8-K
EZCORP INC (EZPW)
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): December 14, 2020
_______________________________________________
EZCORP, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________
| Delaware | 0-19424 | 74-2540145 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (IRS Employer<br>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
_______________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
|---|---|---|---|
| Class A Non-voting Common Stock, par value $.01 per share | EZPW | NASDAQ Stock Market | (NASDAQ Global Select Market) |
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:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | 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 | ☐ |
|---|
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 December 14, 2020, EZCORP, Inc. ("EZCORP") issued a press release announcing its results of operations and financial condition for the year ended September 30, 2020. A copy of that press release is attached as Exhibit 99.1.
In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency ("constant currency") and adjusted basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzals and other Latin American currencies. We believe that presentation of constant currency and adjusted results 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 primarily 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 2020 earnings conference call (to be held on December 15, 2020) will be posted in the Investor Relations section of the company’s website at www.ezcorp.com.
The information set forth, or referred to, in this Item 7.01 shall not be deemed "filed" for purposes 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 into any registration statement or other filing made by EZCORP under the Securities Act of 1933 or the Securities Exchange Act of 1934, unless such subsequent filing specifically references this Item 7.01 of this Report.
Item 9.01 — Financial Statements and Exhibits
(d) Exhibits.
| 99.1 | Press Release, dated December 14, 2020, announcing EZCORP, Inc.’s results of operations and financial condition for quarter and year ended September 30, 2020. |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: | December 14, 2020 | By: | /s/ Jason A. Kulas |
| Jason A. Kulas, | |||
| Chief Executive Officer |
Document
EZCORP Reports Fourth Quarter Fiscal Year 2020 Results
Austin, Texas (December 14, 2020) — EZCORP, Inc. (NASDAQ: EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2020.
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.
Results for the fourth quarter of fiscal 2020 were impacted by lower pawn service charges related to stimulus payments and ongoing COVID-19 headwinds, as well as charges and non-cash write-downs associated with the Company's efforts to simplify and streamline its business and other COVID-19 impacts. Given the typical delay between growth in pawn loan originations and pawn service charges, near-term pawn service charge revenue trends will continue to lag the recent stabilization and rebound in new loans made and pawn loans outstanding.
CEO COMMENTARY AND OUTLOOK
Chief Executive Officer Jason Kulas stated, "We continue to make progress on key strategic initiatives. First, we implemented a number of initiatives that will result in a reduction of annual corporate expenses of more than $12 million beginning in fiscal 2021. We have also lowered store-level operating costs by $14 million on an annualized basis. While a majority of those store-level savings will be added back as transaction activity continues to grow, we are realizing significant expense reductions, with an ongoing focus on extracting further operating efficiencies. Second, we continue to strengthen our core pawn business by increasingly leveraging data analytics across geographies to optimize pricing, productivity and returns. Third, recent efforts to rationalize non-core activities have included closing our CASHMAX business in Canada. Finally, we remain focused on innovation to broaden customer engagement across channels, improve the customer experience and capture new business. Our digital pawn servicing platform, Lana, and our other digital efforts have been refocused on achieving these goals.
"At EZCORP, we are focused on optimizing the unique and essential elements of our core pawn business to address customers’ short-term cash needs. We have implemented a culture of continuous operational improvements that will drive operating leverage as we grow and will improve earnings power and shareholder value over time. As we sharpen our focus on continuous improvement in our pawn business, our team is viewing all initiatives through the lens of whether they benefit our core business. We look forward to providing updates on these initiatives in future quarters."
RESULTS FOR FOURTH QUARTER OF FISCAL 2020
•Total revenues declined 22% to $166.9 million, and net revenues declined 26% to $89.6 million. These declines were driven by a reduction in revenue from pawn service charges (PSC), which was down 34% to $55.2 million as a result of lower average pawn loans outstanding (PLO) during the quarter.
•PLO balance at the end of the quarter was $131.3 million, 34% below the prior-year quarter. Pawn loan demand was significantly reduced in the third quarter and into the fourth quarter following economic stimulus actions in the U.S. and constrained traffic in Latin America. Activity levels have started to normalize, with PLO increasing $18.0 million during the quarter as compared to the third quarter of fiscal 2020.
•Operations expenses were $78.2 million, down $13.3 million, or 15%, $3.9 million of which is due to a reduction in accrued short-term and long-term incentive compensation. Administrative expenses decreased by $11.1 million due to a $17.0 million reduction in accrued short-term and long-term incentive compensation, offset by $4.9 million in increased labor costs.
•Management implemented strategic initiatives to remove over $12 million in annual corporate expenses beginning in fiscal 2021 and $14 million related to store-level operating costs, a majority of which will be added back as transaction activity continues to increase.
•Loss before taxes was $28.7 million and diluted loss per share was $0.42, compared to income before taxes of $0.4 million and diluted loss per share of $0.01, respectively, in the prior-year quarter. On an adjusted basis1, loss before taxes was $2.9 million and diluted earnings per share was $0.07, compared to profit before taxes of $10.0 million and diluted earnings per share of $0.13, respectively, in the prior-year quarter.
•Net inventory of $95.9 million decreased 47%, reflecting annualized inventory turnover of 2.8x. Merchandise sales gross margin of 31% decreased 200 bps, but when excluding a $2.6 million increase in reserves resulting from the impact of COVID-19, merchandise sales gross margin was flat at 33%.
•Cash and cash equivalents increased $147.0 million to $304.5 million as of the end of the quarter, with most of the increase attributable to the decline in PLO.
•During the quarter, management began to implement cost savings and refocus initiatives designed to improve bottom line performance and position the Company for sustainable growth focused on the core pawn business. As a result of these initiatives, we recorded the following pre-tax charges in the quarter:
◦$6.4 million in severance benefits related to the elimination of certain management positions;
◦$4.9 million associated with the closure of the CASHMAX business in Canada and related operations;
◦$4.1 million associated with the closure of four stores in U.S. Pawn and three stores in Latin America Pawn; and
◦$5.0 million of other miscellaneous charges.
CONSOLIDATED RESULTS
Three Months Ended September 30
in millions, except per share amounts
| As Reported | Adjusted1 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Total Revenues | $ | 166.9 | $ | 214.3 | $ | 170.9 | $ | 214.3 |
| Net Revenues | $ | 89.6 | $ | 120.9 | $ | 91.3 | $ | 121.1 |
| (Loss) Income from Continuing Operations, Before Tax | $ | (28.7) | $ | 0.4 | $ | 2.9 | $ | 10.0 |
| Net (Loss) Income from Continuing Operations | $ | (23.3) | $ | (0.6) | $ | 3.8 | $ | 7.4 |
| Diluted Earnings Per Share from Continuing Operations | $ | (0.42) | $ | (0.01) | $ | 0.07 | $ | 0.13 |
| Adjusted EBITDA1 | $ | (16.0) | $ | 12.1 | $ | 12.0 | $ | 19.3 |
•Total revenues decreased 22% to $166.9 million. PSC was down 34% to $55.2 million due to lower average PLO during the quarter. PLO increased 16% from June 30 to September 30, compared to a 5% sequential gain in the same period of the prior year.
•Merchandise sales declined 2%, driven primarily by lower inventory levels.
•Scrap sales declined 72% due to a lack of diamond scrap sales in the quarter as compared to the prior year. Jewelry scrap activity was lower than the prior year in response to lower inventory levels, but the impact of lower volume was lessened by margin improvement to 28%, as compared to 10% in the prior-year quarter. Gross profit on scrap sales decreased 24% to $1.7 million.
•Net revenues were down 26% to $89.6 million. Consolidated merchandise sales gross profit decreased 7% to $32.3 million, while consolidated merchandise sales gross margin was 31%. When excluding a $2.6 million increase in inventory reserves resulting from the impact of COVID-19, consolidated merchandise sales gross margin was 33%.
•Consolidated operations expenses decreased 15% primarily due to cost-cutting initiatives at the store level. Total pawn store count increased 1%, consisting of a net 13 stores opened since the end of the prior-year quarter. Administrative expense decreased 78% to $3.1 million, primarily due to a $17.0 million reduction in accrued short-term and long-term incentive compensation, offset by $4.9 million in increased labor costs.
SEGMENT RESULTS
U.S. Pawn
•Total revenue was down 23%, reflecting the impact of lower average PLO on PSC revenue, which was down 32%.
•PLO decreased 32% to $106.3 million, but increased $19.5 million, or 23%, since the end of June, compared to a 6% sequential increase during the same period of the prior year.
•Gross profit on merchandise sales grew $0.7 million, or 2%, reflecting expanded sales margins, partially offset by a 3% reduction in merchandise sales volume, driven primarily by lower inventory levels. Merchandise sales gross margin was 37% (39%, when excluding an increase in inventory reserves of $1.4 million resulting from the impact of COVID-19), at the high end of our targeted range. Annualized inventory turns were 2.5x, a 32% increase over the prior year. Aged general merchandise inventory improved to 4% from 6% in the prior year.
•Segment contribution decreased $14.6 million to $7.6 million. This decrease was the result of a $20.5 million reduction in PSC, partially offset by a $8.4 million reduction in operating expenses ($2.4 million of which attributable to a reduction in accrued short-term and long-term incentive compensation).
Latin America Pawn
•Merchandise sales grew 2%, to $27.3 million (11% to $30.0 million on a constant currency basis). Merchandise sales gross margin was 13% (17% when excluding an increase in inventory reserves of $1.2 million resulting from the impact of COVID-19). Aged general merchandise inventory increased to 8% from 6% in the prior year, but declined sequentially from 19% at the end of the prior quarter.
•PSC decreased 38% to $12.0 million (down 32% to $13.1 million on a constant currency basis) as a result of lower average PLO for the quarter and a lower yield on pawn loans, reflecting our commitment to work with customers by negotiating reduced interest payments on a case-by-case basis.
•Net revenues decreased 40% to $16.0 million (down 33% to $17.8 million on a constant currency basis) primarily due to lower PSC.
•Operations expense was tightly managed, down 16% to $16.4 million.
•Latin America Pawn added seven de novo stores in the quarter. New store openings typically pressure earnings in the short term as they ramp up, but drive higher profitability over time.
•Segment loss for the quarter was $3.9 million ($4.2 million on a constant currency basis), compared to a contribution of $5.8 million in the prior year quarter, primarily reflecting lower PSC revenues.
FORM 10-K
EZCORP’s Annual Report on Form 10-K for fiscal 2020 has been filed with the Securities and Exchange Commission. The report is available in the Investor Relations section of the Company’s website at http://investors.ezcorp.com. EZCORP shareholders may obtain a paper copy of the report, free of charge, by sending a request to the investor relations contact below.
CONFERENCE CALL
EZCORP will host a conference call on Tuesday, December 15, 2020, at 7:00 am Central Time to discuss fiscal fourth quarter results. Analysts and institutional investors may participate on the conference call by dialing (877) 407-0789, Conference ID: 13713707, or internationally by dialing (201) 689-8562. 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 end of the call.
ABOUT EZCORP
Formed in 1989, EZCORP has grown into a leading provider of pawn loans in the United States and Latin America. We also sell 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 1000 Index and Nasdaq Composite Index.
FORWARD LOOKING STATEMENTS
This announcement contains certain forward-looking statements regarding the company’s strategy, initiatives and expected performance. These statements are based on the Company’s current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the company's strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates, will, should or may occur in the future, including future financial or operating results, are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including operating risks, liquidity risks, legislative or regulatory developments, market factors, current or future litigation and risks associated with the COVID-19 pandemic. For a discussion of these and other factors affecting the Company’s business and prospects, see the Company’s annual, quarterly and other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.
Contact:
Email: Investor_Relations@ezcorp.com
Phone: (512) 314-2220
1”Adjusted” basis, which is a non-GAAP measure, excludes certain items. “Constant currency” basis, which is a non-GAAP measure, excludes the impact of foreign currency exchange rate fluctuations. “Free cash flow,” which is a non-GAAP measure, includes certain adjustments to cash flow from operating activities.
For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.
EZCORP, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, | Fiscal Year Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| (Unaudited) | ||||||||
| (in thousands, except per share amounts) | ||||||||
| Revenues: | ||||||||
| Merchandise sales | $ | 105,118 | $ | 107,189 | $ | 498,213 | $ | 453,375 |
| Jewelry scrapping sales | 6,244 | 22,572 | 47,953 | 60,445 | ||||
| Pawn service charges | 55,231 | 83,068 | 272,638 | 327,366 | ||||
| Other revenues | 267 | 1,510 | 4,007 | 6,043 | ||||
| Total revenues | 166,860 | 214,339 | 822,811 | 847,229 | ||||
| Merchandise cost of goods sold | 72,770 | 72,325 | 334,481 | 297,508 | ||||
| Jewelry scrapping cost of goods sold | 4,512 | 20,287 | 38,041 | 52,935 | ||||
| Other cost of revenues | (39) | 871 | 1,054 | 2,338 | ||||
| Net revenues | 89,617 | 120,856 | 449,235 | 494,448 | ||||
| Operating expenses: | ||||||||
| Operations | 78,205 | 91,525 | 341,040 | 358,253 | ||||
| Administrative | 3,100 | 14,167 | 49,897 | 55,990 | ||||
| Impairment of goodwill, intangible and other assets | 7,606 | — | 54,666 | — | ||||
| Depreciation and amortization | 7,653 | 7,683 | 30,827 | 28,797 | ||||
| Loss on sale or disposal of assets and other | (459) | 756 | 801 | 4,399 | ||||
| Other charges | 20,388 | — | 20,388 | — | ||||
| Total operating expenses | 116,493 | 114,131 | 497,619 | 447,439 | ||||
| Operating (loss) income | (26,876) | 6,725 | (48,384) | 47,009 | ||||
| Interest expense | 5,883 | 5,425 | 22,472 | 32,637 | ||||
| Interest income | (761) | (1,449) | (3,173) | (11,086) | ||||
| Equity in net loss (income) of unconsolidated affiliates | (3,467) | 767 | 2,429 | 135 | ||||
| Impairment of investment in unconsolidated affiliates | — | — | — | 19,725 | ||||
| Other (income) expense | 198 | 1,545 | (17) | 1,424 | ||||
| Income from continuing operations before income taxes | (28,729) | 437 | (70,095) | 4,174 | ||||
| Income tax (benefit) expense | (5,389) | 1,029 | (1,632) | 2,406 | ||||
| (Loss) income from continuing operations, net of tax | (23,340) | (592) | (68,463) | 1,768 | ||||
| Loss from discontinued operations, net of tax | — | (53) | — | (457) | ||||
| Net (loss) income | (23,340) | (645) | (68,463) | 1,311 | ||||
| Net loss attributable to noncontrolling interest | — | — | — | (1,230) | ||||
| Net (loss) income attributable to EZCORP, Inc. | $ | (23,340) | $ | (645) | $ | (68,463) | $ | 2,541 |
| Basic (loss) earnings per share attributable to EZCORP, Inc. — continuing operations | $ | (0.42) | $ | (0.01) | $ | (1.24) | $ | 0.05 |
| Diluted (loss) earnings per share attributable to EZCORP, Inc. — continuing operations | $ | (0.42) | $ | (0.01) | $ | (1.24) | $ | 0.05 |
| Weighted-average basic shares outstanding | 55,070 | 55,446 | 55,313 | 55,341 | ||||
| Weighted-average diluted shares outstanding | 55,070 | 55,446 | 55,313 | 55,984 |
EZCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| September 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Assets: | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 304,542 | $ | 157,567 |
| Restricted cash | 8,011 | 4,875 | ||
| Pawn loans | 131,323 | 199,058 | ||
| Pawn service charges receivable, net | 20,580 | 31,802 | ||
| Inventory, net | 95,891 | 179,355 | ||
| Notes receivable, net | — | 7,182 | ||
| Prepaid expenses and other current assets | 32,903 | 25,921 | ||
| Total current assets | 593,250 | 605,760 | ||
| Investments in unconsolidated affiliates | 32,458 | 34,516 | ||
| Property and equipment, net | 56,986 | 67,357 | ||
| Lease right-of-use asset | 183,809 | — | ||
| Goodwill | 257,582 | 300,527 | ||
| Intangible assets, net | 58,638 | 68,044 | ||
| Notes receivable, net | 1,148 | 1,117 | ||
| Deferred tax asset, net | 8,931 | 1,998 | ||
| Other assets | 4,221 | 4,383 | ||
| Total assets | $ | 1,197,023 | $ | 1,083,702 |
| Liabilities and equity: | ||||
| Current liabilities: | ||||
| Current maturities of long-term debt, net | $ | 213 | $ | 214 |
| Accounts payable, accrued expenses and other current liabilities | 71,504 | 77,957 | ||
| Customer layaway deposits | 11,008 | 12,915 | ||
| Lease liability | 49,742 | — | ||
| Total current liabilities | 132,467 | 91,086 | ||
| Long-term debt, net | 251,016 | 238,380 | ||
| Deferred tax liability, net | 524 | 1,985 | ||
| Lease liability | 153,040 | — | ||
| Other long-term liabilities | 10,849 | 7,302 | ||
| Total liabilities | 547,896 | 338,753 | ||
| Commitments and contingencies | ||||
| Stockholders’ equity: | ||||
| Class A Non-Voting Common Stock, par value $0.01 per share; shares authorized: 100 million; issued and outstanding: 52,332,848 as of September 30, 2020 and 52,565,064 as of September 30, 2019 | 521 | 526 | ||
| Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171 as of September 30, 2020 and 2019 | 30 | 30 | ||
| Additional paid-in capital | 398,475 | 407,628 | ||
| Retained earnings | 318,169 | 389,163 | ||
| Accumulated other comprehensive loss | (68,068) | (52,398) | ||
| Total equity | 649,127 | 744,949 | ||
| Total liabilities and equity | $ | 1,197,023 | $ | 1,083,702 |
EZCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Fiscal Year Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2018 | ||||
| (in thousands) | ||||||
| Operating activities: | ||||||
| Net (loss) income | $ | (68,463) | $ | 1,311 | $ | 36,294 |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 30,827 | 28,797 | 25,484 | |||
| Amortization of debt discount and deferred financing costs | 13,200 | 19,759 | 17,595 | |||
| Amortization of lease right-of-use asset | 45,649 | — | — | |||
| Accretion of notes receivable discount and deferred compensation fee | (821) | (4,524) | (9,150) | |||
| Deferred income taxes | (8,393) | 1,616 | 7,916 | |||
| Impairment of goodwill, intangibles and other assets | 54,666 | — | — | |||
| Other adjustments | 1,652 | 5,776 | 2,607 | |||
| Reserve on jewelry scrap receivable | — | 3,646 | — | |||
| Stock compensation expense | (5,094) | 9,751 | 10,784 | |||
| Equity in net loss (gain) from investment in unconsolidated affiliates | 2,429 | 135 | (5,529) | |||
| Impairment of investment in unconsolidated affiliates | — | 19,725 | 11,712 | |||
| Changes in operating assets and liabilities, net of business acquisitions: | ||||||
| Pawn service charges receivable | 11,021 | (732) | (1,788) | |||
| Inventory | 17,043 | (493) | (1,074) | |||
| Prepaid expenses, other current assets and other assets | (875) | 5,732 | 477 | |||
| Accounts payable, accrued expenses and other liabilities | (37,401) | 22,246 | (3,271) | |||
| Customer layaway deposits | (1,647) | 1,176 | 709 | |||
| Income taxes, net of excess tax benefit from stock compensation | (4,715) | (10,404) | (3,785) | |||
| Net cash provided by operating activities | 49,078 | 103,517 | 88,981 | |||
| Investing activities: | ||||||
| Loans made | (568,368) | (737,585) | (707,220) | |||
| Loans repaid | 394,469 | 434,142 | 421,331 | |||
| Recovery of pawn loan principal through sale of forfeited collateral | 304,323 | 288,502 | 266,962 | |||
| Capital expenditures, net | (28,526) | (38,839) | (40,474) | |||
| Acquisitions, net of cash acquired | — | (8,116) | (93,165) | |||
| Investment in unconsolidated affiliate | — | — | (14,036) | |||
| Principal collections on notes receivable | 8,000 | 34,067 | 32,396 | |||
| Net cash provided by (used in) investing activities | 109,898 | (27,829) | (134,206) | |||
| Financing activities: | ||||||
| Taxes paid related to net share settlement of equity awards | (1,459) | (3,288) | (311) | |||
| Payout of deferred consideration | (350) | — | — | |||
| Proceeds from borrowings, net of issuance costs | 912 | 1,064 | 171,409 | |||
| Payments on borrowings | (198) | (196,093) | (3,510) | |||
| Repurchase of common stock | (5,158) | — | — | |||
| Net cash (used in) provided by financing activities | (6,253) | (198,317) | 167,588 | |||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (2,612) | (507) | (654) | |||
| Net increase (decrease) in cash and cash equivalents and restricted cash | 150,111 | (123,136) | 121,709 | |||
| Cash and cash equivalents and restricted cash at beginning of period | 162,442 | 285,578 | 163,869 | |||
| Cash and cash equivalents and restricted cash at end of period | $ | 312,553 | $ | 162,442 | $ | 285,578 |
| Supplemental disclosure of cash flow information | ||||||
| Cash and cash equivalents | $ | 304,542 | $ | 157,567 | $ | 285,311 |
| Restricted cash | 8,011 | 4,875 | 267 | |||
| Total cash and cash equivalents and restricted cash | $ | 312,553 | $ | 162,442 | $ | 285,578 |
| Cash paid during the period for interest | $ | 8,489 | $ | 12,900 | $ | 8,412 |
| Cash paid during the period for income taxes, net | $ | 9,753 | $ | 11,132 | $ | 13,676 |
| Non-cash investing and financing activities: | ||||||
| Pawn loans forfeited and transferred to inventory | $ | 241,252 | $ | 301,357 | $ | 274,590 |
EZCORP, Inc.
OPERATING SEGMENT RESULTS
(Unaudited and in thousands)
| Three Months Ended September 30, 2020 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| U.S. Pawn | Latin America Pawn | Lana | Other<br>International | Total Segments | Corporate Items | Consolidated | ||||||||
| (in thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Merchandise sales | $ | 77,862 | $ | 27,256 | $ | — | $ | — | $ | 105,118 | $ | — | $ | 105,118 |
| Jewelry scrapping sales | 3,786 | 2,458 | — | — | 6,244 | — | 6,244 | |||||||
| Pawn service charges | 43,222 | 12,009 | — | — | 55,231 | — | 55,231 | |||||||
| Other revenues | 43 | (50) | 21 | 253 | 267 | — | 267 | |||||||
| Total revenues | 124,913 | 41,673 | 21 | 253 | 166,860 | — | 166,860 | |||||||
| Merchandise cost of goods sold | 49,056 | 23,714 | — | — | 72,770 | — | 72,770 | |||||||
| Jewelry scrapping cost of goods sold | 2,634 | 1,878 | — | — | 4,512 | — | 4,512 | |||||||
| Other cost of revenues | — | 32 | — | (71) | (39) | — | (39) | |||||||
| Net revenues | 73,223 | 16,049 | 21 | 324 | 89,617 | — | 89,617 | |||||||
| Operating expenses (income): | ||||||||||||||
| Operations | 59,687 | 16,423 | 699 | 1,396 | 78,205 | — | 78,205 | |||||||
| Administrative | — | — | — | — | — | 3,100 | 3,100 | |||||||
| Impairment of goodwill, intangibles and other assets | — | 2 | — | 25 | 27 | 7,579 | 7,606 | |||||||
| Depreciation and amortization | 2,705 | 1,839 | 332 | 8 | 4,884 | 2,769 | 7,653 | |||||||
| Loss (gain) on sale or disposal of assets and other | 151 | — | — | — | 151 | (610) | (459) | |||||||
| Other Charges | 3,106 | 1,715 | 3,258 | 3,802 | 11,881 | 8,507 | 20,388 | |||||||
| Interest expense | — | 255 | — | 85 | 340 | 5,543 | 5,883 | |||||||
| Interest income | — | (425) | — | — | (425) | (336) | (761) | |||||||
| Equity in net loss of unconsolidated affiliates | — | — | — | (3,467) | (3,467) | — | (3,467) | |||||||
| Other expense (income) | — | 147 | — | (8) | 139 | 59 | 198 | |||||||
| Segment contribution (loss) | $ | 7,574 | $ | (3,907) | $ | (4,268) | $ | (1,517) | $ | (2,118) | ||||
| Income (loss) from continuing operations before income taxes | $ | (2,118) | $ | (26,611) | $ | (28,729) | ||||||||
| Three Months Ended September 30, 2019 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| U.S. Pawn | Latin America Pawn | Lana | Other<br>International | Total Segments | Corporate Items | Consolidated | ||||||||
| (in thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Merchandise sales | $ | 80,357 | $ | 26,832 | $ | — | $ | — | $ | 107,189 | $ | — | $ | 107,189 |
| Jewelry scrapping sales | 17,458 | 5,114 | — | — | 22,572 | — | 22,572 | |||||||
| Pawn service charges | 63,711 | 19,357 | — | — | 83,068 | — | 83,068 | |||||||
| Other revenues | 108 | 45 | — | 1,357 | 1,510 | — | 1,510 | |||||||
| Total revenues | 161,634 | 51,348 | — | 1,357 | 214,339 | — | 214,339 | |||||||
| Merchandise cost of goods sold | 52,205 | 20,120 | — | — | 72,325 | — | 72,325 | |||||||
| Jewelry scrapping cost of goods sold | 15,638 | 4,649 | — | — | 20,287 | — | 20,287 | |||||||
| Other cost of revenues | — | — | — | 871 | 871 | — | 871 | |||||||
| Net revenues | 93,791 | 26,579 | — | 486 | 120,856 | — | 120,856 | |||||||
| Operating expenses (income): | ||||||||||||||
| Operations | 68,119 | 19,496 | 2,694 | 1,207 | 91,516 | — | 91,516 | |||||||
| Administrative | — | — | — | — | — | 14,176 | 14,176 | |||||||
| Depreciation and amortization | 2,928 | 1,724 | 10 | 29 | 4,691 | 2,992 | 7,683 | |||||||
| Loss (gain) on sale or disposal of assets | 546 | (52) | — | 260 | 754 | 2 | 756 | |||||||
| Interest expense | — | 39 | — | 211 | 250 | 5,175 | 5,425 | |||||||
| Interest income | — | (375) | — | — | (375) | (1,074) | (1,449) | |||||||
| Equity in net income of unconsolidated affiliates | — | — | — | 767 | 767 | — | 767 | |||||||
| Other (income) expense | — | (30) | — | 1,605 | 1,575 | (30) | 1,545 | |||||||
| Segment contribution (loss) | $ | 22,198 | $ | 5,777 | $ | (2,704) | $ | (3,593) | $ | 21,678 | ||||
| Income from continuing operations before income taxes | $ | 21,678 | $ | (21,241) | $ | 437 | ||||||||
| Fiscal Year Ended September 30, 2020 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| U.S. Pawn | Latin America Pawn | Lana | Other<br>International | Total Segments | Corporate Items | Consolidated | ||||||||
| (in thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Merchandise sales | $ | 391,921 | $ | 106,292 | $ | — | $ | — | $ | 498,213 | $ | — | $ | 498,213 |
| Jewelry scrapping sales | 36,691 | 11,262 | — | — | 47,953 | — | 47,953 | |||||||
| Pawn service charges | 210,081 | 62,557 | — | — | 272,638 | — | 272,638 | |||||||
| Other revenues | 150 | — | 34 | 3,823 | 4,007 | — | 4,007 | |||||||
| Total revenues | 638,843 | 180,111 | 34 | 3,823 | 822,811 | — | 822,811 | |||||||
| Merchandise cost of goods sold | 251,544 | 82,937 | — | — | 334,481 | — | 334,481 | |||||||
| Jewelry scrapping cost of goods sold | 28,064 | 9,977 | — | — | 38,041 | — | 38,041 | |||||||
| Other cost of revenues | — | 101 | — | 953 | 1,054 | — | 1,054 | |||||||
| Net revenues | 359,235 | 87,096 | 34 | 2,870 | 449,235 | — | 449,235 | |||||||
| Operating expenses (income): | ||||||||||||||
| Operations | 261,608 | 69,916 | 4,270 | 5,246 | 341,040 | — | 341,040 | |||||||
| Administrative | — | — | — | — | — | 49,897 | 49,897 | |||||||
| Impairment of goodwill, intangibles and other assets | 10,000 | 35,938 | — | 1,149 | 47,087 | 7,579 | 54,666 | |||||||
| Depreciation and amortization | 11,030 | 7,315 | 1,058 | 68 | 19,471 | 11,356 | 30,827 | |||||||
| Loss (gain) on sale or disposal of assets and other | 385 | (72) | — | (20) | 293 | 508 | 801 | |||||||
| Other Charges | 3,106 | 1,715 | 3,258 | 3,802 | 11,881 | 8,507 | 20,388 | |||||||
| Interest expense | — | 685 | — | 549 | 1,234 | 21,238 | 22,472 | |||||||
| Interest income | — | (1,586) | — | — | (1,586) | (1,587) | (3,173) | |||||||
| Equity in net loss of unconsolidated affiliates | — | — | — | 2,429 | 2,429 | — | 2,429 | |||||||
| Other expense (income) | — | (156) | — | 6 | (150) | 133 | (17) | |||||||
| Segment contribution (loss) | $ | 73,106 | $ | (26,659) | $ | (8,552) | $ | (10,359) | $ | 27,536 | ||||
| Income from continuing operations before income taxes | $ | 27,536 | $ | (97,631) | $ | (70,095) | ||||||||
| Fiscal Year Ended September 30, 2019 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| U.S. Pawn | Latin America Pawn | Lana | Other<br>International | Total Segments | Corporate Items | Consolidated | ||||||||
| (in thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Merchandise sales | $ | 355,996 | $ | 97,379 | $ | — | $ | — | $ | 453,375 | $ | — | $ | 453,375 |
| Jewelry scrapping sales | 45,815 | 14,630 | — | — | 60,445 | — | 60,445 | |||||||
| Pawn service charges | 248,369 | 78,997 | — | — | 327,366 | — | 327,366 | |||||||
| Other revenues | 233 | 179 | — | 5,631 | 6,043 | — | 6,043 | |||||||
| Total revenues | 650,413 | 191,185 | — | 5,631 | 847,229 | — | 847,229 | |||||||
| Merchandise cost of goods sold | 225,136 | 72,372 | — | — | 297,508 | — | 297,508 | |||||||
| Jewelry scrapping cost of goods sold | 39,318 | 13,617 | — | — | 52,935 | — | 52,935 | |||||||
| Other cost of revenues | — | — | — | 2,338 | 2,338 | — | 2,338 | |||||||
| Net revenues | 385,959 | 105,196 | — | 3,293 | 494,448 | — | 494,448 | |||||||
| Operating expenses (income): | ||||||||||||||
| Operations | 269,003 | 74,199 | 7,675 | 7,376 | 358,253 | — | 358,253 | |||||||
| Administrative | — | — | — | — | — | 55,990 | 55,990 | |||||||
| Depreciation and amortization | 11,879 | 6,267 | 10 | 219 | 18,375 | 10,422 | 28,797 | |||||||
| Loss on sale or disposal of assets | 3,402 | 691 | — | 282 | 4,375 | 24 | 4,399 | |||||||
| Interest expense | — | 1,609 | — | 491 | 2,100 | 30,537 | 32,637 | |||||||
| Interest income | — | (1,601) | — | — | (1,601) | (9,485) | (11,086) | |||||||
| Equity in net income of unconsolidated affiliates | — | — | — | 135 | 135 | — | 135 | |||||||
| Impairment of investment in unconsolidated affiliates | — | — | — | 19,725 | 19,725 | — | 19,725 | |||||||
| Other income | — | (93) | — | 1,895 | 1,802 | (378) | 1,424 | |||||||
| Segment contribution (loss) | $ | 101,675 | $ | 24,124 | $ | (7,685) | $ | (26,830) | $ | 91,284 | ||||
| Income from continuing operations before income taxes | $ | 91,284 | $ | (87,110) | $ | 4,174 |
EZCORP, Inc.
STORE COUNT ACTIVITY
(Unaudited)
| Three Months Ended September 30, 2020 | ||||
|---|---|---|---|---|
| U.S. Pawn | Latin America Pawn | Other International | Consolidated | |
| As of June 30, 2020 | 511 | 496 | 22 | 1,029 |
| New locations opened | — | 7 | — | 7 |
| Locations acquired | — | — | — | — |
| Locations sold, combined or closed | (6) | (3) | (22) | (31) |
| As of September 30, 2020 | 505 | 500 | — | 1,005 |
| Three Months Ended September 30, 2019 | ||||
| --- | --- | --- | --- | --- |
| U.S. Pawn | Latin America Pawn | Other International | Consolidated | |
| As of June 30, 2019 | 514 | 470 | 22 | 1,006 |
| New locations opened | — | 10 | — | 10 |
| Locations acquired | — | — | — | — |
| Locations sold, combined or closed | (2) | — | — | (2) |
| As of September 30, 2019 | 512 | 480 | 22 | 1,014 |
| Twelve Months Ended September 30, 2020 | ||||
| --- | --- | --- | --- | --- |
| U.S. Pawn | Latin America Pawn | Other International | Consolidated | |
| As of September 30, 2019 | 512 | 480 | 22 | 1,014 |
| New locations opened | — | 23 | — | 23 |
| Locations acquired | — | — | — | — |
| Locations sold, combined or closed | (7) | (3) | (22) | (32) |
| As of September 30, 2020 | 505 | 500 | — | 1,005 |
| Twelve Months Ended September 30, 2019 | ||||
| --- | --- | --- | --- | --- |
| U.S. Pawn | Latin America Pawn | Other International | Consolidated | |
| As of September 30, 2018 | 508 | 453 | 27 | 988 |
| New locations opened | — | 22 | — | 22 |
| Locations acquired | 7 | 5 | — | 12 |
| Locations sold, combined or closed | (3) | — | (5) | (8) |
| As of September 30, 2019 | 512 | 480 | 22 | 1,014 |
Non-GAAP Financial Information (Unaudited)
In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency ("constant currency") and adjusted basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos and other Latin American currencies. We believe that presentation of constant currency and adjusted results 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 primarily 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 local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the three and twelve months ended September 30, 2020 and 2019 were as follows:
| September 30, | Three Months Ended<br><br>September 30, | Twelve Months Ended<br>September 30, | ||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Mexican peso | 21.6 | 19.7 | 22.1 | 19.4 | 21.0 | 19.4 |
| Guatemalan quetzal | 7.6 | 7.6 | 7.5 | 7.5 | 7.5 | 7.6 |
| Honduran lempira | 24.3 | 24.2 | 24.3 | 24.1 | 24.3 | 24.1 |
| Peruvian sol | 3.5 | 3.4 | 3.5 | 3.3 | 3.4 | 3.3 |
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.
Miscellaneous Non-GAAP Financial Measures
| 2020 Q4 | 2019 Q4 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | ||||||||||||||
| Net loss | $ | (23.3) | $ | (0.6) | ||||||||||
| Loss from discontinued operations, net of tax | — | 0.1 | ||||||||||||
| Interest expense | 5.9 | 5.4 | ||||||||||||
| Interest income | (0.8) | (1.4) | ||||||||||||
| Income tax (benefit) expense | (5.4) | 1.0 | ||||||||||||
| Depreciation and amortization | 7.7 | 7.7 | ||||||||||||
| Adjusted EBITDA | $ | (16.0) | $ | 12.1 | ||||||||||
| Total Revenues | Net Revenues | (Loss) Income Before Tax | Tax Effect | Net (Loss) Income | Adjusted EBITDA | Diluted EPS | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 Q4 Reported | $ | 166.9 | $ | 89.6 | $ | (28.7) | $ | 5.4 | $ | (23.3) | $ | (16.0) | $ | (0.42) |
| Other charges | — | — | 20.4 | (3.7) | 16.7 | 20.4 | 0.30 | |||||||
| Impairment of intangible assets | — | — | 7.6 | (1.7) | 5.9 | 7.6 | 0.11 | |||||||
| Non cash interest | — | — | 3.3 | (0.8) | 2.5 | — | 0.05 | |||||||
| Other adjustments | — | — | 0.7 | 1.8 | 2.5 | (0.2) | 0.04 | |||||||
| Constant currency impact | 4.0 | 1.7 | (0.4) | (0.1) | (0.5) | 0.2 | (0.01) | |||||||
| 2020 Q4 Adjusted | $ | 170.9 | $ | 91.3 | $ | 2.9 | $ | 0.9 | $ | 3.8 | $ | 12.0 | $ | 0.07 |
| Total Revenues | Net Revenues | (Loss) Income Before Tax | Tax Effect | Net (Loss) Income | Adjusted EBITDA | Diluted EPS | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 Q4 Reported | $ | 214.3 | $ | 120.9 | $ | 0.4 | $ | 1.0 | $ | (0.6) | $ | 12.1 | $ | (0.01) |
| Other charges | — | — | 2.4 | 0.4 | 2.0 | — | 0.04 | |||||||
| Impairment of intangible assets | — | — | 2.0 | 0.3 | 1.7 | 2.0 | 0.03 | |||||||
| Non cash interest | — | — | 1.9 | 0.3 | 1.6 | 1.9 | 0.03 | |||||||
| Other adjustments | — | 0.2 | 1.7 | 0.3 | 1.4 | 1.7 | 0.02 | |||||||
| Constant currency impact | — | — | 1.6 | 0.3 | 1.3 | 1.6 | 0.02 | |||||||
| 2019 Q4 Adjusted* | $ | 214.3 | $ | 121.1 | $ | 10.0 | $ | 2.6 | $ | 7.4 | $ | 19.3 | $ | 0.13 |
* During the first quarter of fiscal 2020, we revised the financial information our chief operating decision maker (our chief executive officer) reviews for operational decision-making purposes to include the separate financial results of our Lana business. Our historical segment results have been recast to conform to current presentation including the removal of discretionary strategic investment in digital platform costs in historically adjusted results. We additionally recast certain other adjustments to conform to restated historical results.
| 2020 Q4: | U.S. Dollar Amount | Percentage Change YOY | ||
|---|---|---|---|---|
| (in millions) | ||||
| Consolidated revenue (three months ended September 30, 2020) | $ | 166.9 | (22) | % |
| Currency exchange rate fluctuations | 4.0 | |||
| Constant currency consolidated revenue (three months ended September 30, 2020) | $ | 170.9 | (20) | % |
| Consolidated net revenue (three months ended September 30, 2020) | $ | 89.6 | (26) | % |
| Currency exchange rate fluctuations | $ | 1.7 | ||
| Constant currency consolidated net revenue (three months ended September 30, 2020) | $ | 91.3 | (24) | % |
| Consolidated net inventory | $ | 95.9 | (47) | % |
| Currency exchange rate fluctuations | $ | 1.7 | ||
| Constant currency consolidated net inventory | $ | 97.6 | (46) | % |
| Latin America Pawn net revenue (three months ended September 30, 2020) | $ | 16.0 | (40) | % |
| Currency exchange rate fluctuations | $ | 1.7 | ||
| Constant currency Latin America Pawn net revenue (three months ended September 30, 2020) | $ | 17.8 | (33) | % |
| Latin America Pawn PLO | $ | 25.0 | (40) | % |
| Currency exchange rate fluctuations | $ | 2.4 | ||
| Constant currency Latin America Pawn PLO | $ | 27.4 | (34) | % |
| Latin America Pawn PSC revenues (three months ended September 30, 2020) | $ | 12.0 | (38) | % |
| Currency exchange rate fluctuations | $ | 1.1 | ||
| Constant currency Latin America Pawn PSC revenues (three months ended September 30, 2020) | $ | 13.1 | (32) | % |
| Latin America Pawn merchandise sales (three months ended September 30, 2020) | $ | 27.3 | 2 | % |
| Currency exchange rate fluctuations | $ | 2.8 | ||
| Constant currency Latin America Pawn merchandise sales (three months ended September 30, 2020) | $ | 30.0 | 12 | % |
| Latin America Pawn segment profit before tax (three months ended September 30, 2020) | $ | (3.9) | (168) | % |
| Currency exchange rate fluctuations | $ | (0.3) | ||
| Constant currency Latin America Pawn segment profit before tax (three months ended September 30, 2020) | $ | (4.2) | (103) | % |