OREANDA-NEWS.  EZCORP, Inc., a leading provider of pawn loans in the United States and Mexico, today announced results for its third quarter ended June 30, 2016.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP’s Chief Executive Officer, said: "We have been consistently executing the three year strategic program announced in July 2015 to lead the market in serving and satisfying customers’ need for cash.  Pawn momentum remains strong with four consecutive quarters of improvement in same store PLO in the U.S. and eight consecutive quarters in Mexico.

"Our focus on customer engagement and optimizing our U.S. and Mexico pawn businesses will continue, including investments in technology to improve innovation and productivity, reduce costs, and leverage investments.  We are confident these initiatives, along with the quality pawn performance we have demonstrated in recent quarters, will help us continue to build our platform for profitable growth.

"We recently announced an agreement to sell Grupo Finmart, and we expect to close that transaction by the end of our fiscal year.  After the sale of Grupo Finmart, 99% of our revenue will be generated from our U.S. and Mexico pawn businesses."

CONSOLIDATED RESULTS

Three-Months Ended June 30, 2016

  • Net income from continuing operations attributable to EZCORP was $2.9 million ($0.05 per share), compared to a net loss of $0.7 million ($0.01 per share). This increase was driven by revenue growth from strong customer engagement and continued focus on expense management.

1 In 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.

  • Total revenue for the current quarter was $170.2 million, up 3%, and net revenue was $100.4 million, up 7%. On a constant currency basis1, total revenue was $174.3 million, up 6%, with net revenue of $102.8 million, up 10%. The increase in both total revenue and net revenue (stated on a GAAP and constant currency basis) is primarily due to higher pawn service charges and merchandise margin.
  •  Total operating expenses for the current quarter decreased 2% (flat on a constant currency basis) as we continue to implement operational efficiencies.  Corporate administrative expense was $14.5 million, down 14%.

Nine-Months Ended June 30, 2016

  • Net income from continuing operations attributable to EZCORP was $9.0 million ($0.16 per share), compared to net income of $5.8 million ($0.11 per share). This increase reflects continued improvement in our U.S. and Mexico pawn businesses (as discussed below).
  • Total revenue for the nine-months ended June 30, 2016 was $545.9 million, 1% lower, with net revenue of $321.4 million, a 6% increase. On a constant currency basis, total revenue was $559.9 million, 2% higher, and net revenue was $329.1 million, 8% higher.  Higher pawn service charges and merchandise margins drove the increase in total revenue and net revenue on a constant currency basis.
  • Total operating expenses for the nine-months ended June 30, 2016 increased 5% (7% on a constant currency basis), primarily due to new store costs offset by store rationalization, accrued incentives at both field and corporate levels, as well as restatement expenses.

OPERATING METRICS

U.S. Pawn Segment

Three-Months Ended June 30, 2016 

  • Enhanced focus on customers drove pawn lending, resulting in an increase in total PLO of 13% to $143.9 million, up 10% on a same store basis. The pawn loan redemption rate for the quarter was 85%, consistent with the prior-year period.
  • Total PSC increased 10% to $54.4 million, up 8% on a same store basis, as a result of strong same store PLO growth of 10%. Annualized yield on PLO decreased slightly to 164%, from 167% in the prior year quarter.  The lower PLO yield is primarily due to shift in portfolio composition.
  • Merchandise sales gross margin improved to 37% from 35% attributable to discipline in pawn loan valuations and pricing cadence, driving merchandise sales gross profit growth of 8% to $29.2 million.
  • Store expenses were tightly managed, leveraging 9% growth in net revenue to $85.7 million into a 25% increase in segment profit before tax to $20.2 million.
  • Aged inventory reduced to 9% of total inventory from 11%.

Nine-Months Ended June 30, 2016 

  • Same store PLO growth continues, increasing to 10% as compared to a decrease of 11% in the prior-year period, generating same store PSC growth of 5% in the nine-month period ended June 30, 2016.
  • Annualized PLO yield and pawn loan redemption rate both decreased slightly from the prior-year period to 164% from 165%, and to 84% from 85%, respectively.
  • Merchandise sales gross margin increased to 38% from 34%, resulting in a 15% increase in merchandise sales gross profit to $102.3 million.
  • Expense management leveraged a 7% growth in net revenue to $277.3 million into an 11% increase in segment profit before tax to $78.7 million.


Mexico Pawn Segment

Three-Months Ended June 30, 2016 

  • Focusing on customer engagement drove the increase in PSC and PLO on a constant currency basis.  PSC grew 1% to $8.1 million (up 20% on a constant currency basis). PLO decreased 1% to $16.3 million (up 19% on a constant currency basis).  The pawn loan redemption rate increased to 77% from 76% in the prior-year period.  Annualized PLO yield was a strong 192% compared to 194%.
  • Merchandise sales gross margin increased to 33% from 29% as the result of disciplined pawn loan valuations and pricing cadence. Merchandise sales gross profit increased 5% to $4.6 million (up 24% on a constant currency basis).
  • Store expenses were tightly managed, leveraging 2% growth in net revenue to $12.9 million into a 476% increase in segment profit before tax to $2.7 million (net revenue up 20% and segment profit before tax up 773% on a constant currency basis).
  • Aged inventory reduced to 3% of total inventory from 8%.


Nine-Months Ended June 30, 2016 

  • PSC increased 2% to $23.6 million (up 22% on a constant currency basis).  Annualized yield on pawn loans decreased to 194% from 196%. The pawn loan redemption rate on pawn loans year-to-date increased slightly to 78% from 77%.
  • Merchandise sales gross margin increased to 33% from 29%, resulting in a 1% increase in merchandise sales gross profit to $14.9 million (up 21% on a constant currency basis).
  • Expense management leveraged a 1% growth in net revenue to $39.0 million into a 165% increase in segment profit before tax to $6.2 million (net revenue up 20% and segment profit before tax up 259% on a constant currency basis).

DISCONTINUED OPERATIONS: GRUPO FINMART

On July 6, 2016, we announced that we had entered into a definitive agreement to sell Prestaciones Finmart, S.A.P.I. DE C.V., SOFOM, E.N.R. (“Grupo Finmart”) to Alpha Holding, S.A. de C.V. (“AlphaCredit”), a leader in consumer lending in Mexico and Colombia.  We currently own 94% of Grupo Finmart, a provider of consumer loans to government agency employees in Mexico.

The decision to divest Grupo Finmart is a result of the continued execution of our three-year strategic program and is expected to provide us with additional capital to invest in our U.S. and Mexico pawn businesses.

As a result of the decision to sell the Grupo Finmart business, we have classified our Grupo Finmart segment as held for sale as of June 30, 2016 and recast all operations of Grupo Finmart as discontinued operations for the three and nine-months ended June 30, 2016.

ABOUT EZCORP

EZCORP is a leading provider of pawn loans in the United States and Mexico. At our pawn stores, we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers.