Record Pawn Loans Outstanding and Third Quarter Merchandise Sales Drive Strong Revenue and Earnings Growth

EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its third quarter ended June 30, 2023.

Unless otherwise noted, all amounts in this release are in conformity with U.S. generally accepted accounting principles ("GAAP") and comparisons shown are to the same period in the prior year.

THIRD QUARTER HIGHLIGHTS

• Pawn loans outstanding (PLO) up 12% to $229.4 million.
• Total revenue increased 19%, and gross profit increased 15%.
• Merchandise sales gross margin remains within our targeted range at 36%.
• Net income increased $6.0 million to $18.2 million.
• Diluted earnings per share of $0.24, up from $0.17. On an adjusted basis¹, diluted earnings per share of $0.20, compared to $0.16.
• Return on earning assets (ROEA) remains strong at 161%.

CEO COMMENTARY AND OUTLOOK

Lachie Given, Chief Executive Officer, stated, "As a result of our team's persistent pursuit of operational excellence, we achieved record PLO and third quarter revenue and merchandise sales, driving another quarter of robust operating results for our stakeholders.

"We grew our store footprint, opening 13 de novo stores during the quarter. Twelve of the new stores are in Latin America, with five in Mexico, taking our store count there to 540, and seven in Guatemala, expanding our market leadership there to 110 stores. In Las Vegas, we opened an additional Max Pawn luxury store, giving us three luxury pawn stores in that market.

"Our EZ+ Rewards loyalty program has grown to 3.3 million members, an 18% increase over the previous quarter. We continue to implement strategies to win and retain customers and drive customer engagement, enhancing their experience through targeted EZ+ marketing, moving payments online, and improving our retail showrooms. In the local communities we serve, we continue to provide a unique and essential service to our customers, focusing on meeting our customers' immediate cash needs with pawn loans and purchases, while providing outstanding value-for-money, offering a broad array of second-hand goods and a more sustainable way to shop.

"We delivered another strong quarter of operating and financial results through our commitment to People, Pawn, and Passion. Team recruitment, retention, rewards and recognition remain focal points, as we employ the most passionate, productive, and tenured team in the industry. Investing in our people and technology to grow our customer base and improve the customer experience continues to be a successful formula for us in driving excellent financial and operating results for our shareholders," Given concluded.

• Diluted earnings per share of $0.24, up from $0.17. On an adjusted basis, diluted earnings per share of $0.20, up from $0.16.
• Income before taxes was $21.3 million, up from $13.1 million, and adjusted EBITDA increased 8% to $27.0 million.
• PLO increased 12% to $229.4 million, up $25.2 million. On a same-store basis², PLO increased 9% due to improved operational performance and continued strong loan demand.
• Total revenues increased 19% and gross profit increased 15%, reflecting improved pawn service charge (PSC) revenue, merchandise sales and merchandise sales gross profit.
• PSC increased 17% as a result of higher average PLO and yields.
• Merchandise sales gross margin remains within our targeted range at 36%. Aged general merchandise was 1.6% of total general merchandise inventory. This is a 60 bps improvement over the second quarter.
• Net inventory increased 17%, as expected with the growth in PLO. Inventory turnover remained strong at 2.8x.
• Store expenses increased 17%, primarily due to increased labor in-line with store activity, higher store count and, to a lesser extent, expenses related to our loyalty program and rent. On a same-store basis, store expenses increased 12%. General and administrative expenses decreased 4%, primarily due to the litigation accrual charge of $2.0 million recorded in prior period partially offset by an increase in costs related to our Workday implementation.
• Cash and cash equivalents at the end of the quarter was $238.0 million, up 7% year-over-year. The increase was primarily due to cash inflows provided by operating activities and the net cash proceeds associated with the convertible debt refinancing offset by the increase in PLO and inventory, the acquisition of new stores, and strategic investments.

SEGMENT RESULTS

U.S. Pawn

• PLO ended the quarter at $178.9 million, up 12% or 9% on a same store basis.
• Total revenue was up 16% and gross profit increased 12%, reflecting increased PSC and higher merchandise sales.
• PSC increased 16% as a result of higher average PLO.
• Merchandise sales gross margin decreased to 39% from 41%, within our target range. Aged general merchandise was 1.0% of total general merchandise inventory. This is a 40 bps improvement over the second quarter.
• Net inventory increased 13%, as expected with the growth in PLO. Inventory turnover increased to 2.6x from 2.5x.
• Store expenses increased 14%, primarily due to increased labor in-line with store activity, higher store count and, to a lesser extent, expenses related to our loyalty program.
• Segment contribution increased 9% to $32.3 million.
• Segment store count increased by 1 de novo store during the quarter.

Latin America Pawn

• PLO improved to $50.5 million, up 14% (1% on constant currency basis). On a same store basis, PLO increased 11% (decreased 2% on a constant currency basis). PLO balance was lower than expected with a greater pay down during the quarter driven by a change in Mexican law, which significantly increased profit share required to be paid by companies to employees by May 30.
• Total revenue was up 26% (15% on constant currency basis) and gross profit increased 24% (14% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.
• PSC increased 19% (10% on a constant currency basis) as a result of higher average PLO and yield.
• Merchandise sales gross margin increased from 29% to 30%. Aged general merchandise increased to 2.4% from 1.3% of total merchandise inventory. This is a 80 bps improvement over the second quarter.
• Net inventory increased 30% (13% on a constant currency basis), as expected with the growth in PLO. Inventory turnover remained strong at 3.4x, down from 3.7x.
• Store expenses increased 26% (14% on a constant currency basis), primarily due to rent linked to inflation, higher store count and, to a lesser extent, expenses related to our loyalty program. Same-store expenses increased 21% (9% on a constant currency basis).
• Segment contribution increased 59% (48% on a constant currency basis) to $9.7 million. On an adjusted basis, segment contribution was up 12% to $6.7 million, with the primary adjustment being the reversal of contingent consideration liability in connection with a previously completed acquisition.
• Segment store count increased by 12 de novo stores during the quarter.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 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.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, August 3, 2023, at 8:00 am Central Time to discuss Third Quarter Fiscal 2023 results. Analysts and institutional investors may participate on the conference call by dialing (833) 470-1428, Conference ID: 870985, or internationally by dialing (404) 975-4839. 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 transactions in the United States and Latin America. We also sell merchandise, primarily collateral forfeited from pawn lending operations and pre-owned and recycled 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 S&P 1000 Index and Nasdaq Composite Index.

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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.

Note: Percentages are calculated from the underlying numbers in thousands and, as a result, may not agree to the percentages calculated from numbers in millions.

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.

²“Same Store” basis, which is a financial measure, includes stores open the entirety of the comparable periods.

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, Guatemalan quetzales 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. In addition, we have an equity method investment that is denominated in Australian dollars and is translated into U.S. dollars. 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 nine months ended June 30, 2023 and 2022 were as follows:

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