Market Overview

EZCORP Announces Third Quarter Fiscal 2017 Results

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AUSTIN, Texas, July 31, 2017 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its third quarter ended June 30, 2017.

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.

HIGHLIGHTS FOR THIRD QUARTER FISCAL 2017

The company produced its sixth consecutive quarter of year-over-year (YOY) earnings and profit growth with earnings per share up 100% to $0.10 and income from continuing operations before income taxes up 133% to $8.9 million.

Market leading same store pawn loans outstanding (PLO), the most influential driver of revenue and profitability, up 4% in the U.S. and 16% in Mexico. The same store PLO increase in Mexico was 13% when calculated on a constant currency basis1.

Unrestricted cash balance at the end of the quarter was up 287% YOY to $113.7 million. Shortly after the end of the quarter, the company also completed its $143.8 million offering of convertible senior notes due 2024, further strengthening its balance sheet and liquidity, as well as paying off its higher rate secured term debt and retiring a portion of its cash convertible senior notes due 2019.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP's Chief Executive Officer, said: "We are delighted with our results this quarter. We doubled our earnings from continuing operations, reflecting our continued focus on meeting the needs of our customers and enhancing their experience as well as leveraging our expense structure. That focus continues to produce market leading same store PLO growth in the U.S. and Mexico, which is the main driver of future profitability.

"The quarter's results reflect the continued, disciplined execution of our three year strategic plan announced in 2015.  We delivered significant earnings growth in both the U.S. and Mexico this quarter, highlighting the value of that continued focus.  We further strengthened our balance sheet and liquidity position through strong operating results and the convertible bond issuance just after the quarter-end. While we continue to focus on and invest in our core pawn business, this strong cash position enhances our ability to consider attractive acquisitions.

"We are confident that our current strategic initiatives - including store refurbishment and other investments in customer experience; product and customer analytics; team member training, coaching and mentoring; and storefront expansion - will continue to provide a robust platform for further profitable growth."

CONSOLIDATED RESULTS

Three Months Ended June 30, 2017

  • Same store pawn loans outstanding (PLO) was up 4% in U.S. and 16% in Mexico (up 13% in Mexico on a constant currency basis).

  • Total revenue increased 8% to $183.6 million. On a constant currency basis, total revenue was up 8% to $184.4 million.

  • Net revenue improved 5% to $105.6 million (up 6% to $106.0 million on a constant currency basis), due largely to a 5% increase in pawn service charge (PSC) revenue and a 4% increase in merchandise sales (PSC revenue up 6% and merchandise sales up 5% on a constant currency basis).

  • The merchandise sales gross margin was consistent with the prior-year quarter at 36%, and was within our target range of 35-38%.

  • Operations expenses increased 1% to $74.2 million (up 2% to $74.5 million on a constant currency basis) due to investment in customer facing labor and higher benefit claims.

  • Corporate expenses decreased 3% to $14.1 million. The company remains on track to reduce corporate expenses to no more than $50 million in FY18.

  • This was the sixth consecutive quarter of YOY earnings per share increase, with earnings per share from continuing operations up 100% to $0.10.

  • Shortly after the end of the quarter, the company completed its offering of convertible senior notes due 2024 with a 2.875% coupon. This unsecured convertible note issuance strengthens the balance sheet and liquidity, and locks in an attractive fixed interest rate for a seven-year term. The proceeds were used to retire all remaining obligations under a secured credit facility which had a far higher cost of funds, retire $35 million of existing cash convertible senior notes due 2019, and for additional capital to potentially add to our earnings capacity as the company considers attractive acquisition opportunities.

Nine Months Ended June 30, 2017

  • Total revenue increased 4% to $565.9 million. On a constant currency basis, total revenue was up 5% to $574.4 million.

  • Net revenue was up 2% to $327.4 million (up 3% to $331.9 million on a constant currency basis), as a 5% increase in PSC revenue was offset by a lower merchandise sales gross margin (PSC revenue up 6% on a constant currency basis).

  • The merchandise sales gross margin was 200bps lower at 36%, within our target range of 35-38%.

  • Operations expenses increased 2% to $226.4 million (up 4% to $229.4 million on a constant currency basis).

  • Corporate expenses decreased 18% to $41.3 million, in line with the company's continued focus to control corporate expenses.

  • Earnings per share from continuing operations increased 156% to $0.41.

  • The company continues to receive regular payments on the promissory notes it received in connection with the sale of Grupo Finmart in September 2016. It has collected $23.3 million in principal on those notes during the current fiscal year, and expects to collect an additional $24.4 million during the remainder of the fiscal year (for a total of $47.7 million in FY17), $24.4 million in FY18 and $18.3 million in FY19. In July 2017, the company received $6.1 million including early payment of $5.2 million.

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.

OPERATING METRICS

U.S. Pawn Segment

Three Months Ended June 30, 2017

  • This was the seventh consecutive quarter of YOY same store PLO growth, up 3% this quarter in total and 4% on a same store basis, to $148.8 million.

  • PSC increased 4% in total and 5% on a same store basis to $56.8 million.

  • Merchandise sales increased 4% in total and on a same store basis. The merchandise sales gross margin of 37% was consistent with the prior-year quarter and within our target range of 35-38%.

  • Inventory aged over one year improved to 11% from 12% in Q2FY17.

  • Operations expenses increased 1% to $63.6 million.

  • The segment contribution was up 18% to $23.8 million.

  • Initiatives are underway to continue improving net revenue and profitability in the long-term, including investments in upgrading our point of sale system and enhancing product and customer data analytics, as well as enhancing our customer experience with a store refurbishment program.

Nine Months Ended June 30, 2017

  • PSC increased 5% in total and 4% on a same store basis to $177.5 million.

  • Merchandise sales increased 2% in total and 3% on a same store basis. The merchandise sales gross margin of 37% is within our target range of 35-38%.

  • Operations expenses increased 4% to $194.5 million, due to investment in customer facing labor and higher benefit claims.

  • Segment profit was up 3% to $80.7 million.

Mexico Pawn Segment

Three Months Ended June 30, 2017

  • PLO increased 19% to $19.4 million (up 16% to $18.9 million on a constant currency basis).

  • PSC increased 13% to $9.1 million (up 16% to $9.4 million on a constant currency basis).

  • Merchandise sales increased 7% in total and 5% on a same store basis (up 10% in total and 7% in same stores on a constant currency basis). The 33% merchandise sales gross margin was consistent with the prior-year quarter.

  • Inventory aged over one year of 6% was consistent with Q2FY17.

  • Net revenue was up 12% with a smaller 2% increase in operations expenses, yielding a 100% increase in segment contribution (segment contribution was up 104% to $5.5 million on a constant currency basis).

Nine Months Ended June 30, 2017

  • PSC increased 4% to $24.5 million (up 15% to $27.2 million on a constant currency basis).

  • Merchandise sales increased 3% in total and 2% on a same store basis (up 15% in total and 13% in same stores on a constant currency basis). Merchandise margin was 32%, 100bps lower than the prior-year nine-months.

  • Net revenue increased 3% and operations expenses were 9% lower, yielding a 107% increase in segment profit to $12.9 million (up 127% to $14.1 million on a constant currency basis).

CONFERENCE CALL

EZCORP will host a conference call on Tuesday, August 1, 2017, at 7:30am Central Time to discuss third quarter results. Analysts and institutional investors may participate on the conference call by dialing (877) 201-0168, Conference ID: 57788640, 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. We also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers. EZCORP 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 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 June 30,   Nine Months Ended June 30,
  2017   2016   2017   2016
               
  (Unaudited)
  (in thousands, except per share amounts)
Revenues:              
Merchandise sales $ 97,921     $ 94,014     $ 319,672     $ 311,941  
Jewelry scrapping sales 17,641     11,230     37,658     33,631  
Pawn service charges 65,878     62,473     201,983     193,197  
Other revenues 2,193     2,433     6,572     7,151  
Total revenues 183,633     170,150     565,885     545,920  
Merchandise cost of goods sold 62,615     60,140     204,840     194,731  
Jewelry scrapping cost of goods sold 15,010     9,110     32,195     28,271  
Other cost of revenues 453     506     1,433     1,549  
Net revenues 105,555     100,394     327,417     321,369  
Operating expenses:              
Operations 74,246     73,172     226,352     221,446  
Administrative 14,095     14,481     41,305     50,085  
Depreciation and amortization 5,843     6,274     18,246     20,422  
Loss (gain) on sale or disposal of assets 17     (41 )   11     641  
Restructuring             1,910  
Total operating expenses 94,201     93,886     285,914     294,504  
Operating income 11,354     6,508     41,503     26,865  
Interest expense 5,654     3,936     16,847     12,014  
Interest income (2,053 )   (50 )   (6,909 )   (66 )
Equity in net income of unconsolidated affiliate (1,047 )   (1,694 )   (3,768 )   (5,626 )
Other (income) expense (99 )   500  
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