EZCORP (EZPW) 2 Feb 232023 Q1 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to the EZCORP First Quarter Fiscal 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this call may be recorded.

turn with over Freeport's to Young, Jane like Relations Investor Advisors. now the to conference Marine I'd Please go ahead, Jane.

Thank you, and good morning, everyone.

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

current remind expected like as the performance These future operating expectations. contain and begin, slides this statements forward-looking statements as that on periods. to financial we conference everyone are the Before regarding presentation certain I'd call well the Company's based Company's for

future on And and factors remove materials in for to materially annual, those unless currency an discussed results filed differ the Actual periods of as from reports effect our presentation expressed may of presented number and our with adjusted a risks noted items. Exchange other in the discrete quarterly foreign basis otherwise Commission. other and due that to fluctuations and or are identified, Securities results other are

EZCORP's Tim on Chief us Joining Lachie Chief Officer. Jugmans, Given; the Officer, Executive Financial today call are and

Now, turn Lachie? over call to the to Given. Lachie like I'd

Jean, morning, good everyone. and Thanks,

execute I to our engaged plan fiscal to Our their for XXXX. operational and which with our productive on began excellence, put first end of on at continues thank drive consistently the fiscal We three-year team strong XXXX excellent team members an in want continues results. to place quarter. strategic the highly financial passionate, continued focus very

million, for was and a of $XXX.X sales driver our business, key $XXX.X at up result the our increase outstanding, quarterly were ever XX% merchandise XX% QX, loans and result. quarter-end, million Pawn highest highest ever sales to an year-over-year

demand expand U.S. pawn continues in environment offer value goods The geographic are economic pre-owned and our footprint Across for loans. environmentally challenge money we a we on also alternatives. We recycled for diverse to pawn pressures Latin investments businesses, pawn for sell loans seek with increased and macroeconomic our worldwide. We Beginning broking consumers second-hand customer strategic and the to America make operate which demand base. our base, drive increasingly adjacent for be and X,XXX in core The X, consumers. global store and goods. leader as two our retail. products Inflationary we a in stores responsible and Slide increases uncertainty second-hand

Our goal is while best, innovation, convenient environment customers positively and continuous most to the impacting the provide which in for experience the communities serve. through we our

we our so customers attractive team digital core option in We continue and Moving best differentiated strive outstanding people, operate. across we to be sheet from core success, our the and and and team. platform, as customer on incentivization. loans passion committed store drives operating importantly, our footprint, to balance are system ample by providing X, for to engaged We liquidity our a that to regions provide Slide retention investing well-positioned to pawn embrace a of know all service we the pod which proprietary our and in recruitment,

in well In the teams. them. reinstituted This employee member we savings retain in believe goals. progression the to most and new ways industry have the productive And operating and Mexico, been has U.S., our X no-cost Slide health we implemented team insurance. our we shows the passionate, find strategic committed I towards extremely to and program. continue by three-year we team received motivate our

also and improving are enhancing program. points-based by experience loyalty our growing customers’ to our We committed

for our on key to X. Slide Turning financial QX themes

are at to on merchandise sales quarter, levels, gross pre-COVID remain sales and was with a XX% basis same-store and Total million, the PLO year-over-year, above for same-store most million driver XXXX As strong an was up $XX.X revenue profit fiscal continues up of the PSC. XX% mentioned, XX%. in earnings, revenue PLO, for increase $XXX.X up associated quarter the significant XX%. and record year was EBITDA levels.

We issue. the assets, an better on result in address and debt refinancing, slight stores, execution have increase offset that in from proceeds cash are acquisitions in increase increase by region net this inventory strategic share cash convertible to a focused sheet of investments and The of was the seen LatAm on aged in new the balance earning repurchases.

affecting was the the margin margin the EBITDA U.S. ending X, Recently, EBITDA Slide the inflationary December last XX XX% XXXX, XX% has ending due XX months to versus driving with months last growth. in the for pressure business. XXXX flattened December

talk on and our strengthening core we primary a systems. about people with X, Slide focus On

Improving field team We are bench the focused continues on our highly strength [indiscernible]. to engaged. the that ensure to remain team retention, recruitment, of incentivization inclusion and

have In and center technology, addition, data leading this are All we industry we continue been area. to applications transitioned in-house co-location in cloud. believe the to from the in invest

Our and initiatives ease are operational for digital technology at the use improving our products services store our and customers. of and the efficiency of level our

to improve the initiatives. We and support of and XX% have store in now deployed stability stores system network our digital upgrades

first our into user-friendly the and Pawn, to Max offering by a business. e-commerce mobile-ready business, pawn have e-commerce With full tested we been luxury broking secure, and that enhanced migrating capabilities platform venture a in

growth On our third our pillar of and X, execute to is three-year plan. we continue the Slide strategy innovation and

XX%. versus of million an Our showing over loyalty program over increase million EZ+ last has X.X X.X enrolled customers quarter,

balance visibility, receipts this of We points increased XXXX. quarter, from first transactions. the up campaigns $XX.X QR bonus account fiscal in enrollment and quarter payments and million $X.X to points, also collected and earned, Adding online million physical

the opened luxury operating there perspective, country’s We these pawn stores of bought quarter. over new inorganic store reviews in and Las than store acquired XX,XXX Website believe Both started Houston brands from the convenient. more we by an we making stars customers averaging Latin and Google quarter, We in America. visits received shopping more and previous are up From main week. well Vegas financial this X.X the U.S. for acquisitions attracting second the leading very And area. have an in nine the this we perspective. are the XX%

and invested XX acquisition in $XX it Familia and complete which leader. also the preferred ownership Founders, which Paw, We in $XX in is where Puerto market into Florida debt stores to additional La in by used was This purchased operates of capital an million additional Rico, SMG. the equity million SMG XXX%

opened addition, de we novo America. in stores Latin two In

We remains be the continue receiving after the million, net CCV increased stake pipeline XX.X% robust. to We quarter, during cash and evaluating cash in from opportunities dividend acquisition our $XXX,XXX. XX.X% outlay our in disciplined for $X.X CCV from to was a

the Slide fiscal our for ESG XX outlines quarter. first highlights

its recycler by a business, a us very the component of makes and Our economy. compelling local circular nature, neighborhood

them in million from recycler as as hundreds electronic to and of quarter, goods instruments, are local sold pre-owned neighborhoods. toxic consumer all such the TVs, including phones musical tools, significant items We as jewelry, of We computers, items second-hand goods, landfills. over a $X.X household saving well

We and U.S. the e-waste recycling not processing use do use factories, We trucking. sound heavy distribution or in facilities

underserved simple, resource our Diversity who significant for provide engagement affinity to in have women’s traditional we are regulated by we inclusion and essential, an and Black groups. a Empowerment excellent and both are those empowerment transparent financial Importantly, sources. focus, and continue

voluntary In paid in addition our have home insurance health members also support to in U.S., and the previously and leave members mentioned implemented team team at where live. time-off enhanced to paid the for the communities they parental low-cost we the

to Tim call over turn results. details to the CFO, like now would our Jugmans, Tim? to more provide on I financial our

notes, seven-year expense. out to the the we sheet continue $XXX cash and shares convertible convertible we cash grow. cost debt XX, Slide effects On base Lachie. our derisked the capital and of refinancing on can near-term the million balance outstanding enhanced We diluted laid Thanks, interest so low

a results with year-over-year and for the consolidated $XXX.X our details PLO in by the increased up history. the PLO financial first PSC which XX year, basis, revenue was both ended driven is same-store at period Slide XX% first last growth up highest over on quarter growth acquisitions. quarter. XX% EZCORP’s million,

sales to EBITDA as our highest is $XXX.X up consolidated It with to Merchandise range. great but of up was Inventory at XX%, within turnover is ever, $XX.X fell results million, million, XX%. expected, normal another sales was which back stronger X.Xx. quarter margins XX% quarterly our

U.S. to year-over-year, was ever Turning Slide PLO PSC primarily growth. pawn to XX% XX% PLO up driven higher U.S. on our rose highest in operations average the the XX. by

the XXX with gross up On up in sales margin. merchandise side XX%, profit retail with expected drop were X%, the points business, sales of basis an merchandise sales

to increased with million, up line with renewals. prior associated expenses the activity extent, lesser by pawn lease expenses a was primarily to labor in and related for and rent EBITDA store $XX Store XX%, loyalty program XX% due the U.S. year. our to on quarter

XXX XX% for increased up same-store basis XX%. profit XX Segment grew basis. the was Merchandise first in on results American pawn Slide up due XX%, Merchandise XX% PLO basis, PSC sales margins a XX% XX% where were sales and quarter up or same-store up on a to gross points. our on focuses sales Latin operations.

to Store line expenses to and XX% rent program lease mainly on store renewals. with our were associated related increased and same-store in expenses XX% up basis, a with labor to a activity loyalty and lesser extent, due

Inventory turnover at remained X.Xx. strong

which to GM down. execution aged bring on up this is acquisitions. However, driven been has is the focused improving mainly by X.X%, The team recent

EBITDA by $X.X million. For the first improved American Latin quarter, pawn and

With $XXX continued a and to and derisked are of repurchased million during $X the position quarter sheet seven-year $X.X stronger a January the in balance shares note, million successful growth of million our fund placement across XXXX. of in shares convertible We business. have the we

and way capital taking opportunistic into execute and needs the this attractive to investment availability will liquidity consideration and general alternative continue We opportunities. an conditions, program of market responsible in

Looking continue PLO hit should a record to basis, on forward levels consolidated on a basis. see we seasonal

of of gross as and XX% have are focused margin on we see continue remain we merchandise. suggested general to to quarters, in aged likely turns range end inventory strong the As our XX% remain limited at prior we lower to

on Also, this and continue business. do to sequential store as will as so expenses affect increased pressures the have inflationary quarter, basis we seen a

expenses We for sequentially also same G&A to expect reason. the increase

to had achieve superior business results are a We model. what earning above continue with to operating pre-COVID excited our see we

to it closing turn a few now will Lachie for over comments. I

want thank I Thanks, closing, Tim. In our outstanding for quarter. EZCORP another to team

our financial We operating stakeholders growth are for de driving inorganic novo acquisitions consistently and through and store and disciplined investments. additional delivering strong results build-outs,

balance quarter our to during the shareholders. sheet strengthened We and capital returned already robust

to an improving customers employees responsible way. environmentally for committed our the are We in experience our and

supported on for what business, is We and are macroeconomic environment excited three-year to our shareholders. for enhanced continue plan to our execute our a all of drive in value

call with Operator? the questions. And for we will that, open

comes Brian your Brian, question first our have is from We Instructions] Nagel [Operator line Oppenheimer. from now you. open. Thank

Hi, good morning.

morning. Good

another quarter. on nice Congrats

Thank so much. you

So a here. questions of couple

here. a couple So questions of

you for you your probably puts First, mean, and key longer-term from the some of kind I there guess, But normalizing and you about just Tim, we the essentially margins of help this us the the kind of now realized? of takes margin think should as timing margins then front. on here, in but trajectory how understand this more and be parameters. I better talked – can of about about just is gave some script

Yes. over this margins definitely Thanks, does – XX%. back and Brian. The pressure, at down normalized definitely has come between our operates which a some negotiation period we've definitely think obviously level. range, to come XX% have customer store there some the we more as moment, been seen under At time have of

believe the will And range that continues our moment for that the so base. to of it end at lower pressure customer we stay mount the on as

want do Tim, gross margin, gross were little margin. – Brian? margin. talk just to you to obviously do talk want about, you EBITDA you EBITDA margin, a you meant Is talk wanted Or too, to that about that's

be gross helpful but on primarily would margin focused was on I a margin, as well. discussion EBITDA

this as margin, produced we And about have bit a – pressures on we us. pressures for have expenses. – will in We're year hadn't inflationary year last our and when it's on On comping that a from quarter. and through even EBITDA on little come pressure on though the of that of results, see had other really we taken this did inflationary we where some lots annual really wage of talked little we bit in much a businesses bit delayed

So to we'll see continue a little bit.

be as control, to try but the keep expenses So we there under and continue some grow pressure margins EBITDA on will topline.

of seeing or term continues talked second about just And kind rollout? to program, acceptance I longer as the benefits you of sort then just And as then with my helpful. But you're the program. business of to the loyalty this far as guess, in of nature. the That's the strategic consumer the say, what question, maybe respect

very rapid say I X.X a signed It's customers to million that incredibly that pleasing perspective, it's up. we've very, think from have got been strategic growth.

But I we and better better year only benefits that program think us, forward. lot starting sales going both better we're that. just and customer track and for a of to turn in for are are really a margins better the retention, a should there drive – the to engagement, much just much and really we're in

sign-ups. wonderful done in I the So we've job a think

think be customers I on maximizing our comment about financials. coming And I in for able for both now the think more to us. all it's and benefit the quarters, we'll

pretty I see to anything think, add the you to strategically, it's growth would pleasing incredibly that? Tim, there.

No, a stores that's It's Lachie. great a embracing. very addition. similar the about comment it love there, talking definitely customers are and The

Brian. there, come to More

Thanks, Congrats guys. again.

Thank you.

Perfect. Thank you.

Thank you, Brian.

from question your is John next Hecht Jefferies. open. comes from John, Our now line

Thanks, just Good anything opportunity set the pretty on guys. investment accounting Caribbean get else pipeline, to Maybe the stores, there? then update active the morning. touch on respect have been of the in with you you on maybe touch acquisition recent an guys that? the maybe And

Thanks, John. Yes.

market. in nine bought home So very it Houston, our was that’s a we really Obviously, home-based quarter. active stores

really of right down middle the started fairway, that So off well. the

already Vegas and excited brand, obviously invested and in that La MaxPawn so the Pawn opened has new And about we’ve That is under in announced, that. this market XX Luxury commenced which Puerto simple, by in a in is in week a we’d Familia, the exciting As leader turn Florida. Founders, has we’re our then which we stores store buying really the strategy is in significant. that market all been then Rico, investment bought

now is a So scale becoming that business. real

with We’re we all pawn very know focused management on team that well. a strong

really continue that And we’re opportunity. on So we cost the account. about accounting, to excited

that And then a opportunity. pipeline. really then feel obviously Puerto think the it with the I now, the the it position we’re way placed robust forward that preferred equity We going future, is acquisition well We opportunity, have we’re remains potential and a a we’re doing acquisition has. exciting there very there. return elsewhere, comfortable in super And Rico it given leadership

management think, new bias Latin the clearly and exploring there’s to markets world is America. plenty our places got existing of and we’re still I where that’s while we’ve in the the Now where around opportunity, strongest U.S.

I look, it robust, lots really them was about the great there to team, deals, remains a actually about our say work. as it’s making But So do. to It it’s not doing quarter.

focused I the to our think but front. that So us with work And acquisitions really now those on we’re on pipeline for you’ll there, see continue shareholders. we’re the making progress from and very robust happy more

more minus? know things in overall overall plus lapped that I of Or to for but the guys, the in impacting are stabilizing? kind is then any so And and stores? clear consumer just That’s characterize on touched to on you want maybe of and very of healthy, Maybe forth. Okay. margins to shopping any touch talk we've retail have kind the bargain are mean, the or point of you – – kind of as inflation, – But pulling people kind Thanks. so both thoughts inventory continue you the about transitioning environment been results anything helpful. and maybe getting – way on I how to we it's where maybe guess, the I kind

a good question. Look, it's

I on continuing our see we're to unprecedented topline, results our pawn both think loans in of the sales. and kind

young starting continue the is to as difficult clearly secondhand. of to some stores are think bargain-shopping. to are you said, much be is environmentally people conscious, core expectation from growth can – pretty to but more our very demand coming definitely our comping our year. in our it's products. to – comp terms But results against now was, products who they're last We're see very, will Where to very core strong So seem we're buy in I that It's our sales who of you that for from consumer and – definitely the here? fantastic numbers goes both predict, quarter grow. Anecdotally

core look, excited demand two – we about those remain products. are So we and for bullish

well. our I Tim customers are think hitting inflationary we on cost as those business. side, the said, are as But the hit seeing pressures

rates, higher we higher with products. expect see So in growth of inflation, those core both continued interest to higher rates,

very guys. Okay. much, Great. Thanks

John. Thanks,

Thank you, John.

now comes line Genuity. open. We from from your next Brian, Canaccord have is our question McNamara Brian

A Congrats on guys. morning, strong the for Good me. Hey. results. few

So inventory albeit significantly a base. up your low aged in LatAm, off was

POS recent loans goods. I have help time to for I from an mispricing earns? a you potentially larger cited question your should you my acquisitions. or proprietary think over to impact system closer guys you with expect that margins merchandise structurally is, But guess what your do improve peer

Tim, do take you that? want to

Thanks. Brian. Yes. Thanks,

and acquisition. that in about acquisition, system. use especially of So lot yes, the training in turnover really to a We little recent have the is did a how bit [indiscernible]

embraced the to And on expected so use how get fully taken than bit little them longer it's a system. to

So confident about that time. coming down over number we feel

a little and From do side the on a we competitor. out that bit expect focus retail. we to goods do and focus PSC bit bit run margin little will more that little continue little they depends lending the We customer. to return to our the out on little more we bit the that But in, come the the do on bit it perspective, different of a more trying a of business a the try is from get margin, more or a maximize overall, whether

kind store a that, on per you expenses it. pretty significantly about provide of about unit pressure. were rates of the had if Should for then year? kind the color? Or little spoke inflationary should we you of up And of Got QX. in Store balance similar expenses, we more just model how growth could broadly kind think

Yes. where real Obviously, on last was against that effect there inflation no yet. QX we're – year comping

inflation that coming If could at a through. some basis, on sequential last QX look year back of see you definitely you

it comping major expect on some way a in of rather so at to a very than – a lift to staffed basis. The to better but reasons expenses, number We not basis, that's see And ago. we've we a hired on are, continue look short people. year were sequential a

our extra lot change are as the Latin America been in laws transactions well. that obviously, are going some in inflation up wage And supporting a definitely wages there's stores some in and pushing people So more on.

Got it. And on just the one for last program. one me rewards

you it, I X,XXX to like mean what just I'm I number are I which "active?" those – payments per your online of how your have it's you many way versus that's is about store at to percent trying at a are those the in get probably bit, opportunity look should come of about can quite an How members but is but guess actually think I go? look think Thanks. if at year-end. memberships episodically? members down high know now, how we about member, per longer-term the incredible at to what And like customers regulars those more maybe not

you Tim, at hand? do number that have

Those period working are been – within of which numbers the – what in time, numbers done effect have people which on short we're to going an last versus for of those we call the has – that inactive. all year, would a exactly are program we're those active calling be Basically, a only because transaction still through generally customer. active call we

just what has range like think that? I of bound potential of commentary recruitment the upper you of and I'm long-term kind curious itself could think the I it's the Any been – be? in of the upper bound tremendous. on mean

– than – we much has quicker definitely obviously we expected. grown Yes, is that this

our beating expectations definitely the it's moment. at So

but at So the revenue pretty excited business. how it the stage, about drive this haven't additional really about could that upper talked through bound, we

it. Best luck. Got very Thanks of much.

Thanks, Brian.

Brian. you, Thank

your is from question Alexander comes our line have We open. Villalobos now next Alexander, Jefferies. from

on guys. quarter. strong the Hey, Congrats

want you model the purposes, those next real the possible. sure see for for Just as you. as points modeling quarter for have in make to guidance could just just to the accurate wanted we and full-year? and recap Just if Thank quick maybe

Thanks.

hit the definitely continue the basis a we're of remaining So levels. on sales reiterate couple margin to to continue have see XX% sequential expense stated on there. We expenses, see likely and record PLO what growth we to on to sequential range will – points that low base. of XX%. definitely We just pressure we to of think continue we – at a see to end our likely the to Expenses,

Perfect. Thank you.

you, I further questions have Thank hand the line. back closing now floor Alexander. will We the remarks. to for on Lachie no currently

for you, another team And operator. quarter for for joining. on you, value outstanding our our shareholders. thanking leadership everyone, Thank of driving again, our EZCORP behalf team, Thank entire

Thanks. everyone, joining, thanks, we’ll for and soon. talk So

Thank you. gentlemen, call. concludes and Ladies Thank for joining. you this today’s

disconnect You may your now lines.