EZCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 9, 2016

Attached files

file filename
8-K - 8-K - EZCORP INCa2016q3-earningsrelease8xk.htm


EZCORP Announces Third Quarter Fiscal 2016 Results
▪
Net Revenue up $6.6 million to $100.4 million, and Income From Continuing Operations Before Income Taxes up $7.6 million to $3.8 million, driven by strong pawn performance in both U.S. and Mexico.
▪
Pawn loans outstanding (PLO) up 11% to $160.3 million; same store PLO up 9%.
▪
Pawn service charges (PSC) up 8% to $62.5 million; same store PSC up 8%.
▪
Merchandise sales gross margin on both consolidated and same store basis increased 200bps to 36%.
▪
Definitive agreement to sell Grupo Finmart announced July 6, 2016; close expected by September 30, 2016.
▪
Received commitment for a $100 million secured credit facility to support the business.
All amounts in this release are EZCORP continuing operations 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.
Austin, Texas (August 9, 2016) — EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its third quarter ended June 30, 2016.
CEO COMMENTARY AND OUTLOOK
Stuart Grimshaw, EZCORP’s Chief Executive Officer, said: "We have been consistently executing the three year strategic program announced in July 2015 to lead the market in serving and satisfying customers’ need for cash. Pawn momentum remains strong with four consecutive quarters of improvement in same store PLO in the U.S. and eight consecutive quarters in Mexico.

"Our focus on customer engagement and optimizing our U.S. and Mexico pawn businesses will continue, including investments in technology to improve innovation and productivity, reduce costs, and leverage investments. We are confident these initiatives, along with the quality pawn performance we have demonstrated in recent quarters, will help us continue to build our platform for profitable growth.
"We recently announced an agreement to sell Grupo Finmart, and we expect to close that transaction by the end of our fiscal year. After the sale of Grupo Finmart, 99% of our revenue will be generated from our U.S. and Mexico pawn businesses."

1 In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), we provide certain financial information on a “constant currency” basis, which excludes the impact of foreign currency exchange rate fluctuations. 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, see “Non-GAAP Financial Information” at the end of this release.
1



CONSOLIDATED RESULTS
Three-Months Ended June 30, 2016
•
Net income from continuing operations attributable to EZCORP was $2.9 million ($0.05 per share), compared to a net loss of $0.7 million ($0.01 per share). This increase was driven by revenue growth from strong customer engagement and continued focus on expense management.
•
Total revenue for the current quarter was $170.2 million, up 3%, and net revenue was $100.4 million, up 7%. On a constant currency basis1, total revenue was $174.3 million, up 6%, with net revenue of $102.8 million, up 10%. The increase in both total revenue and net revenue (stated on a GAAP and constant currency basis) is primarily due to higher pawn service charges and merchandise margin.
•
Total operating expenses for the current quarter decreased 2% (flat on a constant currency basis) as we continue to implement operational efficiencies. Corporate administrative expense was $14.5 million, down 14%.
Nine-Months Ended June 30, 2016
•
Net income from continuing operations attributable to EZCORP was $9.0 million ($0.16 per share), compared to net income of $5.8 million ($0.11 per share). This increase reflects continued improvement in our U.S. and Mexico pawn businesses (as discussed below).
•
Total revenue for the nine-months ended June 30, 2016 was $545.9 million, 1% lower, with net revenue of $321.4 million, a 6% increase. On a constant currency basis, total revenue was $559.9 million, 2% higher, and net revenue was $329.1 million, 8% higher. Higher pawn service charges and merchandise margins drove the increase in total revenue and net revenue on a constant currency basis.
•
Total operating expenses for the nine-months ended June 30, 2016 increased 5% (7% on a constant currency basis), primarily due to new store costs offset by store rationalization, accrued incentives at both field and corporate levels, as well as restatement expenses.
OPERATING METRICS
U.S. Pawn Segment
Three-Months Ended June 30, 2016
•
Enhanced focus on customers drove pawn lending, resulting in an increase in total PLO of 13% to $143.9 million, up 10% on a same store basis. The pawn loan redemption rate for the quarter was 85%, consistent with the prior-year period.
•
Total PSC increased 10% to $54.4 million, up 8% on a same store basis, as a result of strong same store PLO growth of 10%. Annualized yield on PLO decreased slightly to 164%, from 167% in the prior year quarter. The lower PLO yield is primarily due to shift in portfolio composition.
•
Merchandise sales gross margin improved to 37% from 35% attributable to discipline in pawn loan valuations and pricing cadence, driving merchandise sales gross profit growth of 8% to $29.2 million.
•
Store expenses were tightly managed, leveraging 9% growth in net revenue to $85.7 million into a 25% increase in segment profit before tax to $20.2 million.
•
Aged inventory reduced to 9% of total inventory from 11%.
Nine-Months Ended June 30, 2016
•
Same store PLO growth continues, increasing to 10% as compared to a decrease of 11% in the prior-year period, generating same store PSC growth of 5% in the nine-month period ended June 30, 2016.
•
Annualized PLO yield and pawn loan redemption rate both decreased slightly from the prior-year period to 164% from 165%, and to 84% from 85%, respectively.
•
Merchandise sales gross margin increased to 38% from 34%, resulting in a 15% increase in merchandise sales gross profit to $102.3 million.
•
Expense management leveraged a 7% growth in net revenue to $277.3 million into an 11% increase in segment profit before tax to $78.7 million.
Mexico Pawn Segment
Three-Months Ended June 30, 2016
•
Focusing on customer engagement drove the increase in PSC and PLO on a constant currency basis. PSC grew 1% to $8.1 million (up 20% on a constant currency basis). PLO decreased 1% to $16.3 million (up 19% on a constant currency basis). The pawn loan redemption rate increased to 77% from 76% in the prior-year period. Annualized PLO yield was a strong 192% compared to 194%.

2



•
Merchandise sales gross margin increased to 33% from 29% as the result of disciplined pawn loan valuations and pricing cadence. Merchandise sales gross profit increased 5% to $4.6 million (up 24% on a constant currency basis).
•
Store expenses were tightly managed, leveraging 2% growth in net revenue to $12.9 million into a 476% increase in segment profit before tax to $2.7 million (net revenue up 20% and segment profit before tax up 773% on a constant currency basis).
•
Aged inventory reduced to 3% of total inventory from 8%.
Nine-Months Ended June 30, 2016
•
PSC increased 2% to $23.6 million (up 22% on a constant currency basis). Annualized yield on pawn loans decreased to 194% from 196%. The pawn loan redemption rate on pawn loans year-to-date increased slightly to 78% from 77%.
•
Merchandise sales gross margin increased to 33% from 29%, resulting in a 1% increase in merchandise sales gross profit to $14.9 million (up 21% on a constant currency basis).
•
Expense management leveraged a 1% growth in net revenue to $39.0 million into a 165% increase in segment profit before tax to $6.2 million (net revenue up 20% and segment profit before tax up 259% on a constant currency basis).
DISCONTINUED OPERATIONS: GRUPO FINMART
On July 6, 2016, we announced that we had entered into a definitive agreement to sell Prestaciones Finmart, S.A.P.I. DE C.V., SOFOM, E.N.R. (“Grupo Finmart”) to Alpha Holding, S.A. de C.V. (“AlphaCredit”), a leader in consumer lending in Mexico and Colombia. We currently own 94% of Grupo Finmart, a provider of consumer loans to government agency employees in Mexico.
The decision to divest Grupo Finmart is a result of the continued execution of our three-year strategic program and is expected to provide us with additional capital to invest in our U.S. and Mexico pawn businesses.

As a result of the decision to sell the Grupo Finmart business, we have classified our Grupo Finmart segment as held for sale as of June 30, 2016 and recast all operations of Grupo Finmart as discontinued operations for the three and nine-months ended June 30, 2016.
CONFERENCE CALL
EZCORP will host a conference call on Wednesday, August 10, 2016, at 7:30am Central Time to discuss third quarter results. Analysts and institutional investors may participate on the conference call by dialing (888) 734-0328, Conference ID: 58992016, International dialing (678) 894-3054. The conference call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay of the conference call will be available online at http://investors.ezcorp.com/ shortly after the call.
ABOUT EZCORP
EZCORP is a leading provider of pawn loans in the United States and Mexico. At our pawn stores, we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers. 
FORWARD LOOKING STATEMENTS
This announcement contains certain forward-looking statements regarding the company’s strategy, initiatives and expected performance. These statements are based on the company’s current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the company's strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates, will, should or may occur in the future, including future financial or operating results, are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including operating risks, liquidity risks, legislative or regulatory developments, market factors or current or future litigation. For a discussion of these and other factors affecting the company’s business and prospects, see the company’s annual, quarterly and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

3




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


4



EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
(Unaudited)
 
(in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Merchandise sales
$
94,014

 
$
93,137

 
$
311,941

 
$
310,628

Jewelry scrapping sales
11,230

 
10,588

 
33,631

 
47,521

Pawn service charges
62,473

 
57,599

 
193,197

 
181,996

Consumer loan fees and interest
2,201

 
2,708

 
6,603

 
7,517

Other revenues
232

 
587

 
548

 
2,047

Total revenues
170,150

 
164,619

 
545,920

 
549,709

Merchandise cost of goods sold
60,140

 
61,460

 
194,731

 
206,430

Jewelry scrapping cost of goods sold
9,110

 
8,580

 
28,271

 
37,609

Consumer loan bad debt
506

 
771

 
1,549

 
2,197

Net revenues
100,394

 
93,808

 
321,369

 
303,473

Operating expenses:


 


 


 


Operations
73,172

 
71,455

 
221,446

 
213,335

Administrative
14,481

 
16,860

 
50,085

 
44,212

Depreciation and amortization
6,274

 
7,537

 
20,422

 
22,448

(Gain) loss on sale or disposal of assets
(41
)
 
82

 
641

 
725

Restructuring
—

 
37

 
1,910

 
763

Total operating expenses
93,886

 
95,971

 
294,504

 
281,483

Operating income (loss)
6,508

 
(2,163
)
 
26,865

 
21,990

Interest expense
3,936

 
3,783

 
12,014

 
12,456

Interest income
(50
)
 
(84
)
 
(66
)
 
(223
)
Equity in net income of unconsolidated affiliate
(1,694
)
 
(1,822
)
 
(5,626
)
 
(338
)
Other expense (income)
500

 
(222
)
 
815

 
953

Income (loss) from continuing operations before income taxes
3,816

 
(3,818
)
 
19,728

 
9,142

Income tax expense (benefit)
1,038

 
(3,035
)
 
11,224

 
4,217

Income (loss) from continuing operations, net of tax
2,778

 
(783
)
 
8,504

 
4,925

Loss from discontinued operations, net of tax
(9,133
)
 
(9,454
)
 
(100,916
)
 
(5,047
)
Net loss
(6,355
)
 
(10,237
)
 
(92,412
)
 
(122
)
Net loss attributable to noncontrolling interest
(666
)
 
(390
)
 
(5,124
)
 
(3,230
)
Net (loss) income attributable to EZCORP, Inc.
$
(5,689
)
 
$
(9,847
)
 
$
(87,288
)
 
$
3,108

 
 
 
 
 
 
 
 
Basic earnings per share attributable to EZCORP, Inc. — continuing operations
$
0.05

 
$
(0.01
)
 
$
0.16

 
$
0.11

Diluted earnings per share attributable to EZCORP, Inc. — continuing operations
$
0.05

 
$
(0.01
)
 
$
0.16

 
$
0.11

 
 
 
 
 
 
 
 
Weighted-average basic shares outstanding
53,980

 
54,820

 
54,574

 
54,216

 
 
 
 
 
 
 
 
Net income (loss) from continuing operations attributable to EZCORP, Inc.
$
2,904

 
$
(683
)
 
$
8,954

 
$
5,807

Net loss from discontinued operations attributable to EZCORP, Inc.
(8,593
)
 
(9,164
)
 
(96,242
)
 
(2,699
)
Net (loss) income attributable to EZCORP, Inc.
$
(5,689
)
 
$
(9,847
)
 
$
(87,288
)
 
$
3,108


5



EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
June 30,
2016
 
June 30,
2015
 
September 30,
2015
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
29,380

 
$
113,405

 
$
56,244

Restricted cash
5,000

 
218

 
144

Pawn loans
160,269

 
144,377

 
159,964

Pawn service charges receivable, net
29,643

 
26,989

 
30,852

Inventory, net
130,368

 
115,283

 
124,084

Income taxes receivable
—

 
2,745

 
40,657

Current assets held for sale
156,587

 
82,845

 
72,858

Prepaid expenses and other current assets
20,734

 
57,644

 
24,933

Total current assets
531,981

 
543,506

 
509,736

Investment in unconsolidated affiliate
57,656

 
90,423

 
56,182

Property and equipment, net
61,201

 
99,353

 
73,938

Goodwill
254,273

 
249,174

 
251,646

Intangible assets, net
30,569

 
37,951

 
30,778

Deferred tax asset, net
33,386

 
39,569

 
24,405

Non-current assets held for sale
—

 
231,977

 
226,623

Other assets, net
18,950

 
26,493

 
13,736

Total assets
$
988,016

 
$
1,318,446

 
$
1,187,044

 
 
 
 
 
 
Liabilities, temporary equity and equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
59,239

 
$
77,966

 
$
109,875

Current liabilities held for sale
130,627

 
81,248

 
87,725

Customer layaway deposits
11,201

 
9,635

 
10,470

Income taxes payable
4,842

 
—

 
—

Total current liabilities
205,909

 
168,849

 
208,070

Long-term debt, net
211,421

 
207,925

 
197,976

Non-current liabilities held for sale
—

 
125,378

 
101,644

Deferred gains and other long-term liabilities
3,321

 
4,752

 
3,703

Total liabilities
420,651

 
506,904

 
511,393

Commitments and contingencies


 


 


Temporary equity:
 
 
 
 
 
Class A Non-voting Common Stock, subject to possible redemption at $10.06 per share; none as of June 30, 2016 and 1,168,456 shares issued and outstanding at redemption value as of June 30, 2015 and September 30, 2015
—

 
11,696

 
11,696

Redeemable noncontrolling interest
(2,410
)
 
16,318

 
2,532

Total temporary equity
(2,410
)
 
28,014

 
14,228

Stockholders’ equity:
 
 
 
 
 
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of June 30, 2016 and 2015 and September 30, 2015; issued and outstanding: 51,019,332 as of June 30, 2016; 50,681,477 as of June 30, 2015; and 50,726,289 as of September 30, 2015
510

 
506

 
507

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

 
30

 
30

Additional paid-in capital
313,607

 
327,018

 
307,080

Retained earnings
320,537

 
498,360

 
407,825

Accumulated other comprehensive loss
(64,703
)
 
(42,386
)
 
(54,019
)
EZCORP, Inc. stockholders’ equity
569,981

 
783,528

 
661,423

Noncontrolling interest
(206
)
 
—

 
—

Total equity
569,775

 
783,528

 
661,423

Total liabilities, temporary equity and equity
$
988,016

 
$
1,318,446

 
$
1,187,044


6



EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended June 30,
 
2016
 
2015
 
 
 
 
 
(Unaudited)
 
(in thousands)
Operating activities:
 
 
 
Net loss
$
(92,412
)
 
$
(122
)
Loss from discontinued operations*
100,172

 
7,819

Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,422

 
25,316

Amortization of debt discount and consumer loan premium, net
6,574

 
6,099

Consumer loan loss provision
278

 
18,652

Deferred income taxes
(321
)
 
(5,742
)
Impairment of goodwill
—

 
10,550

Amortization of deferred financing costs
1,318

 
1,213

Other adjustments
961

 
1,348

Loss on sale or disposal of assets
641

 
956

Stock compensation expense (benefit)
3,206

 
(1,319
)
Income from investment in unconsolidated affiliate
(5,626
)
 
(338
)
Changes in operating assets and liabilities, net of business acquisitions:
 
 
 
Service charges and fees receivable
1,838

 
5,329

Inventory
(1,349
)
 
926

Prepaid expenses, other current assets and other assets
(1,038
)
 
(5,124
)
Accounts payable and other, deferred gains and other long-term liabilities
(22,902
)
 
(13,029
)
Customer layaway deposits
781

 
1,127

Restricted cash
(4,861
)
 
(459
)
Income taxes receivable
45,499

 
17,459

Payments of restructuring charges
(8,367
)
 
(3,668
)
Dividends from unconsolidated affiliate
2,197

 
4,842

Net cash provided by operating activities — continuing operations
47,011

 
71,835

Net cash provided by (used in) operating activities — discontinued operations*
10,926

 
(21,523
)
Investing activities:
 
 
 
Loans made
(469,133
)
 
(575,038
)
Loans repaid
291,704

 
409,793

Recovery of pawn loan principal through sale of forfeited collateral
173,710

 
191,170

Additions to property and equipment
(6,408
)
 
(21,914
)
Acquisitions, net of cash acquired
(6,000
)
 
(4,120
)
Investment in unconsolidated affiliate
—

 
(12,140
)
Net cash used in investing activities — continuing operations
(16,127
)
 
(12,249
)
Net cash provided by (used in) investing activities — discontinued operations*
4,590

 
(1,894
)
Financing activities:
 
 
 
Payout of deferred consideration
(14,875
)
 
(6,000
)
Repurchase of redeemable common stock issued due to acquisitions
(11,750
)
 
—

Purchase of subsidiary shares from noncontrolling interest
—

 
(2,774
)
Payments on capital lease obligations
(48
)
 
(355
)
Net cash used in financing activities — continuing operations
(26,673
)
 
(9,129
)
Net cash (used in) provided by financing activities — discontinued operations*
(41,237
)
 
37,713

Effect of exchange rate changes on cash and cash equivalents
(6,506
)
 
(5,691
)
Net (decrease) increase in cash and cash equivalents
(28,016
)
 
59,062

Cash and cash equivalents at beginning of period, excluding held for sale
56,244

 
52,294

Cash and cash equivalents held for sale at beginning of period
2,880

 
3,031

Cash and cash equivalents at end of period
31,108

 
114,387


7



EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Less: cash and cash equivalents held for sale at end of period
(1,728
)
 
(982
)
Cash and cash equivalents at end of period, excluding held for sale
$
29,380

 
$
113,405

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
179,394

 
$
170,185

Issuance of common stock, subject to possible redemption, due to acquisition
—

 
11,696

Deferred consideration
—

 
124

Payable to purchase additional shares of noncontrolling interest
—

 
322


8



EZCORP, Inc.
SELECTED OPERATING SEGMENT RESULTS (UNAUDITED)
U.S. Pawn
The following table presents selected summary financial data from continuing operations for the U.S. Pawn segment:
 
Three Months Ended June 30,
 
Percentage Change
 
2016
 
2015
 
 
 
 
 
 
 
 
(in thousands)
 
 
Net revenues:
 
 
 
 
 
Pawn service charges
$
54,395

 
$
49,609

 
10
 %
 
 
 
 
 
 
Merchandise sales
79,826

 
77,126

 
4
 %
Merchandise sales gross profit
29,240

 
27,043

 
8
 %
Gross margin on merchandise sales
37
%
 
35
%
 
200bps

 
 
 
 
 
 
Jewelry scrapping sales
10,918

 
9,614

 
14
 %
Jewelry scrapping sales gross profit
2,073

 
1,966

 
5
 %
Gross margin on jewelry scrapping sales
19
%
 
20
%
 
(100)bps

 
 
 
 
 
 
Other revenues
39

 
162

 
(76
)%
Net revenues
85,747

 
78,780

 
9
 %
 
 
 
 
 
 
Segment operating expenses:
 
 
 
 
 
Operations
62,733

 
58,902

 
7
 %
Depreciation and amortization
2,888

 
3,707

 
(22
)%
Segment operating contribution
20,126

 
16,171

 
24
 %
 
 
 
 
 
 
Other segment (income) expenses
(52
)
 
65

 
*

Segment contribution
$
20,178

 
$
16,106

 
25
 %
 
 
 
 
 
 
Other data:
 
 
 
 
 
Net earning assets — continuing operations
$
257,396

 
$
223,941

 
15
 %
Inventory turnover — general merchandise (b)
2.5

 
2.9

 
(14
)%
Inventory turnover — jewelry (b)
1.1

 
1.1

 
—
 %
Average monthly ending pawn loan balance per store (a)
$
262

 
$
235

 
11
 %
Average annual yield on pawn loans outstanding
164
%
 
167
%
 
(300)bps

Pawn loan redemption rate (c)
85
%
 
85
%
 
—

*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(b)
Calculation of inventory turnover excludes the effects of scrapping.
(c)
Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

9



Mexico Pawn
The following table presents selected summary financial data from continuing operations for the Mexico Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currency of the Mexican peso. See “Non-GAAP Financial Information” below.
 
Three Months Ended June 30,
 
2016 (GAAP)
 
2015 (GAAP)
 
Percentage Change (GAAP)
 
2016 (Constant Currency)
 
Percentage Change (Constant Currency)
 
 
 
 
 
 
 
 
 
 
 
(in USD thousands)
 
 
 
(in USD thousands)
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Pawn service charges
$
8,078

 
$
7,990

 
1
 %
 
$
9,556

 
20
 %
 
 
 
 
 
 
 
 
 
 
Merchandise sales
14,187

 
15,447

 
(8
)%
 
16,783

 
9
 %
Merchandise sales gross profit
4,633

 
4,420

 
5
 %
 
5,481

 
24
 %
Gross margin on merchandise sales
33
%
 
29
%
 
400bps

 
33
%
 
400bps

 
 
 
 
 
 
 
 
 
 
Jewelry scrapping sales
312

 
886

 
(65
)%
 
369

 
(58
)%
Jewelry scrapping sales gross profit
47

 
19

 
*

 
56

 
*

Gross margin on jewelry scrapping sales
15
%
 
2
%
 
1,300bps

 
15
%
 
1,300bps

 
 
 
 
 
 
 
 
 
 
Other revenues
157

 
274

 
(43
)%
 
186

 
(32
)%
Net revenues
12,915

 
12,703

 
2
 %
 
15,279

 
20
 %
 
 
 
 
 
 
 
 
 
 
Segment operating expenses:
 
 
 
 
 
 
 
 
 
Operations
8,744

 
10,801

 
(19
)%
 
10,344

 
(4
)%
Depreciation and amortization
720

 
1,097

 
(34
)%
 
852

 
(22
)%
Segment operating contribution
3,451

 
805

 
*

 
4,083

 
*

 
 
 
 
 
 
 
 
 
 
Other segment expenses (income) (a)
748

 
336

 
*

 
(12
)
 
*

Segment contribution
$
2,703

 
$
469

 
*

 
$
4,095

 
*

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Net earning assets — continuing operations
$
33,214

 
$
35,464

 
(6
)%
 
$
39,349

 
11
 %
Inventory turnover (b)
2.3

 
2.6

 
(12
)%
 
2.3

 
(12
)%
Average monthly ending pawn loan balance per store (c)
$
71

 
$
70

 
1
 %
 
$
84

 
20
 %
Average annual yield on pawn loans outstanding
192
%
 
194
%
 
(200)bps

 
194
%
 
—

Pawn loan redemption rate (d)
77
%
 
76
%
 
100bps

 
77
%
 
100bps

*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
The three-months ended June 30, 2016 constant currency balance excludes $0.8 million of net foreign currency transaction losses resulting from movement in exchange rates. The three-months ended June 30, 2015 includes net foreign currency transaction losses totaling $0.4 million that are not excluded from the above results.
(b)
Calculation of inventory turnover excludes the effects of scrapping.
(c)
Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(d)
Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

10



U.S. Pawn
The following table presents selected summary financial data from continuing operations for the U.S. Pawn segment:
 
Nine Months Ended June 30,
 
Percentage
Change
 
2016
 
2015
 
 
 
 
 
 
 
 
(in thousands)
 
 
Net revenues:
 
 
 
 
 
Pawn service charges
$
169,630

 
$
158,961

 
7
 %
 
 
 
 
 
 
Merchandise sales
266,560

 
259,040

 
3
 %
Merchandise sales gross profit
102,272

 
88,850

 
15
 %
Gross margin on merchandise sales
38
%
 
34
%
 
400bps

 
 
 
 
 
 
Jewelry scrapping sales
32,117

 
44,012

 
(27
)%
Jewelry scrapping sales gross profit
5,084

 
9,568

 
(47
)%
Gross margin on jewelry scrapping sales
16
%
 
22
%
 
(600)bps

 
 
 
 
 
 
Other revenues
281

 
570

 
(51
)%
Net revenues
277,267

 
257,949

 
7
 %
 
 
 
 
 
 
Segment operating expenses:
 
 
 
 
 
Operations
187,518

 
176,329

 
6
 %
Depreciation and amortization
9,489

 
10,766

 
(12
)%
Segment operating contribution
80,260

 
70,854

 
13
 %
 
 
 
 
 
 
Other segment expenses
1,607

 
64

 
*

Segment contribution
$
78,653

 
$
70,790

 
11
 %
 
 
 
 
 
 
Other data:
 
 
 
 
 
Average monthly ending pawn loan balance per store (a)
$
264

 
$
248

 
6
 %
Average annual yield on pawn loans outstanding
164
%
 
165
%
 
(100)bps

Pawn loan redemption rate (b)
84
%
 
85
%
 
(100)bps

*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(b)
Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

11



Mexico Pawn
The following table presents selected summary financial data from continuing operations for the Mexico Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currency of the Mexican peso. See “Non-GAAP Financial Information” below.
 
Nine Months Ended June 30,
 
2016 (GAAP)
 
2015 (GAAP)
 
Percentage Change (GAAP)
 
2016 (Constant Currency)
 
Percentage Change (Constant Currency)
 
 
 
 
 
 
 
 
 
 
 
(in USD thousands)
 
 
 
(in USD thousands)
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Pawn service charges
$
23,567

 
$
23,035

 
2
 %
 
$
28,216

 
22
 %
 
 
 
 
 
 
 
 
 
 
Merchandise sales
45,376

 
49,910

 
(9
)%
 
54,328

 
9
 %
Merchandise sales gross profit
14,934

 
14,719

 
1
 %
 
17,880

 
21
 %
Gross margin on merchandise sales
33
%
 
29
%
 
400bps

 
33
%
 
400bps

 
 
 
 
 
 
 
 
 
 
Jewelry scrapping sales
1,493

 
3,210

 
(53
)%
 
1,788

 
(44
)%
Jewelry scrapping sales gross profit
271

 
262

 
3
 %
 
325

 
24
 %
Gross margin on jewelry scrapping sales
18
%
 
8
%
 
1,000bps

 
18
%
 
1,000bps

 
 
 
 
 
 
 
 
 
 
Other revenues
231

 
783

 
(70
)%
 
277

 
(65
)%
Net revenues
39,003

 
38,799

 
1
 %
 
46,698

 
20
 %
 
 
 
 
 
 
 
 
 
 
Segment operating expenses:
 
 
 
 
 
 
 
 
 
Operations
28,961

 
31,727

 
(9
)%
 
34,674

 
9
 %
Depreciation and amortization
2,285

 
3,442

 
(34
)%
 
2,736

 
(21
)%
Segment operating contribution
7,757

 
3,630

 
*

 
9,288

 
*

 
 
 
 
 
 
 
 
 
 
Other segment expenses (a)
1,547

 
1,291

 
20
 %
 
884

 
*

Segment contribution
$
6,210

 
$
2,339

 
*

 
$
8,404

 
*

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Average monthly ending pawn loan balance per store (b)
$
68

 
$
64

 
6
 %
 
$
81

 
27
 %
Average annual yield on pawn loans outstanding
194
%
 
196
%
 
(200)bps

 
194
%
 
(200)bps

Pawn loan redemption rate (c)
78
%
 
77
%
 
100bps

 
78
%
 
100bps

*
Represents an increase or decrease in excess of 100% or not meaningful.
(a)
The nine-months ended June 30, 2016 constant currency balance excludes $0.8 million net foreign currency transaction losses resulting from movement in exchange rates. The net foreign currency transaction losses for the nine-months ended June 30, 2015 were $1.1 million and are not excluded from the above results.
(b)
Balance is calculated based upon the average of the monthly ending balance averages during the applicable period.
(c)
Our pawn loan redemption rate represents the percentage of loans made that are repaid, renewed or extended.

12



EZCORP, Inc.
STORE COUNT ACTIVITY
 
Three Months Ended June 30, 2016
 
Company-owned Stores
 
 
 
U.S. Pawn
 
Mexico Pawn
 
Other International
 
Consolidated
 
Franchises
 
 
 
 
 
 
 
 
 
 
As of March 31, 2016
522

 
237

 
27

 
786

 
—

New locations opened
—

 
1

 
—

 
1

 
—

As of June 30, 2016
522

 
238

 
27

 
787

 
—

 
Three Months Ended June 30, 2015
 
Company-owned Stores
 
 
 
U.S. Pawn
 
Mexico Pawn
 
Other International
 
Consolidated
 
Franchises
 
 
 
 
 
 
 
 
 
 
As of March 31, 2015
519

 
262

*
39

 
820

 
2

Locations sold, combined or closed
—

 
(1
)
*
—

 
(1
)
 
(1
)
As of June 30, 2015
519

 
261

 
39

 
819

 
1

* Includes 21 buy/sell stores. One buy/sell store was closed during the period.
 
Nine Months Ended June 30, 2016
 
Company-owned Stores
 
 
 
U.S. Pawn
 
Mexico Pawn
 
Other International
 
Consolidated
 
Franchises
 
 
 
 
 
 
 
 
 
 
As of September 30, 2015
522

 
237

*
27

 
786

 
1

New locations opened
—

 
1

 
—

 
1

 
—

Locations acquired
6

 
1

 
—

 
7

 
—

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

 
(7
)
 
(1
)
As of June 30, 2016
522

 
238

 
27

 
787

 
—

* Includes five buy/sell stores which were converted to Mexico Pawn stores during the three-months ended March 31, 2016.
 
Nine Months Ended June 30, 2015
 
Company-owned Stores
 
 
 
U.S. Pawn
 
Mexico Pawn
 
Other International
 
Consolidated
 
Franchises
 
 
 
 
 
 
 
 
 
 
As of September 30, 2014
504

 
261

*
39

 
804

 
5

New locations opened
5

 
2

*
—

 
7

 
—

Locations acquired
12

 
—

 
—

 
12

 
—

Locations sold, combined or closed
(2
)
 
(2
)
*
—

 
(4
)
 
(4
)
As of June 30, 2015
519

 
261

 
39

 
819

 
1

* Includes 19 buy/sell stores. Two buy/sell stores were opened and one buy/sell store was closed during the period.

13



NON-GAAP FINANCIAL INFORMATION
In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), we provide certain other non-GAAP financial information on a constant currency basis ("constant currency"). We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos and believe that presentation of constant currency results are meaningful and useful in understanding the activities and business metrics of our Mexico Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP condensed consolidated financial statements. We use this non-GAAP financial information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to, but not instead of or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
Constant currency results reported herein are calculated by translating condensed consolidated balance sheet and condensed consolidated statement of operations items denominated in Mexican pesos to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations. For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and nine-months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss.

14



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, where not already included in constant currency segment results above.
Miscellaneous Non-GAAP Financial Measures
 
U.S. Dollar Amount
 
Percentage Change YOY
 
 
 
 
 
(in thousands)
 
 
Consolidated revenue (three-months ended June 30, 2016)
$
170,150

 
3
 %
Currency exchange rate fluctuations
4,160

 
 
Constant currency consolidated revenue (three-months ended June 30, 2016)
$
174,310

 
6
 %
 
 
 
 
Consolidated net revenue (three-months ended June 30, 2016)
$
100,394

 
7
 %
Currency exchange rate fluctuations
2,364

 
 
Constant currency consolidated net revenue (three-months ended June 30, 2016)
$
102,758

 
10
 %
 
 
 
 
Consolidated operating expenses (three-months ended June 30, 2016)
$
93,886

 
(2
)%
Currency exchange rate fluctuations
1,730

 
 
Constant currency consolidated operating expenses (three-months ended June 30, 2016)
$
95,616

 
—
 %
 
 
 
 
Consolidated revenue (nine-months ended June 30, 2016)
$
545,920

 
(1
)%
Currency exchange rate fluctuations
13,942

 
 
Constant currency consolidated revenue (nine-months ended June 30, 2016)
$
559,862

 
2
 %
 
 
 
 
Consolidated net revenue (nine-months ended June 30, 2016)
$
321,369

 
6
 %
Currency exchange rate fluctuations
7,695

 
 
Constant currency consolidated net revenue (nine-months ended June 30, 2016)
$
329,064

 
8
 %
 
 
 
 
Consolidated operating expenses (nine-months ended June 30, 2016)
$
294,504

 
5
 %
Currency exchange rate fluctuations
6,294

 
 
Constant currency consolidated operating expenses (nine-months ended June 30, 2016)
$
300,798

 
7
 %
 
 
 
 
Mexico Pawn loans outstanding as of June 30, 2016
$
16,332

 
(1
)%
Currency exchange rate fluctuations
3,017

 
 
Constant currency Mexico Pawn loans outstanding as of June 30, 2016
$
19,349

 
18
 %

15

EZCORP INC Reports