Pawn Loans Outstanding of $157.2 million, Net Revenue of $108 million, Net Loss of $2.6 million - All Year-Over-Year Improvements

EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its third quarter ended June 30, 2021.

All amounts in this release are 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.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Jason Kulas stated, “During the quarter, we completed the acquisition of 128 Cash Apoyo Efectivo stores in Mexico, our largest acquisition to date in terms of store-count, solidifying our position as the second largest for-profit pawn operator in Mexico. We also acquired 11 stores in the Houston, Texas area and opened four de novo stores in Latin America, bringing our total store count to 1,143 at the end of the quarter, 627 (55%) of which are in Latin America.

"The third quarter was a solid quarter in which we continued to make significant strides in strengthening and growing our core pawn business. Despite lingering transitory COVID-related impacts, including government stimulus programs in the U.S., we continued to drive meaningful improvements across core operating metrics. We achieved our highest quarter-ending balance of PLO since the beginning of the pandemic, up 25% on a sequential basis and 39% compared to a year ago. While merchandise sales volumes were down 21% from their peak pandemic levels a year ago, we delivered a 6% increase in sales gross profit through effective inventory management and higher margins. These positive results reflect the relentless focus of our store teams on meeting our customers’ needs and executing the fundamentals.

“Net Income improved from a loss of $5.5 million to a loss of $2.6 million, while adjusted EBITDA more than doubled, reflecting not only the improvement in core operating metrics, but also our ongoing commitment to expense management and efficiency. We remain on track to realize annualized cost savings of more than $14.0 million for fiscal 2021 even assuming store-level expenses trend higher as transaction volumes accelerate.

“Looking ahead, we remain well positioned to continue our trend of improving financial performance, and are excited about the increasing earnings power of the platform. Pawn transaction activity continues to rebuild, driving PLO balances closer to pre-pandemic levels, which will drive accelerating pawn service charge revenue in the coming quarters given the natural lag between pawn originations and related fees. In addition, we remain on track to realize meaningful cost savings this year and beyond, even assuming store-level expenses trend higher to meet accelerating transaction volumes. And, we maintain a strong and liquid balance sheet to fund accelerating pawn demand and capitalize on acquisition opportunities that further enhance our scale-enabled and geographically diverse footprint and generate strong returns on investment.”

• Diluted loss per share was $0.05, compared to a diluted loss per share of $0.10 in the prior-year quarter. On an adjusted basis¹, diluted loss per share was $0.03, compared to diluted loss per share of $0.02 in the prior-year quarter.
• Income before taxes improved $9.5 million or 93% from a loss of $10.2 million to a loss of $0.8 million. Adjusted EBITDA increased $6.7 million or 126% from $5.3 million to $12.0 million.
• Pawn loans outstanding (PLO) increased to $157.2 million up 39% from the prior-year quarter and 25% on a sequential basis. On a same store basis, PLO increased 34% year-over-year and 21% sequentially.
• Net revenues increased $5.8 million or 6% while total revenues decreased $36.2 million or 17%.
• Merchandise sales gross profit increased by 6%, even though merchandise sales decreased by $28.7 million or 21% as a result of effective inventory management. Merchandise sales gross profit margin was 44%, a 1,100 bps improvement over the prior-year quarter (which was adversely impacted by a cost of goods sold adjustment for merchandise lost during looting at 30 U.S. stores during that quarter) and 100 bps over the immediately preceding quarter.
• PSC increased $8.0 million or 15% due to an increase in the average PLO balance during the quarter.
• Jewelry scrapping sales decreased $14.6 million or 72% and jewelry scrapping sales gross profit decreased $3.9 million or 95%. Jewelry scrapping sales gross profit margin decreased to 4% from 20%. This reflects our strategy of focusing on selling jewelry at higher retail margins than the scrapping process provides.
• Net inventory was $92.2 million, down 25% year-over-year and 7% sequentially. Inventory turnover improved to 3.1x from 2.9x.
• Total operating expenses were down $2.1 million or 2% to $104.3 million. Store expenses decreased 1% even though store count grew by 11%. In addition, general and administrative expenses decreased $1.6 million or 10% due to continued focus on expense control initiatives implemented since the fourth quarter of 2020.
• Cash and cash equivalents at the end of the quarter was $283.7 million, down $27.5 million or 9% year-over-year and $52.0 million or 15% on a sequential basis. The decrease is primarily due to the increase in PLO and the acquisition of new stores.

¹ ”Adjusted” basis, which is a non-GAAP measure, excludes certain items. “Constant currency” basis, which is a non-GAAP measure, excludes the impact of foreign currency exchange rate fluctuations. “Free cash flow,” which is a non-GAAP measure, includes certain adjustments to cash flow from operating activities.

For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.

SEGMENT RESULTS

U.S. Pawn

• PLO increased 35% year-over-year to $117.2 million. On a sequential basis, PLO increased 23% compared to a 29% sequential decrease in the prior-year quarter. On a same store basis, PLO increased 34% year-over-year and 22% sequentially.
• Total revenue was down 25% to $130.4 million, while net revenues decreased 3% to $83.3 million.
• Merchandise sales and same store sales declined 27% to $84.5 million, but merchandise sales gross profit was down only 3%, reflecting increased gross margins of 46% compared to 35% in the prior-year-quarter (37% when excluding a loss from looting of $2.2 million from merchandise cost of goods sold in the prior-year-quarter). Aged general merchandise inventory as a percentage of total inventory improved to 1.2% from 4.9%.
• PSC increased 7% to $44.0 million as a result of higher average PLO for the quarter.
• Jewelry scrapping sales decreased $15.2 million or 89% and jewelry scrapping sales gross profit decreased $4.2 million or 99% Jewelry scrapping sales gross profit margin decreased to 2% from 25%.
• Net inventory was down $20.9 million or 23% year-over-year and 1% sequentially. Inventory turnover decreased to 2.8x from 3.2x.
• Store expenses were down 6% to $62.5 million driven by a reduction in labor expense.
• Segment contribution increased $1.6 million to $18.1 million. When excluding the looting charge taken in the prior year quarter, segment contribution decreased $0.6 million.
• Segment store count increased by 11 during the quarter, due to the acquisition of 11 pawn stores in the Houston, Texas area.

Latin America Pawn

• PLO increased 51% year-over-year to $40.0 million (36% on constant currency basis). On a sequential basis, PLO increased 34% compared to a 31% sequential decrease in the prior-year quarter. On a same store basis, PLO increased 32% year-over-year and 17% sequentially.
• Total revenue was up 25% to $43.5 million (12% on a constant currency basis), while net revenues increased 59% to $24.7 million (43% on a constant currency basis).
• Merchandise sales grew 15% to $23.3 million (up 3% to $20.8 million on a constant currency basis) and same store sales grew 8% (down 4% on a constant currency basis). Merchandise sales gross profit was up 91%, reflecting significantly improved margins of 35% compared to 21% in the prior-year quarter. Aged general merchandise as a percentage of total inventory improved to 0.9% from 18.1%.
• PSC increased $5.0 million to $16.4 million (up 30% to $14.8 million on a constant currency basis) as a result of higher average PLO for the quarter.
• Net inventory was down $9.9 million or 30% year-over-year (38% on a constant currency basis), but up 41% sequentially. Inventory turnover improved to 4.0x from 2.2x.
• Store expenses were up $4.3 million or 28% ($2.2 million or 15% on a constant currency basis) primarily due to an increase in transaction volume and costs resulting from the re-opening of stores impacted by the COVID-19 pandemic last year.
• Segment contribution was $3.6 million ($3.2 million on a constant currency basis), compared to a segment loss of $0.7 million in the prior year quarter.
• Segment store count increased by 121 during the quarter, reflecting the acquisition of 128 Cash Apoyo Efectivo stores, the addition of four de novo stores and the closure of 11 stores in Peru.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 has been filed with the Securities and Exchange Commission and is available in the Investor Relations section of the Company’s website at http://investors.ezcorp.com.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, August 5, 2021, at 7:00 am Central Time to discuss fiscal third quarter results. Analysts and institutional investors may participate on the conference call by dialing (866) 269-4262, Conference ID: 8885759, or internationally by dialing (323) 347-3281. 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 end of the call.

ABOUT EZCORP

Formed in 1989, EZCORP has grown into a leading provider of pawn transactions in the United States and Latin America. We also sell merchandise, primarily collateral forfeited from pawn lending operations and pre-owned and recycled merchandise purchased from customers. We are dedicated to satisfying the short-term cash needs of consumers who are both cash and credit constrained, focusing on an industry-leading customer experience. EZCORP is traded on NASDAQ under the symbol EZPW and is a member of the Russell 2000 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, current or future litigation and risks associated with the COVID-19 pandemic. 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.

Non-GAAP Financial Information (Unaudited)

In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency ("constant currency") and adjusted basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzales and other Latin American currencies. We believe that presentation of constant currency and adjusted results is meaningful and useful in understanding the activities and business metrics of our operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use this non-GAAP financial information primarily to evaluate and compare operating results across accounting periods.

Readers should consider the information in addition to, but not instead of or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

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. 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. 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 nine months ended June 30, 2021 and 2020 were as follows: