EZCORP, Inc. Price & Performance (EZPW)

During our prepared remarks, we will refer to slides which are available for viewing or download from our website at investors.ezcorp.com EZCORP. Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides contain certain forward looking statements regarding the company's expected operating and financial performance for future periods.

These statements are based on the company's current expectations. Actual results for future periods may differ materially from those expressed due to a number of risks or other factors that are discussed in our annual other reports filed with the Securities and Exchange Commission. And as noted in our presentation materials, and unless otherwise identified, results are presented on an adjusted basis to remove the effect of foreign currency fluctuations and other discrete items. Joining us on the call today are EZCORP Chief Executive Officer, Laki Given and Tim Judgments Chief Financial Officer. Now I'll turn the call over to Laki.

Thanks, Sean, and good morning, everyone. We kicked off fiscal twenty twenty five with another strong set of operating and financial results driven by sustained demand for fast cash pollution and affordable high quality secondhand goods. Building on our momentum from last year, we generated another quarter of record revenue in PLO. In Q1, we achieved total revenue of $329,700,000 marking a 10% year over year increase. While PLO grew 16% to $282,900,000 Our strong bottom line performance included a 12% increase in EBITDA to $53,000,000 and diluted EPS up 17% to $0.42 These results highlight our continued commitment to delivering enhanced value for our stakeholders through relentless operational execution. Beginning on Slide three, we continue to be a global leader in pawn broking at Pre Own Retail. We operate twelve eighty three stores in The U. S. And Latin America, including four de novo stores added this quarter. With the rising cost of living and limited access to credit options for many consumers, the demand for our pawn broking services continues to grow significantly. At the same time, more consumers are seeking affordable, sustainable pre owned goods. Driven by a heightened focus on value conscious shopping. Our commitment to innovation and exceptional service ensures we can effectively meet these evolving customer needs.

Moving on to Slide four, As I mentioned, we opened four de novo stores in Latin America this quarter.

Our earning assets grew 20% year over year supporting a record PLO balance.

And leading to a 13% increase in PSC.

Our cash balance increased to $174,500,000 up $4,000,000 from last quarter. Driven primarily by cash from operating activities. This was partially offset by higher earning assets capital expenditures tax payments for net share settlements of equity awards, and share repurchases. We maintain strong liquidity to support PLO growth de novo store expansion strategic acquisition, near term debt maturities and ongoing share repurchases. Slide five highlights the strong financial performance in the quarter. Showcasing the continued growth of our business across key metrics. Q1 revenues and gross profit grew 10% year over year Merchandise sales increased just said, and our EBITDA was up double digits for the third consecutive quarter. As noted earlier, strong consumer demand operational execution and exceptional customer service continue to fuel our growth. Now turning to our key business strategy highlights for the quarter on Slide six. I'm pleased to highlight the significant progress we have made in strengthening our core corn operations This achievement is a testament to the dedication and expertise of our team. Whose efforts have driven meaningful improvements across the business. As a result, we have delivered strong loan growth fueled by larger average loan sizes operational improvements and robust customer demand. To enhance the customer experience by providing accessible and flexible financing solutions for our customers, we have expanded the third party buy now pay later program into all of our U. S. Stores.

Additionally, in July, we launched a longer term layaway option which drove a 13% increase in new layaways during the quarter. [indiscernible] If layaway sales are recognized upon final payment, and customers now have more time to complete their payments, This adjustment has shifted from sales into future quarters. Reflecting the flexibility we've provided to better meet our customers' financing needs especially for the jewelry category. Complement these efforts, we've seen strong engagement with our Easy Plus Rewards program, which continues to drive customer loyalty, enhance our overall performance. In fact, our Easy Plus Rewards members accounted for 77% of all transactions for the quarter. We also captured a 5% increase in traffic to our core porn website These metrics reflect deepening connections with our customer base, and engagement across multiple platforms. We are equally focused on investing in our team members, who are the backbone of our success. We enhanced fuel compensation plans to more effectively drive expected behaviors reward performance, and increased retention. Additionally, we announced an assistant manager certification program for The U. S. Stores, to grow internal talent strengthen operation support. To celebrate excellence across the business, we held Easy Elite celebrations in each of our regions.

Recognizing our top store managers with a consistent global message centered on growth mindset and exceeding expectations. Turning to innovation and growth, U. S. Online payment collections increased more than 30% to $27,200,000 for the quarter. Similarly, in Mexico, digital adoption continued to rise with 15% of extensions and layaways now handled through online payment. And bonds for affordable luxury remains strong with MaxPawn's luxury e commerce sales increasing 50% largely fueled by eBuy style. As we continue to test buy online pickup in store, we also launched a new pilot program for view online Additionally, we are testing new SMS marketing campaigns in The U. S. To increase engagement with Easy Plus members. Slide seven highlights our continued dedication to sustainability and community impact. In Q1, we sold over 1,500,000 pre owned items to extend their useful life. And provide a critical financial services to customers in the communities we serve. We also advanced inclusivity through affinity groups and belonging initiatives. Enhanced team operations, and supported communities with charity donations and four sixty one hours of company paid volunteer time, going toward non profits and community organizations. With that, I'll hand the call over to Tim Judgments, at CFO will provide a deeper look at our financial results. [indiscernible] Thanks, Lucky.

Slide nine provides a detailed look at our consolidated financial results for the first fiscal quarter. As Lockey mentioned, we closed the quarter with record PLO of $282,900,000.0 16% increase year over year and up 15% on a same store basis.

PSE revenues rose 13% year over year primarily fueled by same store PLO growth. Our inventory turnover rate was 2.7 times compared to three times with HGM inventory excluding our three luxury stores at 1.2%. Some of the lower inventory can be attributed to the expansion of our layaway program in The U. S. As well as a greater composition of jewelry inventory in Latin America, which typically has a longer sales cycle. While these factors contribute to the trend, we are focused on improving inventory turns and are prioritizing efforts to optimize sales velocity and inventory management. Merchandise sales increased by 8% to hundred and $92,900,000 while merchandise gross profit grew by 4% from the prior year. We also posted another strong quarter of EBITDA margin expansion, which increased 35 basis points to 16.1%, we continue to drive operating leverage in our business. Moving to our U. S. Porn segment on Slide 10, U. S. Revenue for the quarter was up 7% to a record $232,200,000 Earnings assets grew by 16% driven by increase in PLO and inventory. Slide 11 includes a map of The U. S. States which we operate, highlighting our robust footprint of five forty two stores across 19 Our first quarter average U. S. Loan size increased by 14% supported by 60 basis points rise in PLO jewelry composition, as well as growing gold and GM prices.

Slide 12 offers an in-depth look at U. S. Financial performance, highlighting a 15% increase in PLO both on total and same store basis This was driven by high average loan size, enhanced operational performance and sustained growing demand for pawn services. On The U. S. Retail side, merchandise sales increased by 3% and were up 1% on a same store basis. Our merchandise gross margin decreased 61 basis points.

The decrease in sales margin reflects an increase in promotional activity and customer negotiation at the counter.

U. S. Porn EBITDA for the quarter was $55,600,000 up 11% primarily due to higher PSC [indiscernible] underscoring our focus on profitability. Turning to our Latin American segment on Slide 13. Total revenues increased 18% to $97,500,000 which was a record high for the fiscal first quarter. Earning assets increased 35% driven by a very strong PLO increase of 19% and inventory increase of 57% from the prior year, which was a historically low level.

As PLO has grown significantly in recent quarters, we continue to focus on driving more sales at comparable [indiscernible] We are implementing actions both systemically and operationally that were successful in The U. S. That aim to drive improvements going forward.

On Slide 14, you can see that we have and now have seven forty one stores opening one store in Mexico and three stores in Guatemala during the quarter. PLO jewelry composition increased by 400 basis points reflecting our continued focus on growing this category. Particularly in Mexico.

As mentioned, our Latin American region saw significant PLO growth of 19% as highlighted on Slide 15, primarily fueled by our team's strong operational performance and increased pawn demand in the area.

PSC rose by 17% driven by same store PLO growth. On the retail side, merchandise sales grew by 19% and up 16% on a same store basis. Merchandise gross profit increased by 11% which was partially offset by a decrease in margin of two twenty three basis points. EBITDA climbed an impressive 20% to $14,600,000 with EBITDA margin increasing by 14 basis points to 15%. A quick word on our balance sheet and allocation priorities.

We continue to have a robust liquidity position with $175,000,000 of cash $333,000,000 of gross convertible notes on our balance sheet. As at 12/31/2024. We believe the most effective use of the cash to drive shareholder value is to use a balanced approach, which includes reinvestment, in our business to drive organic growth acquisitions, share buybacks and debt repayments.

We have $103,000,000 of convertible notes that come due in May 2025 and we continue to explore several use of existing cash traditional debt, high yield debt, or other equity linked instruments. Looking ahead, we remain focused on driving organic growth at across both revenue and earnings through a combination of higher PLO, PSC and merchandise [indiscernible] On a consolidated basis, margin is expected to remain at the low end of our target range of 35% to 38%. Reflecting our commitment to optimizing inventory turnover and minimizing aged general merchandise. As stated last quarter, with inflation rates declining comparable to a year ago, we anticipate a moderation in some same store expense growth. However, in January, we saw minimum wage increase of 6.5% to 12% enacted across Latin America.

These adjustments along with compression effects, aesthetics extended wage increases beyond minimum wage earners.

Resulted in salary increases to 63% of our team members in the region. That said, we will continue investing in our team technology in store network to enhance operational efficiencies.

From a strategic standpoint, our M and A pipeline remains strong and we have consistently executed on our inorganic growth strategy. We expect to continue expanding both within our existing markets and internationally. Collectively, these initiatives will be key drivers of our financial and operational performance in the years ahead. [indiscernible] [indiscernible] the through the due diligence process. Now, I would like to turn it over to Wachie for a few closing remarks. Thanks, Tim. I want to thank our EasyCorp team for delivering an outstanding quarter of operating and financial results for our shareholders. We achieved another record quarter for total revenue and PLO, while continuing to drive operating leverage to expand the bottom line.

Our strong foundation rooted in core values of people, pawn and passion, positions us for continued growth both organically and through strategic M and A. With that, we will open the call to questions. Operator, And our first question comes from Brian McNamara with Canaccord Genuity. You may proceed.

Hey, good morning guys. Thanks for taking the questions. And congrats on the strong results. A few from me. So first off on the merchandise margin, I think it dipped below 35% for the first time in a few years, I think, since 2020. Our pre quarter works adjusted loans would be stronger than there, particularly in LatAm given the 200 basis point drop year over year. That's correct.

It's definitely a very strong loan growth quarter. We're definitely seeing the demand for cash in our in our stores from our consumers and we did have to negotiate a lot more in the stores and provide further discounts Because we do see this customer having less cash to spend.

Got it. Second, a question we've gotten a lot recently is the company's exposure to undocumented immigrants and how potential deportations could impact your business. Is there any way to measure that? I know that anything needs to be kind of ID ed and checked by local police and things like that given regulations. To ensure it's not stolen? Just any color there would be helpful.

Look, I think good morning, Brian, and thanks for the questions. I think look, we certainly had these similar questions too. We haven't seen any impact to this point certainly. I think you've seen in this quarter's results As Tim mentioned, some incredibly strong lending results and across many regions some strong sales results So look, we haven't seen any impact yet. We can't comment on policy or what we think is going to happen with the new with the new administration. I what we're focused on is what we can do what we can do to maximize the earnings in the business and look, I think we're very, very well set up to do that in the future. I think the best way to sort of deal with this is to concentrate on what we can do, as I said, in the stores. And at this point, we've seen no impact as yet.

Great. And then maybe one for Tim. How is the company planning for tax refund season this year? And how should investors think of PLO seasonality? I mean, obviously, obviously, you have a really great PLO balance to finish off the calendar 2024. We haven't had obviously we haven't had a normal tax season in a while. So I'm curious if there's any puts or takes there that investors should be aware Yes. If we look back in the last two years, even though that hadn't been normal compared to the prior years, They may be the new normal. Which is a shorter period of time where people are receiving tax refunds and the dollars of refund has not moved. Those are what I've been reading. From analysts is that is what people are assuming it's going to happen. Especially in The States we operate.

Got it. And then you guys announced an acquisition I think in September. It doesn't look like it is closed yet, Auto De Niro. Any Anything to read into there? No, I think I mean Tim said it in his remarks think we are it's an acquisition in Mexico. It's in the auto pawn business, which is a relatively new thing for EasyCall.

We've got a very, very small amount of auto loans. In our booked out in Mexico. So it's looking at the leading platform down there and we are just in diligence making sure that we completely understand the business and that it's the right path forward. But we're doing the work and as soon as we're finished, we'll come back to the market and let you know.

Got it. And then, fine. I appreciate all the congrats taking all the questions here. Finally, I know you guys mentioned in your prepared remarks the refinancing options for your converts in May. It remains a key topic most investors we speak with. Are you leaning in a certain direction Look, I think the color is the color hasn't changed. It's very good news in that We certainly are under no pressure to do anything. We have liquidity to pay it with cash in May So we can take our time here in really weighing the pros and the cons of each alternative. I know people have different views on those alternatives [indiscernible] we are highly focused on it. We may go before May, we may go after May, but I think given the amount of growth potential in our business both organically and inorganically, We will likely do another financing in the future to to fuel that growth. But as I said, we are under no pressure to do it in any hurry. The terms continue to improve for us with our operating performance improving. So I think we are very comfortable with where we are at in terms of potential financing, but the Board is, as I said, very focused on it.

Spending the time with our various advisors to hopefully kick the right path forward Got it. Appreciate all the color guys. Thanks very much. Thanks, Brian.

Thank you.

Our next question comes from John Hecht with Jefferies. You may proceed.

Good morning, guys. Thanks very much for taking my questions.

First one on the recent wage increases in Mexico.

Number one is there's been a series of these. Do you guys have any insight as to that we're probably reaching the end of this cycle of wage increases, number one.

And number two is, other than the increasing of expenses down there from wage increases, Does the wage increases affect any other aspects of your business on the lending side? Look, I think good morning, John, and thank you for the questions as well. Look, I think yes, we are seeing various programs from the Mexican government on wage increases This one was a pretty significant one again. We don't know, to be honest with you, what the future holds on that front.

But what I can tell you is that our Mexican and Latin American business are gaining real momentum [indiscernible] sales growth. So I think that ash is being put into pocket is clearly helping on the sales side. But in terms of the loan side, we are not seeing any slowdown given the money that's been through the minimum wage rises. So look, it has impacted our expenses [indiscernible] In answering your question, we don't know where it's going to go. But the very good news is that that segment is growing incredibly well in a balanced way with a great team. So I'm super excited about the growth prospects down there. Okay. That's great. Thanks. And then you guys have invested in infrastructure to develop new services like the online sales, the customer rewards, which I think are pretty unique in the industry.

Maybe can you give us a sense for how you measure the impact of that? Any customer trends that you're seeing as a result of those activities?

Yes. Look, it's a good question. And yes, we are investing across all of our digital assets our core infrastructure, our point of sale system, And look, I think if you start at every level, I think you can say that whatever we are doing here is in part due to the investment we're making in driving more customers through our digital business because we are trending very, very well comparatively. We look at when we look at acquisitions, compare the way we're growing both from loans and from sales as to other companies are growing and we're obviously growing very strongly. We think we're winning market share in the neighborhoods in which we operate. So I think we start with the high level numbers and we think that we compare quite favorably to the competition. And in part that we believe that that's due to the digital investments we're making you go into our stores, which I know you do and you speak to a store manager, and you talk about our easy plus program or our Google ratings or our social media presence, you say to a store manager, well, we're thinking about winding that back. They immediately jump jump down at you and say, no, no, no, don't do that.

That's We really we find it important an important way to engage our customers. So I think, look, from a customer centric point of view and from a high level numbers point of view, I think we're confident in what we're doing. I think you look at other sectors, And you know that you have to meet the customer in all sorts of places. You can't just choose to meet them in the store because they want to meet you online or on the telephone. So I think we are just building building various distribution platforms in order to give our customer the best experience. So look, we've done in a pretty disciplined way. We haven't gone and spent a huge amount of money on this stuff. We keep it lean. We test. We look at it on our ROI basis. But look, I think when you run a customer and people centric business, These investments are important.

Okay. And then my final question is, you've been adding stores, you've been making acquisitions. I mean, maybe can you give us your sense for this fiscal year? Where are the store whether it's acquisition or growth opportunities and where you focus there?

Look, that's a good question. I think, look, we're trying to run a balanced growth strategy around stores. So you've obviously got the de novo program, then you've got your M and A program. And I think with de novo, you can be a little bit better planned. And I think we've been building roughly 40 stores per year over the last couple of years. And look, I think that's that's a good way to think about at least the short term future. We'd like to be somewhere in that kind of vicinity. The only caveat to that is if you do a large a medium to large size acquisition, maybe you slow down that de novo program a little. But look, de novo is a very important part of our growth strategy We've got a fantastic team in Latin America that are solely focused on that and are getting very good at it. So I think that's an important part of the growth story. And then on M and A, as you know, it's It takes a willing bar and a willing seller to come up with a mutually acceptable price and that can that can take time. And I think you've seen in our recent acquisitions over the years that Our sort of price and structure disciplines are are very real.

So look, we think the pipeline is strong.

I don't think there's been much change in the last few years in pipeline.

I just think we're going to do it in a disciplined way. We're going to do it where we think we're buying good people. Often in areas that we can fall pretty easily into our field team. But I think it's Latin America particularly is still very exciting in terms of the M and A M and A platform. In The U. S, it's as you know, there are still definitely targets out there. I think the biggest is Simple Management Group, which we obviously have a significant investment in. So that's an exciting one for us. That's now 100 stores across Florida, The Caribbean and Central America. So I think that one's very interesting and then beyond, I think I think the world of pawnbroking is a very large world. Of incredible scale. And so I think long term, this is a super exciting global scale opportunity. But for now, think we're concentrated on our core markets And I think there's plenty to do there both organically and inorganically.

Great. Thanks very much for that color. Thanks, John.

Thank you. Our next question comes from Kyle Joseph with Stephens. You may proceed.

Hey, good morning. Thanks for taking my questions. Just wanted to get a sense for domestic growth. I know you guys talked about as inflation wanes you would expect that growth come down a bit, but you did we did see it accelerate in the December. So just kind of give us any sort of sense of what drove the acceleration in the quarter and and kind of how quickly you expect that to normalize?

Good morning, Carl. Look, as you point out, it was a super strong result in The U. S. On the lending side.

I think it was as Tim said in his remarks, I think it was driven by both really strong engagement by our people in store Blair and his team are phenomenal in teaching our our team members, our pawnbrokers in store to engage every customer. And I think that engagement and that core expertise is really driving stronger loans.

And then you've got higher average loan size, as Tim mentioned, and just I do think that the consumer out there is still challenged at our end. And so so, yes, inflation is coming down, but it's still it's still up there, interest rates are high gas prices. You've got other forms of finance tightening. So I think our customer is showing that there is still a strong need for cash. So So our view is that with strong execution in the stores, we should continue to drive pretty strong growth here in loans.

Got it.

And then just high level talk about competitive [indiscernible] call it the two segments, The U. S. And LatAm and where you're seeing LTV trends in each I think competitive trends I don't think that changed quarter over quarter. I think obviously there are the two major competitors us and first cash and then a very fragmented industry beyond that. So I think, I mean, the competitive trends, I think, have been pretty stable And then segment by segment what was the second part of the question, segment by segment competitive trends?

Yes, just where you're seeing LTVs.

Tim, do you want to comment on that?

Segment by segment? Yes. So from an LTV perspective, those are in constant movement based on where we're seeing the sales occur in our stores and across the market. And so those we are adjusting all the time But from a consolidated perspective, they really remain very consistent year after year. Got it. That's it for me. Thanks for answering my questions. Thanks, Kyle.

Thank you. I would now like to turn the call back over to Lachy Given, for any closing remarks. Thank you, operator, and thank you everyone for joining today.

We very much appreciate your time, and we are looking forward to talking to a lot of you over the next couple of days. And just one last time, a very big thank you to the EZCORP team for another very, very strong set of operating results. [indiscernible]