EZCORP Announces First Quarter Fiscal 2017 Results

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| Source: EZCORP, Inc.
  • Total revenue up $5.1 million to $192.6 million (up $9.8 million to $197.4 million on a constant currency basis1).

  • Profit before tax more than doubled to $13.0 million ($13.9 million on a constant currency basis); four consecutive quarters of YOY profit growth.

  • Earnings per share from continuing operations increased to $0.15 from $0.06.

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.

AUSTIN, Texas, Feb. 02, 2017 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its first quarter ended December 31, 2016.

HIGHLIGHTS FOR FIRST QUARTER FISCAL 2017

Improvements to earning assets generated revenue and profit growth:

  • Positive PLO growth in U.S. and Mexico:

    – Market leading growth in same store pawn loans outstanding (PLO) up 3% in U.S. and down 4% in Mexico (up 14% on a constant currency basis).

    – Leading the U.S. market with average PLO of $287,000 per store.

  • Delivering profitable growth:

    – Growth in revenue and profit before tax, four consecutive quarters of YOY profit growth.

    – Corporate expense savings of 30%; on track for $50 million in FY18.

    – Significant investment in field leadership and customer-facing team members in U.S. Pawn, adding 224 store Team Members, nine field human resources managers, six District Managers and two Divisional Vice Presidents to improve customer experience, particularly during peak sales season; offset impacts of staff turnover; and better coach & mentor store managers.

Strong liquidity position to support growth:

  • $63.7 million cash balance at quarter-end plus $50 million undrawn on our credit facility.

  • Collected $7.8 million in principal on notes receivable from the Grupo Finmart sale during the current quarter, and anticipate collection of an additional $37.4 million in principal during the remainder of fiscal 2017.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP's Chief Executive Officer, said: "Our first quarter results reflect the continued intense focus on market leadership in meeting our customers' desire for cash whenever they want it, combined with consistent execution in pawn fundamentals. We delivered strong operating results in our pawn businesses in the U.S. and Mexico with continued growth in same store pawn loans outstanding (PLO), the most influential driver of revenue and profitability.

"We continue to drive corporate expense savings as we move to a leaner business model and remain on track to reduce corporate expense to $50 million in FY18 from $68 million in FY16.  We are reinvesting a portion of the savings into initiatives to better serve our customers, including product and customer data analytics and feedback; upgrading our technology; and training, coaching and mentoring programs for our field team. We have also made significant investments in field leadership and customer-facing Team Members.  We plan to open about ten new stores in Mexico in FY17.

"We are confident that all these initiatives will continue to improve our pawn operating performance and provide a platform for profitable growth."

1In 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.

CONSOLIDATED RESULTS

  • Total revenue up $5.1 million to $192.6 million, and income from continuing operations net of tax increased $4.8 million to $8.3 million.  (On a constant currency basis, total revenue was up $9.8 million to $197.4 million and income from continuing operations net of tax was up $5.6 million to $9.1 million.)  These results were driven by continued intense focus on market leadership in meeting our customers' desire for cash.

  • Total operating expenses decreased $7.4 million, or 7% (5% on a constant currency basis).  This included a corporate expense decrease of $6.1 million to $13.9 million, or 30% lower, driven by a leaner business model.

OPERATING METRICS

U.S. Pawn Segment

  • Continued focus on meeting customers' desire for cash resulted in an increase in total PLO of 4% to $148.6 million, up 3% on a same store basis.

  • Pawn Service Charges (PSC) increased 4% to $61.0 million, up 3% on a same store basis.

  • Merchandise sales increased 3%, both in total and on a same store basis. The merchandise sales gross margin of 36% remained within our target range of 35-38%, although it was 400bps lower than the prior-year quarter.

  • Slight increase in aged inventory to 9% from 8% of total inventory at the end of the previous quarter, although improved to 9% from 11% at the end of the prior-year quarter.

  • Operations expense increased $3.8 million, or up 6%, primarily due to:

    – 224 customer-facing store Team Members, and field leadership positions including two Divisional Vice Presidents, six District Managers and nine field Human Resources Managers; and

    – Commenced store preventative maintenance program.

  • Segment profit before tax decreased $1.7 million, or 6%, to $27.1 million as a result of increased investments in store operations (as shown above).

Mexico Pawn Segment

  • PLO decreased 3% to $14.1 million, compared to an increase of 13% in the prior-year quarter (up 16% to $16.8 million on a constant currency basis. PSC remained flat at $8.0 million, but was up 18% to $9.4 million on a constant currency basis.

  • Merchandise sales were flat, both in total and on a same store basis (up 19% in constant currency). Merchandise margin of 31%, 400bps lower than the prior-year quarter.

  • Segment profit before tax increased 194%, or $2.8 million, to $4.2 million (up 249%, or $3.6 million on a constant currency basis).

  • Maintained aged inventory levels at 5% of gross inventory, although slight increase from 3% at the end of the previous quarter.

CONFERENCE CALL

EZCORP will host a conference call on Friday, February 3, 2017, 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: 62600120, international 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.

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.

EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended December 31,
 2016 2015
    
 (Unaudited)
 (in thousands, except per share amounts)
Revenues:   
Merchandise sales$111,513  $108,584 
Jewelry scrapping sales9,798  9,621 
Pawn service charges69,013  66,594 
Other revenues2,300  2,758 
Total revenues192,624  187,557 
Merchandise cost of goods sold71,732  66,259 
Jewelry scrapping cost of goods sold8,344  8,076 
Other cost of revenues583  612 
Net revenues111,965  112,610 
Operating expenses:   
Operations77,646  76,018 
Administrative13,927  19,983 
Depreciation and amortization6,373  7,542 
(Gain) loss on sale or disposal of assets(77) 33 
Restructuring  1,692 
Total operating expenses97,869  105,268 
  Operating income14,096  7,342 
Interest expense5,565  4,127 
Interest income(2,616) (9)
Equity in net income of unconsolidated affiliate(1,478) (2,055)
Other (income) expense(423) 102 
Income from continuing operations before income taxes13,048  5,177 
Income tax expense4,782  1,758 
Income from continuing operations, net of tax8,266  3,419 
Loss from discontinued operations, net of tax(1,228) (11,685)
Net income (loss)7,038  (8,266)
Net loss attributable to noncontrolling interest(127) (792)
Net income (loss) attributable to EZCORP, Inc.$7,165  $(7,474)
    
Basic earnings per share attributable to EZCORP, Inc. — continuing operations$0.15  $0.06 
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations$0.15  $0.06 
    
Weighted-average basic shares outstanding54,158  54,895 
Weighted-average diluted shares outstanding54,214  54,909 


EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
 December 31,
 2016
 September 30,
 2016
    
 (Unaudited)  
Assets:   
Current assets:   
Cash and cash equivalents$63,707  $65,737 
Pawn loans162,696  167,329 
Pawn service charges receivable, net30,967  31,062 
Inventory, net143,440  140,224 
Notes receivable, net36,180  41,946 
Income taxes receivable1,518  2,533 
Prepaid expenses and other current assets34,724  33,312 
  Total current assets473,232  482,143 
Investment in unconsolidated affiliate39,875  37,128 
Property and equipment, net54,881  58,455 
Goodwill253,585  253,976 
Intangible assets, net31,708  30,681 
Non-current notes receivable, net39,365  41,119 
Deferred tax asset, net34,667  35,303 
Other assets, net37,187  44,439 
Total assets$964,500  $983,244 
    
Liabilities and equity:   
Current liabilities:   
Accounts payable, accrued expenses and other current liabilities$68,694  $84,285 
Customer layaway deposits9,729  10,693 
  Total current liabilities78,423  94,978 
Long-term debt, net278,936  283,611 
Other long-term liabilities8,259  10,450 
  Total liabilities365,618  389,039 
Commitments and contingencies   
Stockholders’ equity:   
Class A Non-voting Common Stock, par value $.01 per share; shares authorized:100 million as of December 31, 2016 and September 30, 2016;
issued and outstanding: 51,306,608 as of December 31, 2016 and 51,129,144 as of September 30, 2016
513  511 
Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,17130  30 
Additional paid-in capital319,825  318,723 
Retained earnings326,973  319,808 
Accumulated other comprehensive loss(47,577) (44,089)
  EZCORP, Inc. stockholders’ equity599,764  594,983 
Noncontrolling interest(882) (778)
  Total equity598,882  594,205 
Total liabilities and equity$964,500  $983,244 


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Three Months Ended December 31,
 2016 2015
    
 (Unaudited)
 (in thousands)
Operating activities:   
Net income (loss)$7,038  $(8,266)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:   
Depreciation and amortization6,373  8,090 
Amortization of debt discount and deferred financing costs2,826  3,195 
Amortization of prepaid commissions  4,023 
Accretion of notes receivable discount(1,029)  
Consumer loan loss provision583  9,691 
Deferred income taxes750  (4,744)
Other adjustments295  (1,966)
(Gain) loss on sale or disposal of assets(77) 33 
Stock compensation1,808  833 
Income from investment in unconsolidated affiliate(1,478) (2,055)
Changes in operating assets and liabilities:   
Service charges and fees receivable(83) 6,381 
Inventory(615) (2,107)
Prepaid expenses, other current assets and other assets(3,856) (5,592)
Accounts payable and other, deferred gains and other long-term liabilities(21,948) (10,776)
Customer layaway deposits(881) (310)
Income taxes receivable and payable, current, net of excess tax benefit from stock compensation5,004  4,045 
Payments of restructuring charges  (4,943)
Net cash used in operating activities(5,290) (4,468)
Investing activities:   
Loans made(156,457) (173,162)
Loans repaid91,283  106,372 
Recovery of pawn loan principal through sale of forfeited collateral64,430  58,566 
Additions to property and equipment(2,326) (1,139)
Principal collections on notes receivable7,831   
Net cash provided by (used in) investing activities4,761  (9,363)
Financing activities:   
Taxes paid related to net share settlement of equity awards(706)  
Payout of deferred consideration  (8,915)
Proceeds from settlement of forward currency contracts  3,557 
Change in restricted cash  (1,261)
Proceeds from borrowings, net of issuance costs  14,302 
Payments on borrowings  (29,358)
Net cash used in financing activities(706) (21,675)
Effect of exchange rate changes on cash and cash equivalents(795) (837)
Net decrease in cash and cash equivalents(2,030) (36,343)
Cash and cash equivalents at beginning of period65,737  59,124 
Cash and cash equivalents at end of period$63,707  $22,781 


EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
 Three Months Ended December 31, 2016
 U.S. Pawn Mexico
Pawn
 Other
International
 Total
Segments
 Corporate
Items
 Consolidated
            
 (in thousands)
Revenues:           
Merchandise sales$94,861  $16,652  $  $111,513  $  $111,513 
Jewelry scrapping sales8,845  953    9,798    9,798 
Pawn service charges61,045  7,968    69,013    69,013 
Other revenues51  131  2,118  2,300    2,300 
Total revenues164,802  25,704  2,118  192,624    192,624 
Merchandise cost of goods sold60,248  11,484    71,732    71,732 
Jewelry scrapping cost of goods sold7,550  794    8,344    8,344 
Other cost of revenues    583  583    583 
Net revenues97,004  13,426  1,535  111,965    111,965 
Segment and corporate expenses (income):           
Operations67,350  8,640  1,656  77,646    77,646 
Administrative        13,927  13,927 
Depreciation and amortization2,617  631  50  3,298  3,075  6,373 
Gain on sale or disposal of assets(71) (6)   (77)   (77)
Interest expense  2    2  5,563  5,565 
Interest income  (67)   (67) (2,549) (2,616)
Equity in net income of unconsolidated affiliate    (1,478) (1,478)   (1,478)
Other (income) expense(5) 11  (1) 5  (428) (423)
Segment contribution$27,113  $4,215  $1,308  $32,636     
Income from continuing operations before income taxes      $32,636  $(19,588) $13,048 



EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
 
 Three Months Ended December 31, 2015
 U.S. Pawn Mexico
Pawn
 Other
International
 Total
Segments
 Corporate
Items
 Consolidated
            
 (in thousands)
Revenues:           
Merchandise sales$91,994  $16,586  $4  $108,584  $  $108,584 
Jewelry scrapping sales9,600    21  9,621    9,621 
Pawn service charges58,621  7,973    66,594    66,594 
Other revenues193  191  2,374  2,758    2,758 
Total revenues160,408  24,750  2,399  187,557    187,557 
Merchandise cost of goods sold55,461  10,798    66,259    66,259 
Jewelry scrapping cost of goods sold8,060    16  8,076    8,076 
Other cost of revenues    612  612    612 
Net revenues96,887  13,952  1,771  112,610    112,610 
Segment and corporate expenses (income):           
Operations63,545  11,193  1,280  76,018    76,018 
Administrative        19,983  19,983 
Depreciation and amortization3,560  801  51  4,412  3,130  7,542 
Loss on sale or disposal of assets7  26    33    33 
Interest expense86  40    126  4,001  4,127 
Interest income(1)     (1) (8) (9)
Equity in net income of unconsolidated affiliate    (2,055) (2,055)   (2,055)
Restructuring891  328  204  1,423  269  1,692 
Other expense (income)  128  (3) 125  (23) 102 
Segment contribution$28,799  $1,436  $2,294  $32,529     
Income from continuing operations before income taxes      $32,529  $(27,352) $5,177 



EZCORP, Inc.
STORE COUNT ACTIVITY (UNAUDITED)
 
 Three Months Ended December 31, 2016
 Company-owned Stores
 U.S. Pawn Mexico
Pawn
 Other
International
 Consolidated
        
As of September 30, 2016520  239  27  786 
New locations opened       
Locations sold, combined or closed(3)     (3)
As of December 31, 2016517  239  27  783 


 Three Months Ended December 31, 2015
 Company-owned Stores  
 U.S. Pawn Mexico
Pawn
 Other
International
 Consolidated Franchises
          
As of September 30, 2015522  237  27  786  1 
New locations opened  1    1   
Locations sold, combined or closed(6) (1)   (7)  
As of December 31, 2015516  237  27  780  1 
               

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"). 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 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 exchange rate as of December 31, 2016 and 2015 was 20.7 to 1 and 17.3 to 1, respectively. The approximate average exchange rate for the three months ended December 31, 2016 and 2015 was 19.8 to 1 and 16.8 to 1, respectively, however our statement of operations constant currency results reflect the impact of monthly effects of exchange rates and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss and the related foreign currency derivative gain or loss impact.

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, 2016.

Miscellaneous Non-GAAP Financial Measures

 U.S. Dollar
Amount
 Percentage
Change YOY
 (in millions)
    
Consolidated revenue$192.6  3 %
Currency exchange rate fluctuations 4.8    
Constant currency consolidated revenue$197.4  5 %
       
Consolidated income from continuing operations before income taxes$13.0  152 %
Currency exchange rate fluctuations 0.9    
Constant currency income from continuing operations before income taxes$13.9  167 %
       
Mexico Pawn same store loans outstanding$13.7  (4)%
Currency exchange rate fluctuations 2.6    
Constant currency Mexico Pawn same store loans outstanding$16.3  14 %
       
Consolidated income from continuing operations, net of tax$8.3  142 %
Currency exchange rate fluctuations 0.8    
Constant currency income from continuing operations, net of tax$9.1  165 %
       
Consolidated operating expenses$97.9  (7)%
Currency exchange rate fluctuations 1.7    
Constant currency consolidated operating expenses$99.6  (5)%
       
Mexico Pawn loans outstanding$14.1  (3)%
Currency exchange rate fluctuations 2.7    
Constant currency Mexico Pawn loans outstanding$16.8  16 %
       
Mexico Pawn service charges$8.0   %
Currency exchange rate fluctuations 1.4    
Constant currency Mexico Pawn service charges$9.4  18 %
       
Mexico Pawn merchandise revenue$16.7   %
Currency exchange rate fluctuations 3.1    
Constant currency Mexico Pawn merchandise revenue$19.8  19 %
       
Mexico Pawn same store merchandise revenue$16.1   %
Currency exchange rate fluctuations 3.0    
Constant currency Mexico Pawn same store merchandise revenue$19.1  19 %
       
Mexico Pawn segment profit before tax$4.2  194 %
Currency exchange rate fluctuations 0.8    
Constant currency Mexico Pawn segment profit before tax$5.0  249 %

 

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