Record Year End Pawn Loans Outstanding Driving Revenue and Earnings Growth

EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its fourth quarter and full year ended September 30, 2022.

Unless otherwise noted, all amounts in this release are in conformity with U.S. generally accepted accounting principles ("GAAP") and comparisons shown are to the same period in the prior year.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

• Pawn loans outstanding (PLO) up 19% to a record-high of $210.0 million.
• Total revenue increased 21% for the quarter and for the full year, while gross profit¹ increased 15% for the quarter and 18% for the full year.
• Merchandise sales gross margin remains within our targeted range at 37% for the quarter and 38% for the full year.
• Net income for the quarter was $7.3 million, an increase of $5.8 million, and $50.2 million for the year, an increase of $41.5 million.
• Diluted earnings per share of $0.11 for the quarter was up from $0.03 and for the year was $0.70 up significantly from $0.15. On an adjusted basis², diluted earnings per share for the quarter was $0.15, compared to $0.11, and for the year was $0.75, compared to $0.38.
• Return on earning assets (ROEA) remains strong at 155% for the quarter and 167% for the full year.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Lachie Given stated, “We continue to execute on our three-year strategic plan and closed the fiscal year with another outstanding quarter. PLO hit a record high driving increases in pawn service charges. Strong sales margins with a relentless focus on optimizing store operating costs translated into a significant increase in earnings for the fourth quarter and full year. Inflation and other economic pressures have had a significant impact on our customers' finances, and we are able to help them by providing a unique and essential service to address their short-term cash needs. In addition, we provide an environmentally friendly retail experience at our neighborhood re-commerce stores for our expanding customer base of environmentally and cost-conscious consumers.

“During the fourth quarter, we opened 16 de novo stores in Latin America bringing the total for 2022 to 28. In the US, we acquired three stores during fiscal 2022 and another nine stores in the Houston, Texas area after the end of the year. The rollout of the EZ+ Rewards program continues to be a success, now yielding 1.9 million members across all geographies.

“We are pleased that our strong cash flow and balance sheet has enabled us to return value to shareholders through share repurchases of $3.0 million as of November 15.

“During the quarter we celebrated a team member appreciation week, created engagement action plans on both the enterprise level and team level, and conducted leadership workshop sessions to improve bench strength. We believe we have the best, most passionate, productive team members and we are focused on recruitment, retention and incentivization. They are responsible for delivering the operating performance that underpins our strong financial results,” concluded Given.

CONSOLIDATED RESULTS

• Diluted earnings per share were $0.11 for the fourth quarter, up from $0.03. On an adjusted basis, diluted earnings per share were $0.15, up from $0.11. For the full year, diluted earnings per share was $0.70, compared to $0.15. On an adjusted basis, diluted earnings per share for the year were $0.75, compared to $0.38.
• For the fourth quarter, income before taxes improved to $13.2 million from $4.5 million, while adjusted EBITDA increased 33% to $24.6 million. For the full year, income before taxes improved to $67.7 million from $16.1 million and adjusted EBITDA increased 66% to $112.9 million.
• PLO increased 19% to $210.0 million, up $34.1 million. On a same-store basis³, PLO increased 19% to its highest level due to increased loan demand reflecting continuing recovery above pre-COVID levels.
• In the fourth quarter, total revenues increased 21% and gross profit increased 15%, reflecting improved pawn service charge (PSC) revenue and merchandise sales gross profit. Similarly for the full year, total revenues increased 21% and gross profit increased 18%.
• PSC increased 21% in the fourth quarter and 23% for the year as a result of higher average PLO.
• Merchandise sales gross margin remains within our targeted range at 37%, reflecting our commitment to improving the core business by decreasing aged general merchandise (less than 1% of total general merchandise inventory) and focusing on selling inventory in the first 90 days. For the full year, merchandise sales gross profit margin was 38%, compared to 42%.
• Net inventory increased 37%, reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 2.6x for the quarter, down from 2.8x and decreased from 2.9x to 2.8x for the year.
• For the fourth quarter, store expenses increased 8%, primarily due to increased labor in-line with store activity and rent associated with lease renewals. On a same-store basis, store expenses increased 7%. In addition, general and administrative expenses increased 14%, primarily due to asset write-downs associated with IT infrastructure migration and corporate office sublease. For the full year, store expenses increased 8%, primarily due to increased labor in-line with store activity and rent associated with lease renewals. On a same-store basis, store expenses increased 4%. In addition, general and administrative expenses for the year increased 14%, primarily due to asset write-downs associated with IT infrastructure migration and corporate office sublease, litigation accrual, increased labor and software licensing costs.
• Cash and cash equivalents at the end of the quarter was $206.0 million, down 19% year-over-year. The decrease is primarily due to the increase in PLO and inventory, the acquisition of new stores, and strategic investments.

SEGMENT RESULTS

U.S. Pawn

• PLO continued to increase, ending the year at $163.5 million, up 20% and on a same store basis.
• In the fourth quarter, total revenue was up 25% and gross profit increased 18%, reflecting increasing PSC, higher sales and improved merchandise sales gross profit. For the full year, total revenues increased 19% and gross profit increased 16%, reflecting higher average PLO for the year driving higher PSC.
• PSC increased 25% in the fourth quarter and 22% for the year as a result of higher average PLO.
• During the fourth quarter, merchandise sales gross margin decreased to 40% from 43%. For the year, merchandise sales gross profit gross margins decreased 300 bps to 41%, reflecting a focus on improving retailing and lower levels of aged general merchandise inventory (which continues to be less than 1% of total merchandise inventory).
• Net inventory increased 40% reflecting a return towards normalized inventory levels. Inventory turnover decreased to 2.5x from 2.7x in the quarter and decreased to 2.6x from 2.7x for the year.
• In the fourth quarter, store expenses increased 9%, primarily due to increased labor in-line with store activity and rent associated with lease renewals. Similarly for the full year, store expenses increased 5% (4% on a same store basis).
• Segment contribution increased 49% to $31.0 million in the fourth quarter and increased 51% to $129.1 million for the year.
• Segment store count decreased by one store due to the net impact of the acquisition of three stores and consolidation of four stores during the year.

Latin America Pawn

• PLO improved to $46.6 million, up 17% (15% on constant currency basis). On a same store basis, PLO increased 15% (13% on a constant currency basis).
• In the fourth quarter, total revenue was up 13% and on a constant currency basis, while gross profit increased 8% and on a constant currency basis. For the year, total revenues were up 30% and on a constant currency basis, while gross profit increased by 23% and on a constant currency basis.
• PSC increased to $21.5 million, up 8% (9% on a constant currency basis) as a result of higher average PLO. Similarly for the full year, PSC increased 26% and on a constant currency basis.
• Merchandise sales gross margin decreased in the fourth quarter from 34% to 31%, and for the year it decreased 500 bps to 30%, reflecting a return to more normalized margins. Aged general merchandise inventory increased to 1.9% from 0.3% of total merchandise inventory.
• Net inventory increased 28% (26% on a constant currency basis) reflecting a return towards normalized inventory levels. Inventory turnover remains strong at 3.1x, down from 3.3x for the quarter and decreased for the year to 3.5x from 3.7x.
• In the fourth quarter, store expenses increased 5% (6% on a constant currency basis) primarily due to increased labor in-line with store activity. Same-store expenses increased $0.7 million or 3% (5% on a constant currency basis). For the year, store expenses increased 18% (18% on a constant currency basis) primarily due to increased labor in-line with store activity and rent associated with lease renewals and annual inflation adjustments. Same-store expenses increased 5% and on a constant currency basis).
• For the fourth quarter, segment contribution increased to $6.7 million, up 9% (10% on a constant currency basis). For the year, segment contribution was up 39% to $24.1 million (40% increase to $24.2 million on a constant currency basis). On an adjusted basis, segment contribution for the fourth quarter was $6.7 million, flat from prior year, and the increase for the year was 33% to $24.2 million.
• Segment store count increased by 28 de novo stores opened during the year.

FORM 10-K

EZCORP’s Annual Report on Form 10-K for the year ended September 30, 2022 has been filed with the Securities and Exchange Commission. The report 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, November 17, 2022, at 7:00 am Central Time to discuss Fourth Quarter and Full Year Fiscal 2022 results. Analysts and institutional investors may participate on the conference call by dialing (844) 200-6205, Conference ID: 977401, or internationally by dialing (929) 526-1599. 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 S&P 1000 Index and Nasdaq Composite Index.

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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.

Note: Percentages are calculated from the underlying numbers in thousands and, as a result, may not agree to the percentages calculated from numbers in millions.

¹”We have relabeled "net revenues" to "gross profit" throughout our filings, which we believe will improve comparability across industries and companies. This change is effective for this and future filings.

²”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.

³”Same Store” basis, which is a financial measure, includes stores open the entirety of the comparable periods.

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 twelve months ended September 30, 2022 and 2021 were as follows:

Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss.

Miscellaneous Non-GAAP Financial Measures