Record Second Quarter Pawn Loans Outstanding and Sales Driving Strong Revenue Growth

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, 2023.

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) up 19% to $206.1 million.

• Total revenue increased 20%, and gross profit increased 16%.

• Merchandise sales gross margin remains within our targeted range at 36%.

• Net loss of $6.8 million, was down from Net Income of $14.9 million, primarily driven by our $25.6 million share of the one-time, non-cash goodwill impairment and discrete adjustments recognized by Cash Converters International in its half-year period ended December 31, 2022.

• Diluted loss per share of $0.12 was down from diluted earnings per share of $0.20. On an adjusted basis¹, diluted earnings per share was $0.23, compared to $0.22 in the prior-year quarter.

• Return on earning assets (ROEA) remains strong at 165%.

CEO COMMENTARY AND OUTLOOK

Lachie Given, Chief Executive Officer, stated, "We achieved record second quarter PLO and merchandise sales as we continue to execute our three-year plan, put in place at the end of fiscal 2020. The macro-economic environment continues to support increased core demand for our products and services, including providing our environmentally conscious consumers with a more sustainable way to shop. Our team's relentless commitment to serving our customers with passion and respect and to operational excellence in all that we do, continues to drive our strong operating and financial results.

"During the second quarter, we expanded our store footprint, opening 13 de novo stores. Two of these stores were opened in Las Vegas, the first under our newly acquired luxury brand Max Pawn, and the other under the core EZPAWN brand. We are very excited to be growing our presence in this important pawn market. The other 11 new stores were opened across LatAm – 8 in Mexico and 3 in Guatemala, where we are extending our market leadership, with 103 stores there.

“EZ+ Rewards, our loyalty program, continues to be very well received by our customers and has grown to 2.9 million members globally, an increase of 17% over the first quarter of 2023. We are extremely happy with the increases here and are working hard on strategies to win and retain more customers in all of the local communities in which we operate.

"We continue to believe that investing in our teams and technology is essential. To ensure the continuous improvement of our Field Teams' bench strength, we completed talent and succession processes for all global operations. In Latin America we are enhancing recruiting strategies and implementing development programs for Lead Pawnbrokers and Store Managers. In the US we launched a new SharePoint in store communications program, to enhance our daily program execution and performance management strategies across all stores. We have deployed store system and network upgrades to support digital initiatives and are building out our e-commerce capabilities in a disciplined way.

"During the quarter, we repurchased $3.9 million worth of EZCORP shares as part of the up to $50 million share repurchase program announced in the second quarter of fiscal 2022.

"Our focus on People, Pawn, and Passion, along with the disciplined execution of our enhanced operating model has yielded another quarter of strong results for our shareholders. We will continue to invest in our people and technology with the goal of serving more customers, more frequently, across more locations, in an environmentally sustainable way, to ultimately drive value to our shareholders," Given concluded.

CONSOLIDATED RESULTS

• Diluted loss per share was $0.12, down from diluted earnings per share of $0.20. On an adjusted basis, diluted earnings per share were $0.23, up from $0.22. The primary difference between GAAP and Adjusted financial results is attributable to our share of the previously announced one-time, non-cash goodwill impairment recognized by Cash Converters International in its half-year period ended December 31 2022.

• Loss before taxes was $7.3 million, down from profit before taxes of $20.1 million, while adjusted EBITDA increased 4% to $33.3 million.

• PLO increased 19% to $206.1 million, up $32.5 million. On a same-store basis², PLO increased 16% due to increased loan demand, reflecting continuing growth.

• Total revenues increased 20% and gross profit increased 16%, reflecting improved pawn service charge (PSC) revenue, merchandise sales and merchandise sales gross profit.

• PSC increased 21% as a result of higher average PLO and yields.

• Merchandise sales gross margin remains within our targeted range at 36%. Aged general merchandise has increased to 2.2% of total general merchandise inventory.

• Net inventory increased 25%, reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 2.8x for the quarter, down from 2.9x.

• Store expenses increased 18%, primarily due to increased labor in-line with store activity, higher store count and, to a lesser extent, expenses related to our loyalty program. On a same-store basis, store expenses increased 12%. General and administrative expenses increased 28%, primarily due to the reversal of incentive compensation for the departed CEO in the prior period and, to a lesser extent, increase in accrued incentive compensation.

• Cash and cash equivalents at the end of the quarter was $243.1 million, down 5% year-over-year. The decrease was primarily due to the increase in PLO and inventory, the acquisition of new stores, and strategic investments, partially offset by the net cash proceeds associated with the convertible debt refinancing.

SEGMENT RESULTS

U.S. Pawn

• PLO ended the quarter at $157.0 million, up 18% or 14% on a same store basis.

• Total revenue was up 16% and gross profit increased 11%, reflecting increased PSC and higher merchandise sales.

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

• Merchandise sales gross margin decreased to 38% from 41%, reflecting a more normalized operating environment. Aged general merchandise increased to 1.4% of total general merchandise inventory primarily driven by recent acquisitions.

• Net inventory increased 20% reflecting a return towards normalized inventory levels. Inventory turnover remained flat at 2.6x.

• Store expenses increased 12%, primarily due to increased labor in-line with store activity, higher store count and, to a lesser extent, expenses related to our loyalty program.

• Segment contribution increased 12% to $37.8 million.

• Segment store count increased by 2 de novo stores during the quarter.

Latin America Pawn

• PLO improved to $49.1 million, up 22% (14% on constant currency basis). On a same store basis, PLO increased 19% (12% on a constant currency basis).

• Total revenue was up 30% (22% on constant currency basis) and gross profit increased 32% (23% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.

• PSC increased 29% (21% on a constant currency basis) as a result of higher average PLO and yield.

• Merchandise sales gross margin increased from 29% to 32%. Aged general merchandise inventory increased to 3.2% from 1.0% of total merchandise inventory.

• Net inventory increased 44% (33% on a constant currency basis), reflecting a return towards normalized inventory levels. Inventory turnover remains strong at 3.5x, down from 3.8x.

• Store expenses increased 38% (29% on a constant currency basis), primarily due to increased labor in-line with store activity and higher store count. Same-store expenses increased 32% (24% on a constant currency basis).

• Segment contribution increased 68% (57% on a constant currency basis) to $8.0 million. On an adjusted basis, segment contribution was up 10% to $5.4 million, with the primary adjustment being the reversal of contingent consideration liability in connection with a previously completed acquisition.

• Segment store count increased by 11 de novo stores during the quarter.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 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 4, 2023, at 8:00 am Central Time to discuss Second Quarter Fiscal 2023 results. Analysts and institutional investors may participate on the conference call by dialing (833) 470-1428, Conference ID: 721380, or internationally by dialing (404) 975-4839. 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“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.

²“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. In addition, we have an equity method investment that is denominated in Australian dollars and is translated into U.S. dollars. 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, 2023 and 2022 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