Market Overview

EZCORP Announces Strong Fourth Quarter and Full Fiscal 2017 Earnings


AUSTIN, Texas, Nov. 15, 2017 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2017.

All amounts in this release are from EZCORP continuing operations and conform with U.S. generally accepted accounting principles (GAAP) unless otherwise noted. Comparisons are made to the same period in the prior year unless otherwise noted.


  • Seventh consecutive quarter of year-over-year (YOY) earnings and profit growth. Earnings per share improved $0.52 to $0.21 in the fourth quarter and grew $0.77 to $0.62 in the full fiscal year.

  • Net income from continuing operations improved $27.6 million to $10.1 million in the fourth quarter, and grew $41.0 million to $32.0 million in the full fiscal year. Adjusted EBITDA1 improved $19.1 million to $22.1 million in the fourth quarter, and grew 39%, or $24.6 million, to $88.5 million in the full fiscal year.

  • Continue to lead the U.S. market in same store pawn loans outstanding (PLO) YOY growth. PLO increased 19% in Mexico (11% on a constant currency basis2).

  • Operating contribution from the Mexico Pawn segment improved significantly — up 153% to $5.8 million. Highest growth segment now 20% of company's total pawn profit contribution.

  • Cash balance at September 30 up 150% to $164.4 million.

  • Successfully completed $143.8 million offering of convertible notes, improving liquidity with an attractive coupon rate of 2.875% and seven-year term.

  • Favorable restructuring of the notes receivable repayment arrangement with AlphaCredit improved the return and risk profile and increases future cash flow and profit.

In October 2017, the company significantly expanded its footprint in the emerging Latin American pawn market by acquiring 112 pawn stores in Guatemala, El Salvador, Honduras and Peru for $60 million cash, with an additional $2.25 million earn-out possible based on post-acquisition performance. This acquisition will be accretive to earnings starting the first quarter of fiscal 2018 and provides a platform for further growth and expansion in the high growth rate region.


Chief Executive Officer Stuart Grimshaw said, "Even though our results were somewhat impacted by the hurricane activity in Texas and Florida, we are proud of our operating performance during the fourth quarter, which capped off a fiscal year that showed a dramatic turnaround on the bottom line. We delivered significant earnings growth in both the U.S and Mexico pawn segments during the quarter and the year, driven by continued execution on our strategic initiatives to create long-term profitable growth.

"First, we continue the diversification of our revenue base and operations, increasing our mix of business from Latin America. Our Mexico Pawn segment is our fastest growing business and is now providing 20% of our total pawn operating contribution. We added 10 new stores in Mexico during the year and see plenty of opportunity to open and acquire more. And we are increasing our presence in Latin America beyond Mexico. The recent acquisition of 112 pawn stores in four new countries expands our Latin American store base, which now comprises 41% of our total pawn stores. It provides compelling opportunities for further growth through the expansion of general merchandise pawn loan and retail activities, the opening of new stores in attractive and under-penetrated markets, and the pursuit of complementary acquisitions in the region.

"Second, we are improving the experience customers have in our stores," Grimshaw continued. "Our customers represent a large, underserved market. We are updating our technology, better training our field staff and refreshing our stores to meet their needs and exceed their expectations.

"Third, we're strengthening our balance sheet and liquidity, reducing our corporate expenses, better analyzing and acting on customer data and process improvements, and optimizing loan values and merchandise pricing. These actions are expected to further increase our market share and profitability and provide us with the ability to continue to capitalize on attractive growth opportunities."

1EBITDA is earnings before interest, taxes, depreciation and amortization. "Adjusted EBITDA" includes EBITDA attributable to continuing operations, further adjusted to exclude the estimated impact of the hurricanes that affected the Texas Gulf Coast and Florida in the fourth quarter, as well as certain other discrete items. See "Non-GAAP Financial Information" at the end of this release.

2In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (GAAP), we provide financial information on a "constant currency" and "adjusted EBITDA" basis, which excludes the impact of foreign currency exchange rate fluctuations, and provides a different way to view the operational results of our business, respectively. 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 and calculation of our adjusted EBITDA, see "Non-GAAP Financial Information" at the end of this release.


Temporary Impact of U.S. Hurricanes

During the fourth quarter, the U.S. Pawn segment was affected by Hurricanes Harvey and Irma resulting in the temporary closure of stores in the affected areas, all of which have since reopened. In addition to the loss of inventory and loan collateral and the damage to physical facilities, all totaling $1.0 million, the company estimates that the effects of the hurricanes include a reduction in U.S. pawn loan balances of $5.0 million as of September 30, 2017, with a resulting reduction in pawn service charge (PSC) revenues and merchandise sales gross profit. The company expects pawn loan demand to return to normal levels after the annual tax refund season in the U.S.

Three Months Ended September 30, 2017 Results

  • Despite the impacts of the hurricanes, net revenue improved 1% to $108.1 million (flat at $107.4 million on a constant currency basis), due largely to a 4% increase in PSC revenue (up 3% on a constant currency basis). Same store PLO was down 1% in the U.S. (up 3% in stores unaffected by the hurricanes). Same store PLO rose 19% in Mexico (up 11% in Mexico on a constant currency basis). Merchandise sales gross margins held at 35%, within the 35-38% target range.

  • Continued discipline in cost control reduced operations expenses 2% to $78.3 million (down 3% to $77.8 million on a constant currency basis) and reduced corporate expenses 34% to $11.9 million.

  • The company restructured the repayment of the remaining $60.9 million of principal from AlphaCredit, improving its risk and return profile, as well as significantly increasing future cash flow and profit. Under the restructured arrangement, the company expects to collect $32.6 million of principal in fiscal 2018 and $28.3 million in fiscal 2019. The restructured arrangement includes a higher interest rate and an incremental deferred compensation fee of up to $14.0 million to be received in 2019 and 2020.

  • Interest expense includes a $5.3 million debt extinguishment charge offset by a $3.0 million pre-tax benefit from the restructuring of the AlphaCredit notes. The AlphaCredit note restructuring drove an additional one-time income tax benefit of $3.0 million in the quarter.

  • Improvements in net revenues and cost discipline have increased operating leverage and the resulting bottom line. Earnings per share increased YOY for the seventh-consecutive quarter. EPS from continuing operations is $0.21, up from a loss of $0.31 a year ago.

Fiscal Year Ended September 30, 2017

  • The continued focus on investment in customer experience increased net revenue 2% to $435.5 million (up 3% to $439.3 million on a constant currency basis), driven primarily by a 4% rise in PSC revenue (up 5% on a constant currency basis). Merchandise sales gross margins were down slightly to 36%, but within the 35-38% target range.

  • Corporate expenses were down 22% to $53.3 million.  The company remains on track to reduce corporate expenses to no more than $50 million in FY18.

  • During the year and prior to the note restructuring, EZCORP collected a total of $34 million from AlphaCredit ($29.5 million in principal and $4.5 million in interest).

  • Earnings per share from continuing operations reached $0.62, a significant turnaround from the loss of ($0.15) in the prior year. The strategic transformation initiatives achieved during fiscal 2017 set the stage for further success in fiscal 2018 and beyond.


U.S. Pawn Segment

Three Months Ended September 30, 2017

  • PLO was down 1% in total and on a same store basis, to $148.1 million (up 3% in stores unaffected by the hurricanes). Changes in PLO resulted in PSC increasing 1% in total and 2% on a same-store basis to $61.0 million.

  • The merchandise sales gross margin of 36% was consistent with the prior-year quarter and within the target range of 35-38%. Inventory aged over one year improved to 10% from 11%.

  • Operations expenses decreased 3% to $65.5 million driven by cost control initiatives and lower variable compensation.

  • Segment contribution increased 7% to $22.8 million. Initiatives are underway to continue improving long-term net revenue and profitability. These include investing in upgrading the POS system, enhancing product and customer data analytics, and enhancing the customer experience by refreshing stores.

Fiscal Year Ended September 30, 2017

  • Driven by the impact of PLO outlined above, PSC rose 4% in total and on a same store basis to $238.4 million.

  • Merchandise sales increased 1% in total and on a same store basis. The merchandise sales gross margin of 36% is within the 35-38% U.S. target.

  • Operations expenses grew 2% to $260.0 million as a result of investment in customer facing labor and higher benefit claims.

  • Segment contribution was up 3% to $103.5 million.

Mexico Pawn Segment

Three Months Ended September 30, 2017

  • The company continues to experience significant growth in the Mexico Pawn segment, taking advantage of market opportunities primarily from its existing store footprint. PLO expanded 20% to $21.1 million (up 13% to $19.8 million on a constant currency basis), which drove a 22% increase in PSC to $10.1 million (up 16% to $9.7 million on a constant currency basis).

  • Merchandise sales increased 10% in total and 7% on a same store basis (up 4% in total and 1% in same stores on a constant currency basis). The 30% merchandise sales gross margin was slightly above the prior-year quarter, while aged inventory balances decreased to 2% from 6% in the fiscal 2017 third quarter.

  • Segment contribution increased 153% to $5.8 million (up 140% to $5.5 million on a constant currency basis) driven by an 18% improvement in net revenue, with only a 3% increase in operations expense due to continued discipline in cost control.

  • The company opened four new stores in the fourth quarter, for a total of 10 in fiscal 2017. There is a significant runway for continued store openings and acquisitions, in addition to the growth potential of the existing store base.

Fiscal Year Ended September 30, 2017

  • The PLO changes described above drove a 9% increase in PSC to $34.6 million (up 15% to $36.8 million on a constant currency basis).

  • Merchandise sales grew 4% in total and 3% on a same store basis (up 12% in total and 10% in same stores on a constant currency basis). Merchandise margin was 32%, consistent with the prior year.

  • Segment contribution yielded a 119% increase to $18.7 million (up 130% to $19.6 million on a constant currency basis) as a result of a 7% net revenue expansion while operations expenses dropped 6%.


EZCORP will host a conference call on Thursday, November 16, 2017, at 7:30 a.m. Central Time to discuss fourth quarter and fiscal year-end results. Analysts and institutional investors may participate by dialing (877) 201-0168, Conference ID: 8074459, international dialing (647) 788-4901. The call will be webcast simultaneously to the public through this link: A replay will be available online at shortly after the call.


EZCORP is a leading provider of pawn loans in the United States and Latin America. It also sells merchandise, primarily collateral forfeited from pawn lending operations, and used merchandise purchased from customers. EZCORP is a member of the Russell 2000 Index, S&P SmallCap 600 Index, S&P 1000 Index and Nasdaq Composite Index.


This news release contains forward-looking statements on the company's strategy, initiatives and expected performance. These statements are based on management's current expectations on the outcome and timing of future events. All statements other than historical facts-including those on the company's strategy, initiatives and future performance, which address activities or results that the company plans, expects, believes, projects, estimates or anticipates, will, should or may occur in the future, including future financial or operating results-are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied here, due to a number of uncertainties and other factors. These include operating risks, liquidity risks, legislative or regulatory developments, market factors, or current or future litigation. For a discussion of these and other factors affecting the company's business and prospects, see EZCORP's annual, quarterly and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Jeff Christensen
Vice President, Investor Relations
Phone: (512) 437-3545

  Three Months Ended September 30,   Fiscal Year Ended September 30,
  2016   2017   2016
  (in thousands, except per share amounts)
Merchandise sales $ 95,166     $ 97,166     $ 414,838     $ 409,107  
Jewelry scrapping sales 13,531     16,482     51,189     50,113  
Pawn service charges 71,097     68,603     273,080     261,800  
Other revenues 2,275     2,334     8,847     9,485  
Total revenues 182,069     184,585     747,954     730,505  
Merchandise cost of goods sold 61,685     63,540     266,525     258,271  
Jewelry scrapping cost of goods sold 11,736     13,768     43,931     42,039  
Other cost of revenues 555     416     1,988     1,965  
Net revenues 108,093     106,861     435,510     428,230  
Operating expenses:              
Operations 78,284     79,941     304,636     301,387  
Administrative 11,949     18,016     53,254     68,101  
Depreciation and amortization 5,415     6,120     23,661     26,542  
Loss on sale or disposal of assets 348     465     359     1,106  
Restructuring     11         1,921  
Total operating expenses 95,996     104,553     381,910     399,057  
Operating income 12,097     2,308
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