competitive advantages, including pawn store openings and acquisitions; the development of a new customer-centric digital platform; predictive product and customer analytics; and upgrades to its point of sale and other systems.
•
Cash and cash equivalents rose 162% to $297.0 million. The improved liquidity was driven by $167.0 million of net proceeds from a convertible debt issuance in May 2018. Strong operating cash flow in the quarter increased 18% to $22.8 million, and the company collected another $7.3 million of principal under the Alpha Credit / Grupo Finmart notes receivable.
CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Stuart Grimshaw commented, "We continue to deliver exceptional pawn operating performance leading to market share gains in the quarter. We maintained our intense focus on outstanding customer service and meeting our customers' need for cash.

"Our strong balance sheet and free cash flow generation enhances our ability to invest in initiatives that sustain our strong competitive advantages, leveraging our best-in-industry customer insights. Investments include: opening and acquiring more pawn stores; developing a digital platform that will provide transaction and lending services connected to a ledger of physical assets; and upgrading our POS2 that encompasses predictive product and customer analytics. These investments will build on our core pawn businesses and further differentiate us through data-driven, physical and digital customer engagement. We continually assess opportunities to better serve our customers and attract new ones. Identifying and acting on the best opportunities will allow us to further drive long-term shareholder value."




CONSOLIDATED RESULTS

Three Months Ended December 31
in thousands, except per share amounts
 
As Reported
 
Adjusted2
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Total Revenues
$
215,850

 
$
204,508

 
$
218,100

 
$
204,508

Income (Loss) from Continuing Operations, Before Tax
$
(5,570
)
 
$
19,792

 
$
22,475

 
$
21,342

Net Income (Loss) from Continuing Operations
$
(4,538
)
 
$
12,355

 
$
16,669

 
$
14,697

Diluted Earnings (Loss) Per Share
$
(0.07
)
 
$
0.23

 
$
0.31

 
$
0.27

EBITDA2
$
6,730

 
$
27,092

 
$
30,617

 
$
27,490

•
The loss before tax of $5.6 million, or ($0.07) per share, includes $20.6 million in non-cash charges, as well as discretionary growth investments and other discrete costs. Excluding those items, adjusted diluted earnings per share improved 15% to $0.31.
•
A strong 10% increase in average PLO drove an equivalent 10% improvement in PSC and 6% higher net revenues to $130.2 million (up 7% to $131.5 million on a constant currency basis). Consolidated merchandise sales gross profit grew 4% to $43.9 million on a 7% rise in merchandise sales. On a constant currency basis, PSC expanded 11% and merchandise sales gross profit improved 4%.
•
Operations expenses rose 7% to $89.5 million (up 8% to $90.4 million on a constant currency basis) primarily from the inclusion of recently acquired and new stores. The Company expects expanded operating leverage as acquired stores are further integrated and recent new stores mature and build scale.
•
Administrative expense increased 16% to $15.5 million principally as a result of a $2.1 million discretionary strategic investment in the development of a customer-centric digital platform that is not capitalizable in its early stages of build-out.
•
The Company’s global pawn businesses (consisting of U.S. Pawn and Latin America Pawn) generated consolidated segment contribution of $33.6 million, down 9% from the prior year. On an adjusted basis, consolidated global pawn segment contribution increased 6%, or $2.3 million, to $39.0 million.
•
Non-cash charges totaled $20.6 million, consisting of a $13.3 million impairment to the carrying value of our investment in Cash Converters International Limited, an unconsolidated affiliate; $2.9 million attributable to our equity interest in Cash Converter's recognition of its settlement of a class action lawsuit; and $4.4 million to fully reserve our exposure to Republic Metals Corporation, our primary gold scrap refiner, which declared Chapter 11 bankruptcy in November 2018.
SEGMENT RESULTS
U.S. Pawn
•
The U.S. Pawn segment same store PLO rose 7% and same store PSC grew 8%. The segment delivered ending PLO per store of $305,000, up 7%. This was driven by disciplined lending practices, a focus on meeting customers' need for cash and stronger performance from stores affected by hurricanes in the prior-year quarter.
•
Same store sales improved 5% and merchandise margins remained strong at 38%.
•
U.S. Pawn's segment revenue rose 4% to $166.0 million and the segment contribution decreased 1% to $27.4 million due to the $2.9 million non-cash charge to fully reserve a receivable from Republic Metals Corporation. Adjusted segment contribution, excluding the non-cash charge, increased 8% to $30.2 million.



Latin America Pawn
•
Latin America Pawn's PLO grew 26% to $39.0 million (up 27% to $39.5 million on a constant currency basis). Same store PLO increased 10% (11% on a constant currency basis). The segment delivered ending PLO per store of $84,000, up 4%.
•
The company added nine stores in the quarter ended December 31, 2018, consisting of four new stores and five acquired. Pawn store count in Latin America has expanded 88% in the last 15 months to a total of 462 stores, with 201 acquired and 16 opened.
•
The acquired stores offer significant opportunity for higher revenue and profit by increasing focus on general merchandise pawn loan and retail activities and implementing EZCORP's proven systems and operating practices. The company continues to see a robust pipeline of acquisition opportunities.
•
Net revenues expanded 15% to $27.6 million (up 20% to $28.8 million on a constant currency basis). PSC jumped 16% to $19.4 million (increasing 22% to $20.3 million on a constant currency basis).
•
Operations expense increased 28% to $18.8 million primarily from recently acquired and new stores and discretionary growth investments. Operating leverage is expected to increase as acquired stores are further integrated and recent new stores mature and build scale.
•
The segment incurred a $1.5 million non-cash charge to fully reserve a receivable from, and assets held by, Republic Metals Corporation, due to the refiner's bankruptcy proceedings.
•
Segment contribution is $6.2 million ($6.4 million on a constant currency basis). Adjusted segment contribution is $8.8 million, excluding the non-cash charge, discretionary growth investments, foreign currency impacts and other discrete costs.
CONFERENCE CALL
EZCORP will host a conference call on Thursday, January 31, 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: 7987578, 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 call ends.
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:
Jeff Christensen
Vice President, Investor Relations
Email: jeff_christensen@ezcorp.com
Phone: (512) 437-3545

1“Constant currency” basis, which is a non-GAAP measure, excludes the impact of foreign currency exchange rate fluctuations. For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.
2Adjusted basis, which is a non-GAAP measure, excludes certain items. For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.



EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended December 31,
 
2018
 
2017
 
 
 
 
 
(Unaudited)
 
(in thousands, except per share amounts)
Revenues:
 
 
 
Merchandise sales
$
121,024

 
$
113,588

Jewelry scrapping sales
9,281

 
12,213

Pawn service charges
83,674

 
76,360

Other revenues
1,871

 
2,347

Total revenues
215,850

 
204,508

Merchandise cost of goods sold
77,112

 
71,167

Jewelry scrapping cost of goods sold
8,050

 
10,337

Other cost of revenues
484

 
577

Net revenues
130,204

 
122,427

Operating expenses:
 
 
 
Operations
89,546

 
83,610

Administrative
15,479

 
13,318

Depreciation and amortization
6,848

 
5,723

Loss on sale or disposal of assets and other
4,442

 
39

Total operating expenses
116,315

 
102,690

Operating income
13,889

 
19,737

Interest expense
8,791

 
5,847

Interest income
(3,339
)
 
(4,270
)
Equity in net loss (income) of unconsolidated affiliate
1,119

 
(1,450
)
Impairment of investment in unconsolidated affiliate
13,274

 
—

Other income
(386
)
 
(182
)
(Loss) income from continuing operations before income taxes
(5,570
)
 
19,792

Income tax (benefit) expense
(1,032
)
 
7,437

(Loss) income from continuing operations, net of tax
(4,538
)
 
12,355

Loss from discontinued operations, net of tax
(183
)
 
(222
)
Net (loss) income
(4,721
)
 
12,133

Net loss attributable to noncontrolling interest
(477
)
 
(615
)
Net (loss) income attributable to EZCORP, Inc.
$
(4,244
)
 
$
12,748

 
 
 
 
Basic (loss) earnings per share attributable to EZCORP, Inc. — continuing operations
$
(0.07
)
 
$
0.24

Diluted (loss) earnings per share attributable to EZCORP, Inc. — continuing operations
$
(0.07
)
 
$
0.23

 
 
 
 
Weighted-average basic shares outstanding
55,032

 
54,464

Weighted-average diluted shares outstanding
55,032

 
55,682




EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
December 31,
2018
 
December 31,
2017
 
September 30,
2018
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
297,031

 
$
113,584

 
$
286,015

Pawn loans
193,984

 
177,001

 
198,463

Pawn service charges receivable, net
38,959

 
34,054

 
38,318

Inventory, net
175,422

 
163,310

 
166,997

Notes receivable, net
26,711

 
36,682

 
34,199

Prepaid expenses and other current assets
31,223

 
26,516

 
33,154

Total current assets
763,330

 
551,147

 
757,146

Investment in unconsolidated affiliate
35,511

 
45,605

 
49,500

Property and equipment, net
69,770

 
62,098

 
73,649

Goodwill
294,881

 
288,773

 
297,448

Intangible assets, net
55,956

 
43,974

 
54,923

Notes receivable, net
4,599

 
23,343

 
3,226

Deferred tax asset, net
9,283

 
10,997

 
7,165

Other assets, net
4,442

 
16,625

 
3,863

Total assets
$
1,237,772

 
$
1,042,562

 
$
1,246,920

 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Current maturities of long-term debt, net
$
190,238

 
$
—

 
$
190,181

Accounts payable, accrued expenses and other current liabilities
57,628

 
60,207

 
57,800

Customer layaway deposits
11,747

 
10,686

 
11,824

Total current liabilities
259,613

 
70,893

 
259,805

Long-term debt, net
229,928

 
294,761

 
226,702

Deferred tax liability, net
9,617

 
—

 
8,817

Other long-term liabilities
6,150

 
8,845

 
6,890

Total liabilities
505,308

 
374,499

 
502,214

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 December 31, 2018; 51,494,246 as of December 31, 2017; 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
400,081

 
351,110

 
397,927

Retained earnings
387,936

 
364,414

 
392,180

Accumulated other comprehensive loss
(49,104
)
 
(44,902
)
 
(42,616
)
EZCORP, Inc. stockholders’ equity
739,467

 
671,167

 
748,037

Noncontrolling interest
(7,003
)
 
(3,104
)
 
(3,331
)
Total equity
732,464

 
668,063

 
744,706

Total liabilities and equity
$
1,237,772

 
$
1,042,562

 
$
1,246,920




EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended December 31,
 
2018
 
2017
 
 
 
 
 
(Unaudited)
 
(in thousands)
Operating activities:
 
 
 
Net (loss) income
$
(4,721
)
 
$
12,133

Adjustments to reconcile net (loss) income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
6,848

 
5,723

Amortization of debt discount and deferred financing costs
5,585

 
3,682

Accretion of notes receivable discount and deferred compensation fee
(1,376
)
 
(2,577
)
Deferred income taxes
352

 
3,129

Impairment of investment in unconsolidated affiliate
13,274

 
—

Other adjustments
5,052

 
601

Stock compensation expense
2,238

 
2,919

Loss (income) from investment in unconsolidated affiliate
1,119

 
(1,450
)
Changes in operating assets and liabilities, net of business acquisitions:
 
 
 
Service charges and fees receivable
(877
)
 
(50
)
Inventory
685

 
(1,087
)
Prepaid expenses, other current assets and other assets
(1,564
)
 
(500
)
Accounts payable, accrued expenses and other liabilities
(461
)
 
(5,283
)
Customer layaway deposits
18

 
(283
)
Income taxes, net of excess tax benefit from stock compensation
(3,412
)
 
2,295

Net cash provided by operating activities
22,760

 
19,252

Investing activities:
 
 
 
Loans made
(186,588
)
 
(169,666
)
Loans repaid
106,643

 
103,041

Recovery of pawn loan principal through sale of forfeited collateral
70,594

 
67,144

Additions to property and equipment
(5,880
)
 
(9,537
)
Acquisitions, net of cash acquired
(332
)
 
(62,163
)
Principal collections on notes receivable
7,284

 
2,849

Net cash used in investing activities
(8,279
)
 
(68,332
)
Financing activities:
 
 
 
Taxes paid related to net share settlement of equity awards
(3,288
)
 
(311
)
Proceeds from borrowings, net of issuance costs
743

 
—

Payments on borrowings
(67
)
 
—

Net cash used in financing activities
(2,612
)
 
(311
)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
(865
)
 
(1,165
)
Net increase (decrease) in cash, cash equivalents and restricted cash
11,004

 
(50,556
)
Cash, cash equivalents and restricted cash at beginning of period
286,282

 
164,393

Cash, cash equivalents and restricted cash at end of period
$
297,286

 
$
113,837

Non-cash investing and financing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
80,301

 
$
72,649

Deferred and contingent consideration
—

 
1,920





EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
Three Months Ended December 31, 2018
  
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Merchandise sales
$
95,103

 
$
25,921

 
$
—

 
$
121,024

 
$
—

 
$
121,024

Jewelry scrapping sales
6,552

 
2,729

 
—

 
9,281

 
—

 
9,281

Pawn service charges
64,303

 
19,371

 
—

 
83,674

 
—

 
83,674

Other revenues
48

 
42

 
1,781

 
1,871

 
—

 
1,871

Total revenues
166,006

 
48,063

 
1,781

 
215,850

 
—

 
215,850

Merchandise cost of goods sold
59,148

 
17,964

 
—

 
77,112

 
—

 
77,112

Jewelry scrapping cost of goods sold
5,510

 
2,540

 
—

 
8,050

 
—

 
8,050

Other cost of revenues
—

 
—

 
484

 
484

 
—

 
484

Net revenues
101,348

 
27,559

 
1,297

 
130,204

 
—

 
130,204

Segment and corporate expenses (income):
 
 
 
 
 
 
 
 
 
 
 
Operations
68,068

 
18,848

 
2,630

 
89,546

 
—

 
89,546

Administrative
—

 
—

 
—

 
—

 
15,479

 
15,479

Depreciation and amortization
3,035

 
1,422

 
41

 
4,498

 
2,350

 
6,848

Loss on sale or disposal of assets and other
2,853

 
1,589

 
—

 
4,442

 
—

 
4,442

Interest expense
—

 
29

 
72

 
101

 
8,690

 
8,791

Interest income
—

 
(419
)
 
—

 
(419
)
 
(2,920
)
 
(3,339
)
Equity in net loss of unconsolidated affiliate
—

 
—

 
1,119

 
1,119

 
—

 
1,119

Impairment of investment in unconsolidated affiliate
—

 
—

 
13,274

 
13,274

 
—

 
13,274

Other (income) expense
—

 
(126
)
 
22

 
(104
)
 
(282
)
 
(386
)
Segment contribution (loss)
$
27,392

 
$
6,216

 
$
(15,861
)
 
$
17,747

 
 
 
 
(Loss) income from continuing operations before income taxes
 
 
 
 
 
 
$
17,747

 
$
(23,317
)
 
$
(5,570
)



























EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
Three Months Ended December 31, 2017
  
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Merchandise sales
$
91,494

 
$
22,094

 
$
—

 
$
113,588

 
$
—

 
$
113,588

Jewelry scrapping sales
8,525

 
3,688

 
—

 
12,213

 
—

 
12,213

Pawn service charges
59,705

 
16,655

 
—

 
76,360

 
—

 
76,360

Other revenues
74

 
169

 
2,104

 
2,347

 
—

 
2,347

Total revenues
159,798

 
42,606

 
2,104

 
204,508

 
—

 
204,508

Merchandise cost of goods sold
56,088

 
15,079

 
—

 
71,167

 
—

 
71,167

Jewelry scrapping cost of goods sold
6,842

 
3,495

 
—

 
10,337

 
—

 
10,337

Other cost of revenues
—

 
—

 
577

 
577

 
—

 
577

Net revenues
96,868

 
24,032

 
1,527

 
122,427

 
—

 
122,427

Segment and corporate expenses (income):
 
 
 
 
 
 
 
 
 
 
 
Operations
66,300

 
14,687

 
2,623

 
83,610

 
—

 
83,610

Administrative
—

 
—

 
—

 
—

 
13,318

 
13,318

Depreciation and amortization
2,799

 
845

 
47

 
3,691

 
2,032

 
5,723

Loss on sale or disposal of assets
16

 
10

 
—

 
26

 
13

 
39

Interest expense
—

 
1

 
—

 
1

 
5,846

 
5,847

Interest income
—

 
(637
)
 
—

 
(637
)
 
(3,633
)
 
(4,270
)
Equity in net income of unconsolidated affiliate
—

 
—

 
(1,450
)
 
(1,450
)
 
—

 
(1,450
)
Other (income) expense
(4
)
 
115

 
(83
)
 
28

 
(210
)
 
(182
)
Segment contribution
$
27,757

 
$
9,011

 
$
390

 
$
37,158

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
37,158

 
$
(17,366
)
 
$
19,792





EZCORP, Inc.
STORE COUNT ACTIVITY (UNAUDITED)
 
Three Months Ended December 31, 2018
 
U.S. Pawn
 
Latin America Pawn
 
Other International
 
Consolidated
 
 
 
 
 
 
 
 
As of September 30, 2018
508

 
453

 
27

 
988

New locations opened
—

 
4

 
—

 
4

Locations acquired
—

 
5

 
—

 
5

As of December 31, 2018
508

 
462

 
27

 
997

 
Three Months Ended December 31, 2017
 
U.S. Pawn
 
Latin America Pawn
 
Other International
 
Consolidated
 
 
 
 
 
 
 
 
As of September 30, 2017
513

 
246

 
27

 
786

New locations opened
—

 
4

 
—

 
4

Locations acquired
—

 
133

 
—

 
133

As of December 31, 2017
513

 
383

 
27

 
923

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 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 is meaningful and useful in understanding the activities and business metrics of our operations exclusive of certain non-core operating or other infrequent charges. This will assist users of our financial statements in forecasting, and assessing the performance of the Company’s businesses, providing a meaningful comparison of results of the current period against results of past periods, and performing a comparable analysis to peers. This is intended to provide users of our financial statements with a view of the business's results similarly to how management of the company views and evaluates it.
In addition to constant currency adjustments, we have recorded the following adjustments to present our financial results consistent with the core operating results of our business:
•
Non-cash interest income and expenses regarding our Notes receivable and Convertible debt instruments to reflect the underlying cash flows of our investments and debt;
•
Discrete equity method charges for our investment in Cash Converters International Limited ("CCV"), including a non-cash impairment of our investment to fair value and non-cash litigation charges recorded in our proportionate share of CCV's earnings, neither of which are related to the core operating earnings of CCV;
•
Reserves related to receivables from, and assets held by, a gold scrap refiner based on our understanding of potential collectability or return given knowledge of current bankruptcy proceedings;
•
Discretionary strategic investment in the development of a digital platform representing start-up costs for the incubation of new strategic ventures not included in our core pawn operations;
•
Charge off of aged assets related to historical out-of period adjustments not representative of results of operations for current or comparable periods;
•
Acquisition related costs not related to current revenue generating activities; and
•
Tax effects of each adjustment at the effective rate for the applicable jurisdiction.



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, 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 months ended December 31, 2018 and 2017 were as follows:
 
 
December 31,
 
Three Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Mexican peso
 
19.6

 
19.7

 
19.8

 
19.0

Guatemalan quetzal
 
7.7

 
7.3

 
7.6

 
7.2

Honduran lempira
 
24.2

 
23.5

 
24.0

 
23.3

Peruvian sol
 
3.4

 
3.2

 
3.3

 
3.2

Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss. 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.
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 as of and for the three months ended December 31, 2018 and 2017 (2019 Q1 and 2018 Q1, respectively).
Miscellaneous Non-GAAP Financial Measures
 
2019 Q1
 
2018 Q1
 
 
 
 
 
(in millions)
Income (loss) from continuing operations
$
(4.5
)
 
$
12.4

Interest expense
8.7

 
5.9

Interest income
(3.3
)
 
(4.3
)
Income tax expense (benefit)
(1.0
)
 
7.4

Depreciation and amortization
6.8

 
5.7

EBITDA
$
6.7

 
$
27.1

 
2019 Q1
 
 
 
(in millions)
Impairment on CCV investment
$
13.3

Impact on CCV earnings from litigation settlement
2.9

Adjustment for Republic Metals Corporation reserve
4.4

Non-cash charges
$
20.6




 
Income (Loss) from Continuing Operations, Before Tax
 
Tax Effect
 
Net Income (Loss) from Continuing Operations
 
EBITDA
 
EPS
 
 
 
 
 
 
 
 
 
 
 
(in millions)
2019 Q1 reported
$
(5.6
)
 
$
1.1

 
$
(4.5
)
 
$
6.7

 
$
(0.07
)
Acquisition costs
0.1

 
—

 
0.1

 
0.1

 
—

Charge-off of aged assets and other
0.8

 
(0.2
)
 
0.6

 
0.8

 
0.01

Impairment on CCV investment
13.3

 
(3.0
)
 
10.3

 
13.3

 
0.17

Impact on CCV earnings from litigation settlement
2.9

 
(0.7
)
 
2.2

 
2.9

 
0.04

Adjustment for Republic Metals Corporation reserve
4.4

 
(1.3
)
 
3.1

 
4.4

 
0.06

Currency exchange rate fluctuations
0.2

 
(0.1
)
 
0.1

 
0.3

 
0.01

Non-cash net interest expense
4.3

 
(1.1
)
 
3.2

 
—

 
0.06

Discretionary strategic investment in digital platform
2.1

 
(0.5
)
 
1.6

 
2.1

 
0.03

2019 Q1 adjusted
$
22.5

 
$
(5.8
)
 
$
16.7

 
$
30.6

 
$
0.31

 
Income from Continuing Operations, Before Tax
 
Tax Effect
 
Net Income from Continuing Operations
 
EBITDA
 
EPS
 
 
 
 
 
 
 
 
 
 
 
(in millions)
2018 Q1 reported
$
19.8

 
$
(7.4
)
 
$
12.4

 
$
27.1

 
$
0.23

Expiration of statute of limitation on uncertain tax positions
—

 
(1.6
)
 
(1.6
)
 
—

 
(0.03
)
Revaluation of deferred tax assets upon tax reform
—

 
2.8

 
2.8

 
—

 
0.04

Acquisition costs
0.4

 
(0.1
)
 
0.3

 
0.4

 
0.01

Impact from hurricane store operating expenses
0.3

 
—

 
0.3

 
0.3

 
0.01

Currency exchange rate fluctuations
(0.3
)
 
0.1

 
(0.2
)
 
(0.3
)
 
—

Non-cash net interest expense
1.1

 
(0.4
)
 
0.7

 
—

 
0.01

2018 Q1 adjusted
$
21.3

 
$
(6.6
)
 
$
14.7

 
$
27.5

 
$
0.27

 
U.S. Pawn
 
Latin America Pawn
 
Total
 
 
 
 
 
 
 
(in millions)
Segment contribution 2019 Q1
$
27.4

 
$
6.2

 
$
33.6

Adjustment for Republic Metals Corporation reserve
2.8

 
1.5

 
4.3

Charge-off of aged assets and other
—

 
0.8

 
0.8

Currency exchange rate fluctuations
—

 
0.3

 
0.3

Adjusted segment contribution 2019 Q1
$
30.2

 
$
8.8

 
$
39.0

 
U.S. Pawn
 
 
 
(in millions)
Segment contribution 2018 Q1
$
27.8

Impact from hurricane store operating expenses
0.3

Adjusted segment contribution 2018 Q1
$
28.1




 2019 Q1:
U.S. Dollar Amount
 
Percentage Change YOY
 
 
 
 
 
(in millions)
 
 
Latin America Pawn PLO
$
39.0

 
26
 %
Currency exchange rate fluctuations
0.5

 
 
Constant currency Latin America Pawn PLO
$
39.5

 
27
 %
 
 
 
 
Latin America Pawn same store PLO
$
34.1

 
10
 %
Currency exchange rate fluctuations
0.4

 
 
Constant currency Latin America Pawn same store PLO
$
34.5

 
11
 %
 
 
 
 
Latin America Pawn same store PSC revenue
$
17.1

 
3
 %
Currency exchange rate fluctuations
0.8

 
 
Constant currency Latin America Pawn same store PSC revenue
$
17.9

 
7
 %
 
 
 
 
Consolidated revenue
$
215.9

 
6
 %
Currency exchange rate fluctuations
2.2

 
 
Constant currency consolidated revenue
$
218.1

 
7
 %
 
 
 
 
Consolidated net revenue
$
130.2

 
6
 %
Currency exchange rate fluctuations
1.3

 
 
Constant currency consolidated net revenue
$
131.5

 
7
 %
 
 
 
 
Consolidated PSC revenue
$
83.7

 
10
 %
Currency exchange rate fluctuations
0.9

 
 
Constant currency consolidated PSC revenue
$
84.6

 
11
 %
 
 
 
 
Consolidated merchandise sales gross profit
$
43.9

 
4
 %
Currency exchange rate fluctuations
0.4

 
 
Constant currency consolidated merchandise sales gross profit
$
44.3

 
4
 %
 
 
 
 
Consolidated operations expenses
$
89.5

 
7
 %
Currency exchange rate fluctuations
0.9

 
 
Constant currency consolidated operations expenses
$
90.4

 
8
 %
 
 
 
 
Latin America Pawn net revenue
$
27.6

 
15
 %
Currency exchange rate fluctuations
1.2

 
 
Constant currency Latin America Pawn net revenue
$
28.8

 
20
 %
 
 
 
 
Latin America Pawn PSC revenue
$
19.4

 
16
 %
Currency exchange rate fluctuations
0.9

 
 
Constant currency Latin America Pawn PSC revenue
$
20.3

 
22
 %
 
 
 
 
Latin America Pawn segment profit before tax
$
6.2

 
(31
)%
Currency exchange rate fluctuations
0.2

 
 
Constant currency Latin America Pawn segment profit before tax
$
6.4

 
(29
)%