EZCORP (EZPW) 5 Feb 212021 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to EZCORP's First Quarter Fiscal 2021 Earnings Conference Call [Operator Instructions].

As a reminder, this call may be recorded. I would now like to turn this conference over to Mr. Michael Keim, Investor Relations. Please go ahead, Michael.

begin. may You

good and Thank morning, you, everyone.

prepared to referring our Web at will download be which are site we slides investors.ezcorp.com. available our During from remarks, for or viewing

statements I'd differ current presentation slides based unless These may foreign other certain And annual, this Commission. future due begin, from discussed Before operating everyone items. currency company's regarding identified, statements on expectations. on presented contain otherwise of expressed the to or basis for quarterly a to discrete that our for Exchange and periods well and number and as of the results remove as are financial forward-looking are noted that performance with risks we Actual those as results in the adjusted conference filed effect Securities factors fluctuations an like by materially or the call in and company's the to other expected reports forward-looking these statements the other remind and materials periods. future implied are presentation

Jason like Mr. call to the Jason? over turn to I'd Now Kulas.

retail dedication. were strengthening growing to We retention And and Michael, with thank their our make to the engagement to our remain remain core to toward industry. health, of of is customers' for merchandise. through pricing. committed it initiatives and for morning, and are that and everyone. I and geographies our able the address ongoing options, team building analytics we the data of in because on to customer want and we needs across want our goal focused outstanding our broaden seasoned pandemic, Thanks, servicing trust and expand also of business with and the payment members most the workforce stores our cash for loyalty affordable effective goals. open making this remain progress Virtually and optimize through team increasingly safety, I enhance customers pawn ongoing and beyond efforts the leverage start pandemic. development and digital preowned to by the all their to pawn to good thanking lending our We platform our technology members team

So of the X starting on Slide presentation. investor

tax quarter key season programs run up they quarter consistent for in outstanding, government first by to theme to impact in tax on will The store to pre-COVID our course, XX% the and as remained loans, fading pawn quarter through of strong and demand we term. a driven charges January ultimately pick lead curb season second quarter flat for Having and said get Once a early the stimulus that, and loan quarter-over-quarter. and levels. therefore, even in financial recently pawn did and second up or growth PLO value service their the a pawn the primarily was from loans $XXX PLO, basis, expenses temporarily stimulus million, we demand The loans prior at expect Pawn ended demand and enhance ongoing efforts first to refund reduced to before return programs. customers in stimulus incremental sequential proposition for package the half upcoming as implemented in January. stabilizing PSC further near the

with depressed the we sales through continue charges during quarter first pawn through merchandise relative well levels Second, PLO. revenue the backdrop January, to rebuilding to as prior year service as work as remained challenging

were EBITDA and adjusted year-over-year, to down in likely with result, further come EPS pressure a fiscal As XXXX.

gross some margins. profits are and merchandise reflecting forfeitures sales higher levels pawn Third, degree, from while constraining lower turnover accelerating declining to inventory higher, resulting and trended inventory loans sales

the for quarter. reached X.X of the quarter ratio fiscal our XXXX, For X inventory times compared ago turnover year first to times

the X.X% also cost we quarter, $X.X identified to a Fourth, will strategic stood down inventory efficiencies at and progress inventory to the aged expense quarter, aggregate, million effectively first X.X% detail prior in and of savings in inventory. communicated the general improve or initiatives. in implemented managing million what our total as or remain year continue total $X.X which a XXXX, on above incremental reduction our merchandise track of of ago. point, inventory from December on We result realized meaningfully we in of greater make discuss more the To operating and we at end later

with core sustained plan The structure service. grow. starting simplifying our key is level for on results and members, each team think strengthen openings focused ongoing a arise, million they how will and hand strength Looking in business. business is of about X and the ahead, de earnings is end liquidity ongoing operating puzzle and across emphasis focus accelerating reduction with on at opportunities initiatives critical, remains M&A and activity with the us pawnbroking strategic message ongoing And as transaction financial on and power driving key our Each key to by while our continue and illustrates to drive on store-level That reinforced leverage customer high We to returns continuing cost the flexibility continuing rebuilds, cost costs pieces fund no and as providing cash us thereby debt Slide step-up store core, well on with assets on several time. believe generating outsized PLO performance reducing Slide we and sheet drive growth, at enables the shareholder over against of should the that our our quarter, balance strong revenues innovate quarter strengthening higher position finally, passion of to of as efforts their trend critical. indicators value. potential a this near-term $XXX foundation maturities, simplification to grow X rise, the growth, And and will operating strong an piece and novo to execution capital. our drive us

We detail will several some these. go now of into on additional

simplification reduction and on Turning to to want an cost efforts. Slide We provide X. our update

quarter's conference may approximately realized quarters. million. $XX recall, maximize continuing to call, time, on million in to the mostly identified report better to when G&A. forward recurring At trajectory annual you have savings, and expenses on align to in As of we related we work that out we with revenue laid the streamline to plans profitability growth $XX near-term we quarter, PSC last look progress to the our future further to With raised And resumes.

to costs. Turning store

compared over we leveraging improving expense been store quarter-over-quarter, last incremental store XX% during which $X the This has through to at year. all lower a increased million PLO levels savings quarter, efficiencies achieved achieved model. are While down staffing and

anticipate ongoing focused expenses adding demand in will continue a on will increases. data and as in back, important it's we beyond, and transactional to and centralize with we automate functions, fiscal productivity, manner to reporting cost-effective extracting efficiencies and and operating XXXX corporate store-level office While that practices. further corporate processes, we remain back to Stepping plans standardize additional simplify increase store reiterate rationalize and

and engagement planning on perspective, improve From enhancing core initiatives development strengthen and on pawnbroking to our succession a remain promote X, people and for we to Next we retention. to career passion ongoing focused a pawn programs business. Slide frame

XX% turnover of quarter in and the Mexico declined annualized members by hourly here first fact, declined In in team for XX% fiscal XXXX. the by US

leverage point-of-sale continue increase our to speed pricing technology accuracy. On to the we next-generation automate side, system and transaction pricing, improve product

analytics and and We increasingly customer continue introduce services adopting to and optimize intelligence are values and we a business measurement. products performance in to lending new deliberate manner, improve

Turning initiatives to on our and innovation X. growth Slide

doubled a to was while continue pawn reposition extension amount digital of last lana.com the quarter channel, basis, seeing As fiscal X The encouraging Lana through we of of we online results. as PSC we discussed sequential quarter fourth collected are to times the and quarter, compared our up number transactions on XXXX.

quarter, in options broaden payment plans the stores to layaway US select all with first introduced months. we addition, next in in across stores few participation the In

of central improving include the ongoing and priority. account capabilities. a support management Related initiatives Second, service customer online remains development top customer enhancing

client acquisition. remain we increasingly digital focused to leveraging Next, on drive

developing comprehensive test-and-learn control standpoint, And and investment. on a spend return the digital strategy, search in initial social to have process of from implemented marketing focus disciplined an are We media. marketing maximize on we a engine and approach optimization a with process

terms to opportunities strategic measured in continue related a uncertainty, macroeconomic and ongoing criteria. the approach of of financial markets and light growth meet in store acquisition to our PLO take that growth, primarily to pandemic we any openings fund to Finally, across core potential liquidity de to novo maximize and

preowned focused time. remain Our made significant operations pawn power our clients America, the to our pawn to our both recycling short-term in role complementary play Latin drive all goods. in in on and operations of in cash improving the U.S. while EZCORP optimizing facilitates needs of we meeting progress across our here of And aspects order the business shareholder an and retail while continually business, value over position core earnings we've essential

that, with over turn Officer. Interim call I'd to So Tim Jugmans, Tim? to the like Chief Financial our

Jason. Thanks,

in which XXXX, year the basis, first of compared $X.X basis CCV fiscal on an quarter earnings we $X.XX earnings diluted charge. $X.XX the diluted a $X.XX first of a the to per quarter, settlement share the quarter prior reported fiscal year's quarter the included $X.XX million fiscal first compared per adjusted quarter. For for for was GAAP prior share to for On

back were noncash mostly debt. our expense to quarter the for adding interest adjustments related to related convertible of standard practice our Importantly,

XXXX, consolidated an turnover. by September aged driving velocity, of in basis, period the of year, primarily EBITDA fiscal year-over-year quarter. of is first zero the with down XX of it expenses. by XX% of sales XX% year Merchandise the On day our the all since June levels, levels prior September and That sequentially the XXX to was million, since softer sales basis and PLO up inventory together, XX% reduced on quarter June. revenue down the for consolidated the revenue is Putting bucket. for XX% higher X% from particularly of profit on at the PSC an first end offset gross Slide Merchandise financial quarter by prior XX%, expanded end being G&A improvement end at points said, at $XX profitability. margins year-over-year, partially favorable of reflecting down a store PSC to Focusing is lower more $XX lower compared million age inventory PLO higher X. by down $XXX largely lower the ended down results and from mostly was million merchandise sales increase end on up and function the gross quarter, XXXX. a driven the This

US up XX% was improve to quarter. Segment Slide our operations to XX. basis, on it versus pawn PLO and sequential continued Turning last on a

by driven and However, average This lower year-over-year on the led PSC, is by XX%. a PLO refinement lending and on down to a decline year-over-year XX% basis, in our focus offset systemic our execution continued partially customers. improvement yield PLO PLO to guidelines due for our in of quarter,

and of and a the of which $X.X fiscal side is focused by focuses expanded ago. retail now X% recent merchandise the business, general inventory prior merchandise total perspective, fresh stands a XXX sales just trends, the year the XXXX. From further of identifying versus change continue the US X.X% inventory This million on points nearly remain the and XX% or reducing sales million bottom of margin we On to the at with synergies. More general year favorably, Consistent basis of on quarter versus our quarter. line aged. pawn $X compared to decreased model, expense inventory gross more merchandise segment's first aged selling result a realizing to or decline merchandise operating

fact, were store expenses down X% In year-over-year.

XX% our to down pawn a mostly quarter, year walks U.S. However, financial charges. was results Latin compared EBITDA America. lower service through function in prior XX of pawn Slide

more pawn While improved to ago, COVID-XX-related specifically, including on sequential outstanding compared XX% across loans largely select were operating a regions. year-over-year PLO declined and comps headwinds, limitations ongoing reflecting PSC a restrictions basis, and year trends More challenging. transportation

higher segment's we by expanded velocity increased margin with merchandise a sales was for the quarter, the down continuing a XX% X.X, prior focused and offset points, rate. but and sales year by Following on XXX management. as to declined PLO was inventory PLO gross turns optimize by average yield favorable due through, basis up more remain redemption quarter the to driven Merchandise to inventory LTVs versus XX% lower PSC XX%

last EBITDA quarter, $X.X to million up ongoing but expense on breakeven from PSC, lower Finally, down was by year-over-year efforts. around XX% was driven reduction

and merchandise levels a remain impact, basis. to power sales pawn rebuilds step-up and programs pawn business forward pressure Turning underlying PLO further set pawn through suggest and management impact turnover lower on half versus inventory revenue or earnings of refund the normalize inventory. the payments. Furthermore, ultimate Recent outlook. between sales, to as a government ongoing the natural efforts to whether the exists U.S. prior to loan More headwind of actions, in assuming as softened near-term and further key for time. lag more stimulus up expect here offsets new in it balances our highlighted following time. January we related over demand And we an expense PLO in for we on form the be incremental incremental quarter, revenue collateral drops tax trends assuming fully first remain loan the government demand, a Last expect season. that trends we favorably, absolute muted growth velocity, stimulus us merchandise the service in work related in well accelerating despite and over charges

So with for we'll up the call open Operator? questions. that,

question [Operator line first Instructions] Greg Pendy Sidoti. comes of Our the from with

it about Can be. on guess, the like maybe inventory levels would to think now swung or think you round sales. missing the we understand, a normalized that tax little just us help us bit about And Because season seem should when might how just to challenges it be that lean. another to seems maybe it stimulus, inventory level of high I where going level? you've And getting refund a might you and into you to

to a being inventory interesting that's we with loans. the loans items our look of bit PLO, loan biggest much have today purchase ratio where we'd be inventory little are at think, going into line, inventory. dropping of is we Obviously, low. driver still down, our And we'd less balance biggest thing far you the as line is to loan like a little more if in of going the higher, do much We by really forward. out bit well, where to PLO, So I we more like in is but be our book. be the is One with, but driver feel

now, think example, but X:X the PLO. closer range. in around X.XX PLO, that, little year for right inventory right we've in higher what a level US the lower I is been still And is that inventory to to the ago, bit historically. to A than were than we

would into really I inventory. going made that think inventory point season that and typically having you have the up interesting pick the is into lower that we coming about still where sales do

environment We also have that less with strong seen, I guess, some encouraging signs we've in inventory. this is current sales had

buckets. that we've So that that greater got in those velocity have do day early to higher kind managed better. XX We've got We've inventory X of turns. we inventory

You've inventory. got aged less

a is, more we're in we have it how So past. loans, news we we inventory like, We'd managing than the the overall better in have operationally, position good as really get will as we picture we're is in feel to like of really, inventory, to positive. more. And much make terms more that And generate the manage that inventory.

on maybe up that. then to just And follow

Just you're be inventory and on targeted, kind high end improved believe given towards in tracking and say, margin I wrong, merchant next -- where thoughts over I gross on will Historically, I your quarters? margin to saw be thinking of you this XX% inventory. whether guys should we couple aged but has merchandise was the Any it might range, range. of of as in kind quarter the that the XX% usually

given XX%, in the likely long-term terms high I of that the XX% although that it some It's better. end range factors just be now. to much managing of still we're that of of a it think mentioned above how right We as more definitely range to at

than settle So improvements. little we've that's I operational think a than level we'll bit a because been likely historically are, into lower we those higher but of

of And a another, existing takes call, from I discussions the mean muted I on see in of on -- a more to puts then us impact, the I the guess, ramp balance a bit one just about. impact PLO you a on we you little guess, one. been coming starting stimulus final give just stimulus checks? color the Can mentioned, there's might and and muted just $X,XXX why more you're

very encouraging. is that So

If through see very to the of little loan look bit of what to we early you at impact a since seen started balances come continue the and January, pullback. But we've did in January, a drop. that stabilize mid to not

what's as another it's being as see of will round drop a there's discussed. large and if We stimulus

what's the The lower the that around. that might did yet it. people lower. this back. than A down us think was we that quarter, book to first last those see not been of maybe have the was already that when encouraging dollars what is it second pay is have I really that And our encouraging used is is stimulus we've we the stimulus we saw and lot saw loans pawn But that PLO it is first fades. impact sign to it. most come for what probably quarter, in but grows to it that's saying see seen them great is fiscal and We've taken time -- this in happens, round and

next quickly. so and it that season tax round we stimulus, we in get form as demand forward of that past takes, look know the whatever comes get And comes we and and past we back this back

Our the with of comes next line from Hecht John question Jefferies.

than right flow have now anything the on much the I mix? I what's the those was the mean, product the I category And particular products than was margins. A there as of tied mix better that that that Was to only any sit guess we other follow-up there categories? other real on here? margin question is, had quick asked

rising inventory that. all boats management -- are to better This with is approach

positive. moves some prices, commodity allowed to been in really business. margins us. us have lend Obviously, the in in increase prices gold good the been individual that's each piece, of with you've the has has So benefited for gold which on the seen Also, more

if kinds again, margins be again, you that you look Again, at America. TVs, really And on, demand sheltered across quick of where kind are business place manage way, terms to items we've but across continue scales we've helpful margins, of hopefully, home and the Latin But where seen items. the amount things to where whole guidance. also the And of the in of US, we improvement were of terms seen the effectively of we'll In it in step-up. early But were consoles, that where be in the even we categories, in terms year we business, at of were improvement board. needed things, that's really there ago certain happened in improvement improvement each kinds piece a Big versus greater those we improvement in think improvement people When in business. different what a a we we've and as those and those look on strong big was of at board. seen across we're see seeing in game across substantial board. the

great about obviously, expenses. guys the done have then, expenses investing as you you regrows. And job business And in talked controlling a

internal just the factors business? investments so to those? kind recovery point with of So any slowly respect the and think cadence about and as think grow Or the and of starting of the forth base about to level expenses with this other should of quarter a we

is John, we what said it. how you I view think that exactly

closed, increase think activity. slight quarter for compare with with in to coming good to probably a increase this it, quarter, an just related base you the If about it's we a example, maybe

of handle As activity And to that increase and down potentially to we in coming do the use loans more those you dollars things labor there's and people since in more kinds stores. in the staffing activity. one see, pay impacts of would need of that

said I the the right is increase expect it So way you think but approach. a we would slight quarter-over-quarter,

what of in And investment then, update guess goals with process? I developments are near-term you infrastructure and are positive effects And seeing? kind we maybe the Lana the kind I to are What guess, respect in where on in of the this strategy? that there.

excited with now. pretty seeing we're So Lana what right we're with

few in summer number think of if But Lana, where extensions of terms in of now volumes, off about prepared that from the growing we are remarks. I over up comments much XX this look from kind versus a where our being we a a in on a the In times. the times collections were just we're of at we range extensions small lower were X PSC, XX,XXX maybe summer done base, since in increase level, the made you terms PSC where are our but of summer. we is

our of If I through in at the being think percentage the our of overall, being it's platform X% through that you of look extensions X% total total now, are that to are Lana. extensions done Lana made range kind

in time really a our customers when into to from on work seen need can't big we activity. an do or get we've So just from do able store. extension home that we days convenience And saying, to is from be the to pickup think we that time

And been really that's so good.

investments investment, what At functionality. of to are additional the maintain we on is continued it platform. terms Lana continue to to same than because want grow the platform the to we much though, spend time do out making was roll the lower In

those having the just been nice into now functionalities those to to come So it. time all mentioned rolled it anywhere of stores the every to layaway And will we do making the you and it next that's another in able few That's to one be months, store from if tested of layaways. you're do it's payments out instead over regular US be

having. digital as our what's as itself And servicing already do rate our slow. it's that pawn So something But grow of continue to is it appreciate on is likely to the volumes. will report growth platform that continues customers we'll those established

Mr. like would Ladies closing back Jason and session. gentlemen, today's we Kulas this remarks. have the to reached call I to for turn over end question-and-answer of

you, discuss look progress your our everyone everyone, and for we forward continuing great thank hope has to We calls, on to future morning. this a day. closing, time In

concludes joining Thank you today's This for conference. today. us

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