Form 8-K Ezcorp Inc

Current report, items 2.02, 7.01, and 9.01

Published: 2018-11-14 16:13:45
Submitted: 2018-11-14
Period Ending In: 2018-11-14
a2018-q4earningsrelease8xk.htm 8-K




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________________________________________ 
FORM 8-K
_______________________________________________________ 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 14, 2018 (November 14, 2018)
 _______________________________________________ 
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 14, 2018, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the quarter and year ended September 30, 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 on an 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. As Camira Administration Corp. and subsidiaries ("GPMX") was not acquired until fiscal 2018, such results included on a constant currency basis reflect the actual exchange rates in effect during fiscal 2018 without adjustment. 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 results on an adjusted basis is meaningful and useful in understanding the activities and business metrics of our 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 provide 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, 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 fiscal 2018 earnings conference call (to be held on November 15, 2018) will be posted in the Investor Relations section of the Company’s website at www.ezcorp.com.
Item 9.01 — Financial Statements and 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 14, 2018
 
 
 
By:
 
/s/ David McGuire
 
 
 
 
 
 
 
David McGuire
 
 
 
 
 
 
 
Deputy Chief Financial Officer and Chief Accounting Officer


a2018-q4earningsreleaseexh.htm EXHIBIT 99.1




fy2014q1ezcorpa01a04a19.jpg
EZCORP Reports Fourth Quarter and Fiscal Year 2018 Results
Austin, Texas (November 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.
HIGHLIGHTS
Profit before tax was $3.7 million in the quarter and $57.1 million for the year. Adjusted profit before tax1 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 basis2). 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.
CEO COMMENTARY AND OUTLOOK
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."
CONSOLIDATED RESULTS
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.
SEGMENT RESULTS
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).




CONFERENCE CALL
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.
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 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

All industry comparisons are based on available information from similar publicly traded companies.
1Adjusted basis, which is a non-GAAP measure, excludes certain items. For additional information about these calculations, as well as a reconciliation to the comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.
2“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 comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.




EZCORP, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended September 30,
 
Fiscal Year Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
(in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Merchandise sales
$
105,102

 
$
95,166

 
$
438,372

 
$
414,838

Jewelry scrapping sales
16,586

 
13,531

 
60,752

 
51,189

Pawn service charges
82,335

 
71,097

 
305,936

 
273,080

Other revenues
2,308

 
2,275

 
8,455

 
8,847

Total revenues
206,331

 
182,069

 
813,515

 
747,954

Merchandise cost of goods sold
66,335

 
61,685

 
276,618

 
266,525

Jewelry scrapping cost of goods sold
14,754

 
11,736

 
52,290

 
43,931

Other cost of revenues
424

 
555

 
1,697

 
1,988

Net revenues
124,818

 
108,093

 
482,910

 
435,510

Operating expenses:
 
 
 
 
 
 
 
Operations
85,847

 
78,284

 
334,649

 
304,636

Administrative
13,726

 
11,949

 
53,653

 
53,254

Depreciation and amortization
7,186

 
5,415

 
25,484

 
23,661

Loss on sale or disposal of assets
10

 
348

 
463

 
359

Total operating expenses
106,769

 
95,996

 
414,249

 
381,910

Operating income
18,049

 
12,097

 
68,661

 
53,600

Interest expense
8,764

 
10,956

 
27,834

 
27,803

Interest income
(4,145
)
 
(5,194
)
 
(17,041
)
 
(12,103
)
Equity in net income of unconsolidated affiliate
(2,052
)
 
(1,148
)
 
(5,529
)
 
(4,916
)
Impairment of investment
11,712

 

 
11,712

 

Other expense (income)
82

 
(129
)
 
(5,391
)
 
(423
)
Income from continuing operations before income taxes
3,688

 
7,612

 
57,076

 
43,239

Income tax expense (benefit)
3,238

 
(2,457
)
 
18,149

 
11,206

Income from continuing operations, net of tax
450

 
10,069

 
38,927

 
32,033

(Loss) income from discontinued operations, net of tax
(225
)
 
43

 
(856
)
 
(1,825
)
Net income
225

 
10,112

 
38,071

 
30,208

Net income (loss) attributable to noncontrolling interest
360

 
(1,298
)
 
(988
)
 
(1,650
)
Net (loss) income attributable to EZCORP, Inc.
$
(135
)
 
$
11,410

 
$
39,059

 
$
31,858

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

 
$
0.21

 
$
0.73

 
$
0.62

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

 
$
0.21

 
$
0.69

 
$
0.62

 
 
 
 
 
 
 
 
Weighted-average basic shares outstanding
54,466

 
54,298

 
54,456

 
54,260

Weighted-average diluted shares outstanding
57,390

 
54,428

 
57,896

 
54,368






EZCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
September 30,
 
2018
 
2017
 
 
 
 
Assets:
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
286,015

 
$
164,393

Pawn loans
198,463

 
169,242

Pawn service charges receivable, net
38,318

 
31,548

Inventory, net
166,997

 
154,411

Notes receivable, net
34,199

 
32,598

Prepaid expenses and other current assets
33,154

 
28,765

Total current assets
757,146

 
580,957

Investment in unconsolidated affiliate
49,500

 
43,319

Property and equipment, net
73,649

 
57,959

Goodwill
297,448

 
254,760

Intangible assets, net
54,923

 
32,420

Notes receivable, net
3,226

 
28,377

Deferred tax asset, net
7,165

 
16,856

Other assets, net
3,863

 
9,715

Total assets
$
1,246,920

 
$
1,024,363

 
 
 
 
Liabilities and equity:
 
 
 
Current liabilities:
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
57,800

 
$
61,543

Current Maturities of long-term debt
190,181

 

Customer layaway deposits
11,824

 
11,032

Total current liabilities
259,805

 
72,575

Long-term debt, net
226,702

 
284,807

Deferred tax liability
8,817

 

Other long-term liabilities
6,890

 
7,055

Total liabilities
502,214

 
364,437

Stockholders’ equity:
 
 
 
Class A Non-Voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding: 51,614,746 as of September 30, 2018 and 51,427,832 as of September 30, 2017
516

 
514

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
397,927

 
348,532

Retained earnings
392,180

 
351,666

Accumulated other comprehensive loss
(42,616
)
 
(38,367
)
EZCORP, Inc. stockholders’ equity
748,037

 
662,375

Noncontrolling interest
(3,331
)
 
(2,449
)
Total equity
744,706

 
659,926

Total liabilities and equity
$
1,246,920

 
$
1,024,363






EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Fiscal Year Ended September 30,
 
2018
 
2017
 
 
 
 
 
(in thousands)
Operating activities:
 
 
 
Net income
$
38,071

 
$
30,208

Adjustments to reconcile net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
25,484

 
23,661

Amortization of debt discount and deferred financing costs
17,595

 
12,303

Accretion of notes receivable discount
(9,150
)
 
(3,788
)
Deferred income taxes
7,978

 
6,046

Other adjustments
2,607

 
2,364

Gain on restructured notes receivable

 
(3,048
)
Loss on extinguishment of debt and other

 
5,250

Stock compensation expense
10,784

 
5,866

Income from investment in unconsolidated affiliate
(5,529
)
 
(4,916
)
Impairment of investments in unconsolidated affiliate
11,712

 

Changes in operating assets and liabilities:
 
 
 
Service charges and fees receivable
(3,153
)
 
(224
)
Inventory
(1,074
)
 
721

Prepaid expenses, other current assets and other assets
214

 
11,314

Accounts payable, accrued expenses and other liabilities
(3,902
)
 
(31,041
)
Customer layaway deposits
709

 
241

Income taxes, net of excess tax benefit from stock compensation
(3,622
)
 
3,027

Net cash provided by operating activities
88,724

 
57,984

Investing activities:
 
 
 
Loans made
(707,220
)
 
(646,625
)
Loans repaid
421,331

 
386,383

Recovery of pawn loan principal through sale of forfeited collateral
266,962

 
244,632

Additions to property and equipment
(40,474
)
 
(25,001
)
Acquisitions, net of cash acquired
(93,165
)
 
(2,250
)
Investment in unconsolidated affiliate
(14,036
)
 

Principal collections on notes receivable
32,396

 
29,458

Net cash used in investing activities
(134,206
)
 
(13,403
)
Financing activities:
 
 
 
Taxes paid related to net share settlement of equity awards
(311
)
 
(767
)
Proceeds from borrowings, net of issuance costs
171,409

 
139,506

Payments on borrowings
(3,510
)
 
(85,388
)
Net cash provided by financing activities
167,588

 
53,351

Effect of exchange rate changes on cash and cash equivalents
(484
)
 
724

Net increase in cash and cash equivalents
121,622

 
98,656

Cash and cash equivalents at beginning of period
164,393

 
65,737

Cash and cash equivalents at end of period
$
286,015

 
$
164,393

Non-cash investing and financing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
274,590

 
$
257,388






EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
Three Months Ended September 30, 2018
  
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Merchandise sales
$
80,554

 
$
24,548

 
$

 
$
105,102

 
$

 
$
105,102

Jewelry scrapping sales
13,230

 
3,356

 

 
16,586

 

 
16,586

Pawn service charges
63,022

 
19,313

 

 
82,335

 

 
82,335

Other revenues
45

 
(503
)
 
2,766

 
2,308

 

 
2,308

Total revenues
156,851

 
46,714

 
2,766

 
206,331

 

 
206,331

Merchandise cost of goods sold
49,443

 
16,892

 

 
66,335

 

 
66,335

Jewelry scrapping cost of goods sold
11,734

 
3,020

 

 
14,754

 

 
14,754

Other cost of revenues

 

 
424

 
424

 

 
424

Net revenues
95,674

 
26,802

 
2,342

 
124,818

 

 
124,818

Segment and corporate expenses (income):
 
 
 
 
 
 
 
 
 
 
 
Operations
66,346

 
16,583

 
2,918

 
85,847

 

 
85,847

Administrative

 

 

 

 
13,726

 
13,726

Depreciation and amortization
3,529

 
1,356

 
42

 
4,927

 
2,259

 
7,186

Loss (gain) on sale or disposal of assets
6

 
(4
)
 

 
2

 
8

 
10

Interest expense
71

 
19

 

 
90

 
8,674

 
8,764

Interest income

 
(547
)
 

 
(547
)
 
(3,598
)
 
(4,145
)
Equity in net income of unconsolidated affiliate

 

 
(2,052
)
 
(2,052
)
 

 
(2,052
)
Impairment of investment

 

 
11,712

 
11,712

 

 
11,712

Other income

 
(53
)
 
(14
)
 
(67
)
 
149

 
82

Segment contribution (loss)
$
25,722

 
$
9,448

 
$
(10,264
)
 
$
24,906

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
24,906

 
$
(21,218
)
 
$
3,688






EZCORP, Inc.
OPERATING SEGMENT RESULTS
 
Twelve Months Ended September 30, 2018
  
U.S. Pawn
 
Latin America Pawn
 
Other
International
 
Total Segments
 
Corporate Items
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Merchandise sales
$
350,699

 
$
87,673

 
$

 
$
438,372

 
$

 
$
438,372

Jewelry scrapping sales
47,745

 
13,007

 

 
60,752

 

 
60,752

Pawn service charges
237,461

 
68,475

 

 
305,936

 

 
305,936

Other revenues
250

 
85

 
8,120

 
8,455

 

 
8,455

Total revenues
636,155

 
169,240

 
8,120

 
813,515

 

 
813,515

Merchandise cost of goods sold
216,408

 
60,210

 

 
276,618

 

 
276,618

Jewelry scrapping cost of goods sold
40,417

 
11,873

 

 
52,290

 

 
52,290

Other cost of revenues

 

 
1,697

 
1,697

 

 
1,697

Net revenues
379,330

 
97,157

 
6,423

 
482,910

 

 
482,910

Segment and corporate expenses (income):
 
 
 
 
 
 
 
 
 
 
 
Operations
263,094

 
61,361

 
10,194

 
334,649

 

 
334,649

Administrative

 

 

 

 
53,653

 
53,653

Depreciation and amortization
12,869

 
4,068

 
184

 
17,121

 
8,363

 
25,484

Loss on sale or disposal of assets
203

 
27

 

 
230

 
233

 
463

Interest expense
71

 
25

 

 
96

 
27,738

 
27,834

Interest income

 
(2,619
)
 

 
(2,619
)
 
(14,422
)
 
(17,041
)
Equity in net income of unconsolidated affiliate

 

 
(5,529
)
 
(5,529
)
 

 
(5,529
)
Impairment of investments

 

 
11,712

 
11,712

 

 
11,712

Other income
(3
)
 
(42
)
 
(132
)
 
(177
)
 
(5,214
)
 
(5,391
)
Segment contribution (loss)
$
103,096

 
$
34,337

 
$
(10,006
)
 
$
127,427

 
 
 
 
Income from continuing operations before income taxes
 
 
 
 
 
 
$
127,427

 
$
(70,351
)
 
$
57,076






EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
Three Months Ended September 30, 2017
  
U.S. Pawn
 
Latin America 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
)
Impairment of investments

 

 

 

 

 

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
 
Latin America 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.
STORE COUNT ACTIVITY (UNAUDITED)
 
Three Months Ended September 30, 2018
 
U.S. Pawn
 
Latin America Pawn
 
Other International
 
Consolidated
 
 
 
 
 
 
 
 
As of June 30, 2018
510

 
451

 
27

 
988

New locations opened

 
2

 

 
2

Locations sold, combined or closed
(2
)
 

 

 
(2
)
As of September 30, 2018
508

 
453

 
27

 
988

 
Three Months Ended September 30, 2017
 
U.S. Pawn
 
Latin America 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

 
Twelve Months Ended September 30, 2018
 
U.S. Pawn
 
Latin America Pawn
 
Other International
 
Consolidated
 
 
 
 
 
 
 
 
As of September 30, 2017
513

 
246

 
27

 
786

New locations opened

 
12

 

 
12

Locations acquired

 
196

 

 
196

Locations sold, combined or closed
(5
)
 
(1
)
 

 
(6
)
As of September 30, 2018
508

 
453

 
27

 
988

 
Twelve Months Ended September 30, 2017
 
U.S. Pawn
 
Latin America 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

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 on a constant currency basis ("constant currency") and on an 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. As GPMX was not acquired until fiscal 2018, such results included on a constant currency basis reflect the actual exchange rates in effect during the year ended September 30, 2018 without adjustment. 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 results on an adjusted basis is meaningful and useful in understanding the activities and business metrics of our 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 provide 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, our





financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in Mexican pesos to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current 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 Mexican peso to U.S. dollar exchange rate as of September 30, 2018 and 2017 was 18.7 to 1 and 18.2 to 1, respectively. The approximate average Mexican peso to U.S. dollar exchange rate for the years ended September 30, 2018, 2017 and 2016 was 19 to 1, 19.1 to 1, and 17.9, respectively.
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 September 30, 2018.
Miscellaneous Non-GAAP Financial Measures (Unaudited)
 
Three Months Ended September 30,
 
Fiscal Year Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(in millions)
Income from continuing operations before income taxes
$
3.7

 
$
7.6

 
$
57.1

 
$
43.2

Impairment of investment
11.7

 

 
11.7

 

Acquisition expenses
0.2

 
0.8

 
0.8

 
1.1

Currency exchange rate fluctuations
0.6

 

 
0.1

 
(0.4
)
Net revenue impact from Hurricanes Harvey and Irma

 
0.2

 

 
0.2

Operating expense impact from Hurricanes Harvey and Irma

 
0.9

 

 
0.9

Impact from restructuring of Grupo Finmart notes receivable

 
(3.0
)
 

 
(3.0
)
Debt extinguishment costs

 
5.2

 

 
5.2

Litigation settlement

 

 
(5.2
)
 

Asset disposal

 

 
(0.1
)
 
0.2

Organizational realignment expenses

 

 

 
1.1

Adjusted income from continuing operations before income taxes
$
16.2

 
$
11.7

 
$
64.4

 
$
48.5

 
 
 
 
 
 
 
 
Basic earnings per share
 
 
 
 
$
0.73

 
$
0.62

Impairment of investment, net of tax impact per share
 
 
 
 
0.16

 

Acquisition expenses, net of tax impact per share
 
 
 
 
0.01

 
0.02

Operating expense impact from Hurricanes Harvey and Irma, net of tax impact per share
 
 
 
 

 
0.02

Impact from restructuring of Grupo Finmart notes receivable, net of tax impact per share
 
 
 
 

 
(0.09
)
Debt extinguishment costs, net of tax impact per share
 
 
 
 

 
0.06

Litigation settlement, net of tax impact per share
 
 
 
 
(0.06
)
 

Organizational realignment expenses, net of tax impact per share
 
 
 
 

 
0.01

Adjusted basic earnings per share
 
 
 
 
$
0.84

 
$
0.64

 
 
 
 
 
 
 
 
Diluted earnings per share
 
 
 
 
$
0.69

 
$
0.62

Impairment of investment, net of tax impact per share
 
 
 
 
0.15

 

Acquisition expenses, net of tax impact per share
 
 
 
 
0.01

 
0.02

Operating expense impact from Hurricanes Harvey and Irma, net of tax impact per share
 
 
 
 

 
0.02

Impact from restructuring of Grupo Finmart notes receivable, net of tax impact per share
 
 
 
 

 
(0.09
)
Debt extinguishment costs, net of tax impact per share
 
 
 
 

 
0.06

Litigation settlement, net of tax impact per share
 
 
 
 
(0.06
)
 

Organizational realignment expenses, net of tax impact per share
 
 
 
 

 
0.01

Adjusted diluted earnings per share
 
 
 
 
$
0.79

 
$
0.64






 
U.S. Dollar Amount
 
Percentage Change YOY
 
 
 
 
 
(in millions)
 
 
Latin America Pawn segment profit before tax (three months ended September 30, 2018)
$
9.4

 
63
%
Currency exchange rate fluctuations
0.4

 
 
Constant currency Latin America Pawn segment profit before tax (three months ended September 30, 2018)
$
9.8

 
69
%
 
 
 
 
Latin America Pawn segment profit before tax (twelve months ended September 30, 2018)
$
34.3

 
84
%
Currency exchange rate fluctuations
(0.1
)
 
 
Constant currency Latin America Pawn segment profit before tax (twelve months ended September 30, 2018)
$
34.2

 
83
%
 
 
 
 
Consolidated net revenue (twelve months ended September 30, 2018)
$
482.9

 
11
%
Currency exchange rate fluctuations
0.1

 
 
Constant currency consolidated net revenue (twelve months ended September 30, 2018)
$
482.9

 
11
%
 
 
 
 
Consolidated PSC revenue (twelve months ended September 30, 2018)
$
305.9

 
12
%
Currency exchange rate fluctuations
0.4

 
 
Constant currency consolidated PSC revenue (twelve months ended September 30, 2018)
$
306.3

 
12
%
 
 
 
 
Consolidated merchandise sales gross profit (twelve months ended September 30, 2018)
$
161.8

 
9
%
Currency exchange rate fluctuations
(0.1
)
 
 
Constant currency consolidated merchandise sales gross profit (twelve months ended September 30, 2018)
$
161.7

 
9
%
 
 
 
 
Consolidated operations expenses (twelve months ended September 30, 2018)
$
334.6

 
10
%
Currency exchange rate fluctuations

 
 
Constant currency consolidated operations expenses (twelve months ended September 30, 2018)
$
334.6

 
10
%
 
 
 
 
U.S. Pawn same store PLO
$
155.0

 
5
%
U.S. Pawn same store PLO for Hurricanes Harvey and Irma impacted
(50.8
)
 
 
U.S. Pawn adjusted same store PLO
$
104.2

 
2
%
 
 
 
 
Latin America Pawn PLO
$
43.5

 
106
%
Currency exchange rate fluctuations
0.8

 
 
Constant currency Latin America Pawn PLO
$
44.3

 
110
%
 
 
 
 
Latin American Pawn same store PLO
$
22.0

 
4
%
Currency exchange rate fluctuations
0.6

 
 
Constant currency Latin America Pawn same store PLO
$
22.6

 
7
%
 
 
 
 
Latin America Pawn net revenue (three months ended September 30, 2018)
$
26.8

 
74
%
Currency exchange rate fluctuations
1.2

 
 
Constant currency Latin America Pawn net revenue (three months ended September 30, 2018)
$
28.0

 
82
%
 
 
 
 
Latin America Pawn PSC revenue (three months ended September 30, 2018)
$
19.3

 
90
%
Currency exchange rate fluctuations
0.8

 
 
Constant currency Latin America Pawn PSC revenue (three months ended September 30, 2018)
$
20.1

 
99
%
 
 
 
 
Latin America Pawn merchandise sales (three months ended September 30, 2018)
$
24.5

 
50
%
Currency exchange rate fluctuations
1.3

 
 
Constant currency Latin America Pawn merchandise sales (three months ended September 30, 2018)
$
25.8

 
57
%
 
 
 
 
Latin America Pawn same store merchandise sales (three months ended September 30, 2018)
$
17.0

 
4
%
Currency exchange rate fluctuations
1.0

 
 
Constant currency Latin America Pawn same store merchandise sales (three months ended September 30, 2018)
$
18.0

 
4
%
 
 
 
 
Latin America Pawn merchandise sales gross profit (three months ended September 30, 2018)
$
7.7

 
54
%
Currency exchange rate fluctuations
0.4

 
 
Constant currency Latin America Pawn merchandise sales gross profit (three months ended September 30, 2018)
$
8.1

 
63
%
 
 
 
 
Latin America Pawn merchandise sales (twelve months ended September 30, 2018)
$
87.7

 
39
%
Currency exchange rate fluctuations
(0.2
)
 
 
Constant currency Latin America Pawn merchandise sales (twelve months ended September 30, 2018)
$
87.5

 
39
%
 
 
 
 
Latin America Pawn same store merchandise sales (twelve months ended September 30, 2018)
$
66.8

 
7
%
Currency exchange rate fluctuations
(0.3
)
 
 
Constant currency Latin America Pawn same store merchandise sales(twelve months ended September 30, 2018)
$
66.5

 
6
%


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fy2014q1ezcorpa01a04a19.jpg 3 GRAPHIC 21516
$EZPW

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