EZCORP Reports Fourth Quarter and Fiscal Year 2018 Results

November 14, 2018

AUSTIN, Texas--(BUSINESS WIRE)--Nov 14, 2018--EZCORP, Inc. (NASDAQ: EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2018.

All amounts in this release are from 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.


Profit before tax was $3.7 million in the quarter and $57.1 million for the year. Adjusted profit before tax 1 increased 38% to $16.2 million in the quarter and increased 33% to $64.4 million in the year. The adjusted profit before tax improvement in both periods reflects successful pawn store acquisitions and strong organic growth in Latin America. Pawn fundamentals remain strong: Pawn loans outstanding (PLO) expanded 17% to $198.5 million, and pawn service charges (PSC) rose 16% in the quarter driven by the contribution of acquired stores in Latin America and same store growth in both the U.S. and Latin America. For the full year, PSC increased 12%.Latin America Pawn’s quarterly segment contribution expanded 63% to $9.4 million (69% higher to $9.8 million on a constant currency basis 2 ). For the year, segment contribution grew 84% to $34.3 million (up 83% to $34.2 million on a constant currency basis).U.S. Pawn’s quarterly segment contribution grew 13% on industry-high same store PLO growth of 5%, monthly PLO yield improvement of 54 basis points (bps) to 14%, and a 240bps expansion of merchandise sales margin to 39%. The segment posted industry leading PLO per store at $305,000, the highest year-end balance in seven years. Latin America Pawn store count increased 84% in the year. This segment now comprises 47% of the company’s total consolidated pawn stores, up from 32% a year ago. It produced 25% of consolidated pawn contribution in fiscal 2018, up from 15%. Cash and cash equivalents rose 74% to $286.0 million, enhancing the company’s ability to capitalize on attractive acquisition opportunities. The improved liquidity was driven by $167.0 million of net proceeds from a convertible debt issuance combined with strong cash flow from operations and $38.0 million of collections under two notes receivable.


Chief Executive Officer Stuart Grimshaw commented, “It was pleasing to see our fourth quarter earnings momentum accelerating, underlining the important progress we have made this year in customer service excellence. The biggest contributor to the company’s outstanding performance was our terrific execution in Latin America, through both acquisitions and organic growth. Profit improvement was exceptional and our pawn store count in Latin America jumped 84%, growing by 207 stores. Those acquired stores have exceeded our expectations, providing strategic bases for further penetration and expansion in existing and neighboring geographies.

“In the U.S. Pawn segment, our disciplined lending and relentless focus on servicing and satisfying our customers’ needs for cash delivered industry leading same store PLO growth, PLO yield, and per store averages of both PLO and PSC. We effectively managed our inventory again this quarter in relation to the PLO growth, while maintaining industry leading merchandise sales margins. These results reflect a well-balanced execution in excelling in customer service that underpins the growth of the business.

“We’ll begin fiscal 2019 with strong momentum as a result of the improved activity coming out of this year’s fourth quarter and will continue to leverage opportunities that will further our successful growth strategy. By maintaining our intense focus on outstanding customer service and meeting customers’ desire for cash, this will underpin our industry leading store operating performance for the future. We will invest in the core pawn businesses, and open and acquire more pawn stores, particularly in Latin America, to further expand our geographically diversified earnings platform, where the right opportunities present themselves. We will continue to support our customers where they have a strong need for cash and there are many more locations where we believe we can be relevant to them. We maintain a discipline in assessment of opportunities that when coupled with our proven customer service focus, will drive long-term shareholder value.”


Profit before tax was $3.7 million in the quarter and $57.1 million for the year. Adjusted profit before tax increased 38% to $16.2 million in the quarter. For the year, adjusted profit before tax increased 33% to $64.4 million. Successful pawn store acquisitions and strong organic growth in Latin America drove the improvements in both the quarter and the full fiscal year. A 10% increase in average PLO during the year led to a 12% improvement in annual PSC and 11% higher net revenues to $482.9 million (up 11% to $482.9 million on a constant currency basis). PLO ended the year 17% above the balance at the end of fiscal 2017. Consolidated merchandise sales gross profit for the year grew 9% to $161.8 million on a 6% rise in merchandise sales, while merchandise sales margin increased 120bps to 37%. On a constant currency basis, PSC expanded 12% and merchandise sales gross profit grew 9%. Operations expenses rose 10% to $334.6 million for the year (the same on a constant currency basis) due primarily to acquired stores. As a percentage of net revenues, operations expenses improved to 69% for the year from 70% in fiscal 2017, and to 69% in the quarter from 72% in the prior-year quarter. Included in the quarter was an $11.7 million ($9.2 million net of tax) non-cash impairment of our investment in Cash Converters International Limited, an unconsolidated affiliate. This revalued our investments made in prior years to the value of the Cash Converters’ stock at fiscal year-end, equaling the price at which Cash Converters raised additional equity in June 2018. Cash and cash equivalents at the end of the year improved 74% to $286.0 million. During the year, the company completed a $172.5 million offering of convertible senior notes due 2025, yielding net proceeds of $167.0 million, and collected $38.0 million in principal and interest, as scheduled, on the notes receivable related to the 2016 sale of Grupo Finmart. Basic EPS grew 18% to $0.73 and diluted EPS rose 11% to $0.69 for the year. On an adjusted basis, basic EPS was $0.84 (up 31%) and diluted EPS was $0.79 (up 23%). The fully diluted shares calculation includes the hypothetical conversion of our convertible notes to the extent the company’s average share price in the period exceeded the conversion price of the notes. However, the 2019 convertible notes must be settled in cash and the company may choose to satisfy all or some of its 2024 and 2025 convertible notes with cash rather than shares to minimize actual share dilution.


U.S. Pawn

The U.S. Pawn segment reported a 5% increase in same store PLO, with improved monthly yield, indicating the quality of loan growth. The segment delivered industry leading PLO per store at $305,000. This was driven by disciplined lending practices and our focus on meeting customers’ need for cash. In stores unaffected by hurricanes in the prior year, same store PLO increased 2%. Merchandise sales gross profit increased 9% in the quarter to $31.1 million and 5% for the year to $134.3 million. Merchandise margins increased 240bps to an industry high 39% in the quarter, and were 38% for the full year. Net revenues improved 5% and profit rose 13% in the quarter. For the year, net revenues were up 1% and profit remained relatively flat. This reflected the PSC impact of last year’s hurricanes on PLO, as well as higher expenses. Expenses reflect a higher number of team members per store and other investments implemented in our third quarter to improve customer experience and drive future profit growth.

Latin America Pawn

Latin America Pawn continued to deliver outstanding growth. Its contribution increased 63% in the quarter to $9.4 million (up 69% to $9.8 million on a constant currency basis) and rose 84% for the year to $34.3 million (up 83% to $34.2 million on a constant currency basis). Pawn store count expanded 84% in fiscal 2018, with 196 stores acquired and 12 stores 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 systems and operating practices. The company continues to see a robust pipeline of acquisition opportunities in Latin America. As a percentage of net revenues, segment operating expenses improved 200bps in both the quarter and the full year, at 62% and 63%, respectively. PLO rose 106% to $43.5 million (up 110% to $44.3 million on a constant currency basis). Industry leading same store PLO increased 4% (7% higher on a constant currency basis). Net revenues expanded 74% to $26.8 million in the quarter (up 82% to $28.0 million on a constant currency basis). PSC jumped 90% to $19.3 million (increasing 99% to $20.1 million on a constant currency basis), reflecting the significantly higher PLO from acquired stores and organic growth at same stores. For the full year, net revenues increased 74%. Merchandise sales improved 50% in total and 4% on a same store basis in the quarter (up 57% in total and 4% in same stores on a constant currency basis). Combined with a 90bps improvement in merchandise sales margins, this drove a 54% increase in merchandise sales gross profit (63% on a constant currency basis). For the year, merchandise sales increased 39% and 7% on a same store basis (39% and 6%, respectively, on a constant currency basis).


EZCORP will host a conference call on Thursday, November 15, 2018, 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: 1292208, 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.


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.


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.

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