EZCORP INC
For the period ended Mar 31, 2024. Filed May 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 1, 2024
EZPW$28.55-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-01-31.
0000876523-24-000007
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0000876523-24-000018
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 85 previous paragraphs and 107 current paragraphs.
50 unchanged; 26 reworded; 24 added; 9 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 14 previous and 25 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
Store expenses increased 12%, primarily due to salaries and benefits as we continue to support our team members as a part of People, Pawn and Passion focus, higher store count and, to a lesser extent, expenses related to our loyalty program.
Current report
Segment contribution increased 8% to $40.7 million, due to the changes noted above.
Current report
During the quarter, net store count increased by five due to the acquisition of six stores and the consolidation of one store.
Current report
Net inventory increased 9% (2% on a constant currency basis). Inventory turnover increased to 3.6x from 3.5x.
Current report
Store expenses increased 15% (7% on a constant currency basis), primarily due to higher store count. Same-store expenses increased 10% (2% on a constant currency basis).
Current report
Segment contribution increased 2% (decreased 3% on a constant currency basis) to $8.1 million, due to the changes noted above, in addition to the impact of the prior year reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other income.”
Current report
During the quarter, net store count increased by four due to the opening of nine de novo stores and the consolidation of five stores.
Current report
Segment contribution was $2.4 million, an increase of $34.9 million primarily due to our share of the net loss from Cash Converters related to their non-cash goodwill impairment charge taken during the prior year quarter.
Current report
Six Months Ended March 31, 2024 vs. Six Months Ended March 31, 2023
Current report
U.S. Pawn
Current report
During the six months ended March 31, 2024, net store count increased by six due to the acquisition of seven stores and the consolidation of one store.
Current report
Merchandise sales increased 6% and merchandise sale gross profit increased 3%, reflecting a 100bps decrease in gross margin.
Current report
Segment contribution increased $11.2 million, or 14%, primarily due to the changes described above.
Current report
Latin America Pawn
Current report
During the six months ended March 31, 2024, net store count increased by nine due to the opening of fourteen de novo stores and the consolidation of five stores.
Current report
PSC increased 18% to $54.5 million (9% to $50.6 million on a constant currency basis) as a result of higher average PLO.
Current report
Merchandise sales increased 16% (7% on a constant currency basis) and 12% on a same store basis (2% on a constant currency basis). Merchandise sales gross margin increased 200 bps to 33% from 31%.
Current report
Segment contribution increased $2.7 million, or 18% ($1.8 million, or 12%, on a constant currency basis), due to the changes noted above, in addition to the impact of the prior year reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other income.”
Current report
Other Investments
Current report
Segment income was $4.1 million, an increase of $35.0 million from the prior-year six months ended March 31, 2023, primarily due to our share of the prior year net loss from Cash Converters related to their non-cash goodwill impairment charge.
Current report
Other Items
Current report
Segment contribution increased $48.9 million or 79% over the prior year six months ended March 31, 2023, primarily due to our share of the net loss from Cash Converters related to their non-cash goodwill impairment charge during the prior year and the improved operating results of the segments above.
Current report
General and administrative expenses increased $3.7 million or 12%, primarily due to labor driven by incentive compensation related to increase in share price and, to a lesser extent, costs related to the implementation of Workday.
Current report
Income tax expense increased $9.2 million, primarily due to an increase in income before income taxes of $49.2 million for the six months ended March 31, 2024 compared to the same prior year six month period due to our share of the net loss from Cash Converters in the prior year quarter and the non-deductible loss on the convertible debt refinancing during the first quarter of 2023.
Removed paragraphs (9)
Previous report
Business Developments
Previous report
Founders
Previous report
During October 2023, we contributed an additional $15.0 million to Founders One, LLC (“Founders”) associated with our preferred interest, bringing our total equity investment in Founders to $45.0 million. See Note 5 of Notes to Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.”
Previous report
Segment contribution increased 21% to $47.5 million, due to the changes noted above.
Previous report
Segment store count increased by 1 store during the quarter due to an acquisition.
Previous report
Net inventory remained flat (decreased 11% on a constant currency basis) due to PLO growth, offset by increased inventory turnover at 3.8x, up from 3.3x.
Previous report
Segment contribution increased 35% (27% on a constant currency basis) to $10.1 million, due to the changes noted above.
Previous report
Segment store count increased by 5 de novo stores opened during the quarter.
Previous report
Segment contribution was $1.7 million, an increase of $0.1 million due to interest income on our notes receivable to Founders, partially offset by the decrease in our share of equity in income of Cash Converters.
Reworded paragraphs (26)
Previous wording
EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a leading provider of pawn services in the United States and Latin America. Pawn loans are nonrecourse loans collateralized by personal property. We also sell merchandise, primarily collateral forfeited from unpaid loans or goods purchased directly from customers.
Current wording
EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a leading provider of pawn services in the United States and Latin America. Pawn loans are nonrecourse loans collateralized by personal property. We also sell merchandise, primarily collateral forfeited from unpaid loans and pre-owned merchandise purchased from customers.
Previous wording
In the United States, PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season. PSC is historically lowest in our third fiscal quarter (April through June) following the tax refund season and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds. In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on loan balances and fueling some merchandise sales in those periods. In Mexico, we saw similar downward pressure in loan balances during the third quarter of prior year due to a recent change in law related to company profit sharing payments to employees. We believe this change will impact pawn loan balances in May and June going forward. As a net effect of these and other factors and excluding discrete charges, our consolidated income before tax is generally highest in our first fiscal quarter (October through December) and lowest in our third fiscal quarter (April through June).
Current wording
In the United States, PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season. PSC is historically lowest in our third fiscal quarter (April through June) following the tax refund season and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds. In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on loan balances and fueling some merchandise sales in those periods. In Mexico, we saw similar downward pressure in loan balances during the third quarter of fiscal 2023 due to a change in law related to company profit sharing payments to employees. We believe this change will continue to impact pawn loan balances in May and June going forward. As a net effect of these and other factors and excluding discrete charges, our consolidated income before tax is generally highest in our first fiscal quarter (October through December) and lowest in our third fiscal quarter (April through June).
Previous wording
We remain focused on optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher PSC. The following chart presents sources of gross profit, including PSC, merchandise sales gross profit (“Merchandise sales GP”) and jewelry scrapping gross profit (“Jewelry Scrapping GP”) for the three months ended December 31, 2023 and 2022:
Current wording
We remain focused on optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher PSC. The following chart presents sources of gross profit, including PSC, merchandise sales gross profit (“Merchandise sales GP”) and jewelry scrapping gross profit (“Jewelry Scrapping GP”) for the three and six months ended March 31, 2024 and 2023:
Previous wording
The following chart presents sources of gross profit by geographic disbursement for the three months ended December 31, 2023 and 2022:
Current wording
The following chart presents sources of gross profit by geographic disbursement for the three and six months ended March 31, 2024 and 2023:
Previous wording
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. Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and are not directly calculable from the rates below. Constant currency results, where presented, also exclude the foreign currency gain or loss. 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 months ended December 31, 2023 and 2022 were as follows:
Current wording
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. Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and are not directly calculable from the rates below. Constant currency results, where presented, also exclude the foreign currency gain or loss. 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 six months ended March 31, 2024 and 2023 were as follows:
Previous wording
PLO ended the quarter at $190.8 million, up 14% (13% on a same store basis).
Current wording
PLO ended the quarter at $173.7 million, up 11% (9% on a same store basis).
Previous wording
Total revenue was up 12% and gross profit increased 10%, reflecting increased PSC and higher merchandise sales.
Current wording
Total revenues and gross profit was up 10%, reflecting increased PSC and higher merchandise sales.
Previous wording
Merchandise sales increased 6% and gross margin decreased to 37% from 38%. Aged general merchandise was 1.1% of total general merchandise inventory.
Current wording
Merchandise sales increased 6% and gross margin decreased to 37% from 38%. Aged general merchandise, which is inventory over one year old, increased to 3.0% of total general merchandise inventory, primarily driven by luxury handbags in our Max Pawn stores.
Previous wording
Net inventory increased 8%, as expected with the growth in PLO. Inventory turnover increased to 2.7x from 2.6x.
Current wording
Net inventory increased 9%, as expected with the growth in PLO. Inventory turnover remained flat at 2.6x.
Previous wording
PLO improved to $52.5 million, up 22% (11% on constant currency basis). On a same store basis, PLO increased 19% (8% on a constant currency basis).
Current wording
PLO improved to $62.0 million, up 26% (19% on constant currency basis). On a same store basis, PLO increased 22% (15% on a constant currency basis) due to improved operational performance and continued strong pawn demand.
Previous wording
Total revenue was up 19% (9% on constant currency basis) and gross profit increased 22% (11% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.
Current wording
Total revenues was up 12% (4% on constant currency basis), and gross profit increased 18% (10% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.
Previous wording
PSC increased 18% (8% on a constant currency basis) as a result of higher average PLO.
Current wording
PSC increased 18% (10% on a constant currency basis) as a result of higher average PLO.
Previous wording
Merchandise sales gross margin increased from 30% to 32%. Aged general merchandise was 1.6% of total merchandise inventory.
Current wording
Merchandise sales gross margin increased to 33% from 32%. Aged general merchandise was 1.4% of total merchandise inventory.
Previous wording
Segment contribution increased $11.0 million or 23% over the prior year quarter primarily due to improved operating results of the U.S. Pawn and Latin America Pawn segments above.
Current wording
Segment contribution increased $37.9 million over the prior year quarter. That increase was primarily attributable to the increase in our Other Investments segment due to our share of the net loss from Cash Converters during the prior year quarter and the improved operating results of the U.S. Pawn and Latin America Pawn segments above.
Previous wording
General and administrative expense increased $1.1 million or 7%, primarily due to annual salary increases and an increase in costs related to the implementation of Workday.
Current wording
General and administrative expense increased $2.7 million or 17%, primarily due to labor driven by incentive compensation related to an increase in share price and, to a lesser extent, costs related to the implementation of Workday.
Previous wording
Income tax expense increased $1.5 million primarily due to an increase in income before income taxes of $13.2 million this quarter compared to the prior year quarter as a result of improved operating results within the U.S. Pawn segment and the Latin American Pawn segment.
Current wording
Income tax expense increased $7.7 million primarily due to an increase in income before income taxes of $36.0 million this quarter compared to the prior year quarter. That increase was primarily attributable to our share of the net loss from Cash Converters in the prior year quarter and the improved operating results this quarter within the U.S. Pawn segment and the Latin American Pawn segment.
Previous wording
Store expenses increased 5%, primarily due to wage inflationary pressures, higher store count and, to a lesser extent, rent.
Current wording
Store expenses increased 9%, primarily due to primarily due to wage inflationary pressures, higher store count and, to a lesser extent, expenses related to our loyalty program.
Previous wording
Store expenses increased 21% (10% on a constant currency basis), primarily due to increases in minimum wage and headcount, higher store count and, to a lesser extent, rent. Same-store expenses increased 16% (6% on a constant currency basis).
Current wording
Store expenses increased by 18% (9% on a constant currency basis) primarily due to increases in minimum wage and headcount, higher store count and, to a lesser extent, rent. On a same-store basis, store expenses increased 13% (4% on a constant currency basis).
Previous wording
Interest expense decreased $2.8 million, primarily due to the loss on extinguishment of debt in the prior year quarter. In December 2022, the Company repurchased approximately $109.4 million aggregate principal amount of 2.875% Convertible Senior Notes Due 2024 for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of 2.375% Convertible Senior Notes Due 2025 for approximately $62.9 million plus accrued interest and recorded a $3.5 million loss on extinguishment of debt.
Current wording
Interest expense decreased $2.7 million, primarily due to the loss on extinguishment of debt in the prior year. In December 2022, the Company repurchased approximately $109.4 million aggregate principal amount of 2.875% Convertible Senior Notes Due 2024 for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of 2.375% Convertible Senior Notes Due 2025 for approximately $62.9 million plus accrued interest and recorded a $3.5 million loss on extinguishment of debt.
Previous wording
Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations. See Annual Report on Form 10-K for the year ended September 30, 2023 Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.
Current wording
Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and the foreign rate differential. See Annual Report on Form 10-K for the year ended September 30, 2023, Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.
Previous wording
Our cash and equivalents balance was $218.5 million at December 31, 2023 compared to $220.6 million at September 30, 2023. At December 31, 2023, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.
Current wording
Our cash and equivalents balance was $229.1 million at March 31, 2024 compared to $220.6 million at September 30, 2023. At March 31, 2024, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.
Previous wording
The increase in cash flows provided by operating activities quarter-over-quarter was primarily due to an increase in net income as well as changes in working capital primarily related to the timing of payments of prepaid expenses and accounts payable.
Current wording
The decrease in cash flows provided by operating activities year-over-year was primarily due to changes in working capital primarily related to the timing of payments of accounts payable, income taxes and prepaid expenses, offset by an increase in net income (when considering adjustments for non-cash items affecting net income).
Previous wording
The $27.8 million decrease in cash flows used in investing activities year-over-year was primarily due to a $29.8 million decrease in cash flows used to fund acquisitions and strategic investments, offset by a $10.2 million increase in cash inflows from the sale of forfeited collateral and an increase of $14.0 million in net pawn lending outflows.
Current wording
The $22.4 million decrease in cash flows used in investing activities year-over-year was primarily due to a $21.1 million decrease in cash flows used to fund acquisitions and strategic investments and a $16.8 million increase in cash inflows from the sale of forfeited collateral, offset by an increase of $22.1 million in net pawn lending outflows.
Previous wording
The $40.4 million decrease in cash flows provided by financing activities was primarily related to the December 2022 financing of the 2029 Convertible Notes, in which we issued $230.0 million (less issuance costs) principal amount of 3.750% Convertible Senior Notes Due 2029 offset by the extinguishment of approximately $109.4 million aggregate principal amount of our 2024 Convertible Notes for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of our 2025 Convertible Notes for approximately $62.9 million plus accrued interest. In addition, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase 578,703 shares of our Class A common stock from purchasers of the notes in privately negotiated transactions.
Current wording
The $39.5 million decrease in cash flows provided by financing activities was primarily related to the December 2022 financing of the 2029 Convertible Notes, in which we issued $230.0 million principal amount of 3.750% Convertible Senior Notes Due 2029 offset by the extinguishment of approximately $109.4 million aggregate principal amount of our 2024 Convertible Notes for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of our 2025 Convertible Notes for approximately $62.9 million plus accrued interest. In addition, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase 578,703 shares of our Class A common stock from purchasers of the notes in privately negotiated transactions.
Previous wording
The net effect of these changes was a $2.0 million decrease in cash on hand during the current year to date period, resulting in a $227.0 million ending cash and restricted cash balance.
Current wording
The net effect of these changes was an $8.7 million increase in cash on hand during the current year to date period, resulting in a $237.7 million ending cash and restricted cash balance.
Previous wording
On May 3, 2022, our Board authorized the repurchase of up to $50 million of our Class A Common Stock over three years. As of December 31, 2023, we have repurchased 1,981,927 shares of our Class A Common Stock under the program for $17.0 million. Execution of the program will be responsive to fluctuating market conditions and valuations, liquidity needs and the expected return on investment compared to other opportunities.
Current wording
On May 3, 2022, our Board authorized the repurchase of up to $50 million of our Class A Common Stock over three years. As of March 31, 2024, we have repurchased 2,287,402 shares of our Class A Common Stock under the program for $20.0 million. Execution of the program will be responsive to fluctuating market conditions and valuations, liquidity needs and the expected return on investment compared to other opportunities.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
The following table reconciles our consolidated segment contribution discussed above to net income (loss) attributable to EZCORP, Inc., including items that affect our consolidated financial results but are not allocated among segments:
Current report — wording carried from elsewhere
Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and the foreign rate differential. See our Annual Report on Form 10-K for the year ended September 30, 2023, Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.
Current report — wording carried from elsewhere
The tables below and discussion that follows should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.
Current report — wording carried from elsewhere
The following table presents selected summary financial data for the U.S. Pawn segment:
Current report — wording carried from elsewhere
Pawn service charges increased 14% as a result of higher average PLO.
Current report — wording carried from elsewhere
The following table presents selected summary financial data our Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from functional currencies. See “Results of Operations — Non-GAAP Constant Currency and Same Store Financial Information” above.
Current report — wording carried from elsewhere
The following table presents selected financial data for our Other Investments segment after translation to U.S. dollars from its functional currency of primarily Australian dollars: