PLO Up 39%; Revenue up 17%; Net Income up 179%

Board of Directors Authorizes a Three-Year $50 Million Share Repurchase Program

EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its second quarter ended March 31, 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.

SECOND QUARTER HIGHLIGHTS

• Pawn loans outstanding (PLO) was up 39%.

• Total revenue increased 17%, and net revenue increased 13%.

• Merchandise sales gross profit margin was at the high end of our stated range at 38%.

• Net income increased 179%.

• Diluted earnings per share of $0.20 were up significantly from $0.10. On an adjusted basis¹, diluted earnings per share were $0.22, compared to $0.17 in the prior-year quarter.

• Return on earning assets (ROEA) remains strong at 175%.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Lachie Given stated, “We continue to execute on the plan we put in place at the end of fiscal 2020 and drove another quarter of successful results. We had a significant increase in net income, and PLO continues to grow strongly. PLO is at the highest level it has ever been at the end of the second quarter, and is now within 4% of pre-pandemic levels on a same store basis.

“Our Board of Directors has approved a new three-year share repurchase program for up to $50 million that enables us to return capital to shareholders by buying back shares at what we believe to be attractive valuations. This share repurchase program underscores our confidence in our balance sheet and strong cash flow generation. We believe our consistent and positive business momentum provides us with capacity to return cash to shareholders while continuing to innovate and grow the business.

“In the second quarter, we opened three de novo stores in Latin America, and after the end of the quarter, we acquired three stores in the Dallas, Texas area. We continue to look for opportunities to grow and diversify in new and established pawn markets.

“We have expanded our EZ+ Rewards program beyond the US and Mexico into Guatemala. We are now live in our three largest regions, with over 900,000 customers enrolled. We have also improved our online customer experience with live chat support. Our focus is on providing our customers with a unique and essential service by addressing their short-term cash needs, as well as an environmentally friendly retail experience. The nature of our business contributes to the circular economy, extending the useful life of items and reducing waste, and we are looking to further expand our customer base with programs focused on environmentally conscious consumers.

“Improving the experience for team members as well as our customers is the foundation for improving our financial results. Attracting and retaining talent is a high priority. We engage with team members at all levels to understand their goals, identify future leaders and make sure we are rewarding performance.

“People, Pawn and Passion is our operating theme, and our team is focused on improving efficiency, optimizing costs and providing the best experience for our customers. I am extremely proud of our team members, who have driven another successful quarter. We are committed to continuous improvement for all stakeholders: our team, our customers and our shareholders.”

CONSOLIDATED RESULTS

• Diluted earnings per share were $0.20 for the second quarter, up from $0.10. On an adjusted basis, diluted earnings per share were $0.22, up from $0.17.

• Income before taxes improved by 196% to $20.1 million, while adjusted EBITDA increased 61% to $32.1 million.

• PLO increased 39% to $173.6 million, up $48.4 million. On a same-store basis², PLO increased 33% due to increased loan demand reflecting a recovery towards pre-COVID levels.

• Total revenues increased 17%, and net revenues increased 13%, reflecting improved pawn service charge (PSC) revenue and merchandise sales.

• PSC increased 21% due to an increase in the average PLO balance during the quarter.

• Merchandise sales gross profit margin was at the high end of our stated range at 38%, reflecting the 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.

• Net inventory increased 39% reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 2.9x for the quarter, down from 3.1x.

• Store expenses increased 6%, primarily due to increased store count. On a same-store basis, store expenses were flat.

• General and administrative expenses decreased 11%, primarily due to the reversal of incentive compensation for the departing CEO.

• Cash and cash equivalents at the end of the quarter was $255.0 million, down 24% year-over-year. The decrease is primarily due to the increase in PLO and inventory, strategic investments and the acquisition of new stores.

SEGMENT RESULTS

U.S. Pawn

• PLO continued to increase, ending the quarter at $133.5 million, up 40% (39% on a same store basis).

• Total revenue was up 10% and net revenues increased 10%, reflecting increasing PSC and higher sales.

• PSC increased 19% as a result of higher average PLO.

• Merchandise sales gross profit gross margins decreased to 41% from 45% as expected. Aged general merchandise inventory improved to 0.4% from 1.6% of total merchandise inventory.

• Net inventory increased 34%. Inventory turnover decreased to 2.6x from 2.9x due to increased inventory levels in the current quarter and stimulus impacts in the prior year.

• Store expenses increased 1% primarily due to increased store count.

• Segment contribution increased 31% to $33.8 million.

Latin America Pawn

• PLO improved to $40.1 million or 34% (31% on constant currency basis). On a same store basis, PLO increased 15% (13% on a constant currency basis).

• Total revenue was up 42% (43% on a constant currency basis), while net revenues increased 30% (31% on a constant currency basis).

• PSC increased to $17.9 million or 29% (30% on a constant currency basis) as a result of higher average PLO for the quarter.

• Merchandise sales gross profit margins decreased from 35% to 29%, reflecting a return to more normalized margins.

• Net inventory increased 62% (58% on a constant currency basis). Inventory turnover remains strong at 3.8x, down from 4.0x.

• Store expenses increased 22% (22% on a constant currency basis) primarily due to growth in year-over-year store count. Same-store expenses decreased 1% (1% on a constant currency basis).

• Segment contribution increased to $4.8 million or 85% (88% on a constant currency basis), compared to $2.6 million.

• Segment store count increased by three de novo stores opened during the quarter.

   

SHARE REPURCHASE PROGRAM

The Board of Directors has approved a new share repurchase program, which will replace the previous program that was suspended in March 2020 at the onset of the COVID-19 pandemic. Under the new program, the Company is authorized to repurchase up to $50 million of our Class A Non-Voting common shares over the next three years. This decision reflects the strength of our balance sheet and the successful recovery from the adverse impacts of the pandemic, as well as the Board’s confidence in our continued ability to generate significant cash flows and our commitment to driving long-term shareholder value through efficient capital deployment. 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.

Under the stock repurchase program, the Company may purchase Class A Non-Voting common stock from time to time at management’s discretion in accordance with applicable securities laws, including through open market transactions, block or privately negotiated transactions, or any combination thereof. In addition, the Company may purchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934.

The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows, and corporate considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities. The Board of Directors has reserved the right to modify, suspend or terminate the program at any time.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended March 31, 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, May 5, 2022, at 7:00 am Central Time to discuss Second Quarter Fiscal 2022 results. Analysts and institutional investors may participate on the conference call by dialing (833) 579-0921, Conference ID: 5093419, or internationally by dialing (778) 560-2579. 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.

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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.

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 six months ended March 31, 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