# Ezcorp Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [Ezcorp Inc](/companies/ezpw.md) (CIK 876523)
- Form: 10-Q
- Filed: 2023-08-02
- Accepted by EDGAR: Aug 2, 2023, 16:19 ET
- Period: 2023-06-30
- Accession: 0000876523-23-000032
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/876523/000087652323000032/ezpw-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/876523/000087652323000032/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $255.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-10-01 to 2023-06-30 | $778.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $148.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-10-01 to 2023-06-30 | $450.5m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $20.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-10-01 to 2023-06-30 | $75.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $3.4m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-10-01 to 2023-06-30 | $13.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $3.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-10-01 to 2023-06-30 | $10.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $18.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-10-01 to 2023-06-30 | $28.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.24 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-10-01 to 2023-06-30 | $0.38 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.33 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-10-01 to 2023-06-30 | $0.51 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 86,825,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-10-01 to 2023-06-30 | 79,559,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-10-01 to 2023-06-30 | $74.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-10-01 to 2023-06-30 | $27.8m | us-gaap:PaymentsToAcquireProductiveAssets |
| Share repurchases | 9 months, 2022-10-01 to 2023-06-30 | $14.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $238.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $710.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $1.46bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $150.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $718.6m | us-gaap:Liabilities |
| Long-term debt | at 2023-06-30 | $359.7m | us-gaap:LongTermDebtNoncurrent |

## Management's discussion and analysis

As filed, 40,500 characters.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to inform the reader about matters affecting the financial condition and results of operations of EZCORP, Inc. and its subsidiaries (collectively, “we,” “us”, “our”, "EZCORP" or the “Company”). The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere within this report. This discussion contains forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. See “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2022, as supplemented by the information set forth in “Part I, Item 3 — Quantitative and Qualitative Disclosures about Market Risk” and “Part II, Item 1A — Risk Factors” of this Report, for a discussion of certain risks, uncertainties and assumptions associated with these statements.

### Business Overview

EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a leading provider of pawn services in the United States and Latin America. Pawn loans are nonrecourse loans collateralized by personal property. We also sell merchandise, primarily collateral forfeited from unpaid loans or goods purchased directly from customers.

We exist to serve our customers’ short-term cash needs, helping them to live and enjoy their lives. We are focused on three strategic pillars:

|  |  |
| --- | --- |
| **Strengthen the Core** | **Relentless focus on superior execution and operational excellence in our core pawn business** |
| **Cost Efficiency and Simplification** | **Shape a culture of cost efficiency through ongoing focus on simplification and optimization** |
| **Innovate and Grow** | **Broaden customer engagement to service more customers more frequently in more locations** |

### Pawn Activities

At our pawn stores, we advance cash against the value of collateralized tangible personal property. We earn pawn service charges (“PSC”) for those cash advances, and the PSC rate varies by state and transaction size. At the time of the transaction, we take possession of the pawned collateral, which consists of tangible personal property, generally jewelry, consumer electronics, tools, sporting goods or musical instruments. If the customer chooses to redeem their pawn, they will repay the amount advanced plus any accrued PSC. If the customer chooses not to redeem their pawn, the pawned collateral becomes our inventory, which we sell in our retail merchandise sales activities or, in some cases, scrap for its inherent gold or precious stone content. Consequently, the success of our pawn business is largely dependent on our ability to accurately assess the probability of pawn redemption and the estimated resale or scrap value of the collateralized personal property.

Our ability to offer quality second-hand goods at prices significantly lower than original retail prices attracts value-conscious customers. The gross profit on sales of inventory depends primarily on our assessment of the estimated resale or scrap value at the time the property is either accepted as pawn collateral or purchased and our ability to sell that merchandise in a timely manner. As a significant portion of our inventory and sales involve gold and jewelry, our results can be influenced by the market price of gold and diamonds.

### Growth and Expansion

Our strategy is to expand the number of locations we operate through opening new (“de novo”) locations and through acquisitions and investments in both Latin America, the United States and potential new markets. Our ability to open de novo stores, acquire new stores and make other related investments is dependent on several variables, such as projected achievement of internal investment hurdles, the availability of acceptable sites or acquisition candidates, the alignment of acquirer/seller price expectations, the regulatory environment, local zoning ordinances, access to capital and the availability of qualified personnel.

### Seasonality and Quarterly Results

In the United States, PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season. PSC is historically lowest in our third fiscal quarter (April through June) following the tax refund season and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds. In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on loan balances and fueling some merchandise sales in those periods. In Mexico, we saw similar downward pressure in loan balances during the quarter due to a recent change in law related to company profit sharing payments to employees. We believe this change will impact pawn loan balances in May and June going forward. As a net effect of these and other factors and excluding discrete charges, our consolidated income/loss before tax is generally highest in our first fiscal quarter (October through December) and lowest in our third fiscal quarter (April through June).

### Financial Highlights

We remain focused on optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher PSC. The following chart presents sources of gross profit, including PSC, merchandise sales gross profit (“Merchandise sales GP”) and jewelry scrapping gross profit (“Jewelry Scrapping GP”) for the three and nine months ended June 30, 2023 and 2022:

The following chart presents sources of gross profit by geographic disbursement for the three and nine months ended June 30, 2023 and 2022:

### Results of Operations

### Non-GAAP Constant Currency and Same Store Financial Information

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide certain other non-GAAP financial information on a constant currency basis (“constant currency”) and “same store” 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 analyze results on a same store basis (which is defined as stores open during the entirety of the comparable periods) to better understand existing store performance without the influence of increases or decreases resulting solely from changes in store count. We believe presentation of constant currency and same store results is meaningful and useful in understanding the activities and business metrics of our Latin America Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a better understanding and evaluation 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 to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to, but not rather than 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. Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and are not directly calculable from the rates below. Constant currency results, where presented, also exclude the foreign currency gain or loss. 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 nine months ended June 30, 2023 and June 30, 2022 were as follows:

|  | June 30, 2023 | 2022 | Three Months Ended June 30, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Mexican peso | 17.1 | 20.2 | 17.7 | 20.0 | 18.7 | 20.4 |
| Guatemalan quetzal | 7.7 | 7.6 | 7.6 | 7.5 | 7.6 | 7.5 |
| Honduran lempira | 24.4 | 24.2 | 24.3 | 24.2 | 24.3 | 24.1 |
| Australian dollar | 1.5 | 1.5 | 1.5 | 1.4 | 1.5 | 1.4 |

### Operating Results

### Segments

We manage our business and report our financial results in three reportable segments:

- U.S. Pawn — Represents all pawn activities in the United States;
- Latin America Pawn — Represents all pawn activities in Mexico and other parts of Latin America; and
- Other Investments — Represents our equity interest in the net income of Cash Converters along with our investments in Founders and RDC.

### Store Count by Segment

|  | Three Months Ended June 30, 2023 U.S. Pawn | Latin America Pawn | Consolidated |
| --- | ---: | ---: | ---: |
| As of March 31, 2023 | 527 | 672 | 1,199 |
| New locations opened | 1 | 12 | 13 |
| As of June 30, 2023 | 528 | 684 | 1,212 |

25

|  | Three Months Ended June 30, 2022 U.S. Pawn | Latin America Pawn | Consolidated |
| --- | ---: | ---: | ---: |
| As of March 31, 2022 | 516 | 636 | 1,152 |
| New locations opened | — | 8 | 8 |
| Locations acquired | 3 | — | 3 |
| As of June 30, 2022 | 519 | 644 | 1,163 |

|  | Nine Months Ended June 30, 2023 U.S. Pawn | Latin America Pawn | Consolidated |
| --- | ---: | ---: | ---: |
| As of September 30, 2022 | 515 | 660 | 1,175 |
| New locations opened | 3 | 25 | 28 |
| Locations acquired | 10 | — | 10 |
| Locations sold, combined or closed | — | (1) | (1) |
| As of June 30, 2023 | 528 | 684 | 1,212 |

|  | Nine Months Ended June 30, 2022 U.S. Pawn | Latin America Pawn | Consolidated |
| --- | ---: | ---: | ---: |
| As of September 30, 2021 | 516 | 632 | 1,148 |
| New locations opened | — | 12 | 12 |
| Locations acquired | 3 | — | 3 |
| As of June 30, 2022 | 519 | 644 | 1,163 |

26

### Three Months Ended June 30, 2023 vs. Three Months Ended June 30, 2022

These tables, as well as the discussion that follows, should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes.

### U.S. Pawn

The following table presents selected summary financial data for our U.S. Pawn segment:

*(in thousands)*

| Gross profit: | Three Months Ended June 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Pawn service charges | $68,790 | $59,322 | 16% |
| Merchandise sales | 102,177 | 94,005 | 9% |
| Merchandise sales gross profit | 39,378 | 38,120 | 3% |
| Gross margin on merchandise sales | 39% | 41% | (200)bps |
| Jewelry scrapping sales | 13,098 | 5,404 | 142% |
| Jewelry scrapping sales gross profit | 1,997 | 898 | 122% |
| Gross margin on jewelry scrapping sales | 15% | 17% | (200)bps |
| Other revenues | 27 | 21 | 29% |
| Gross profit | 110,192 | 98,361 | 12% |
| Segment operating expenses: |  |  |  |
| Store expenses | 75,389 | 66,036 | 14% |
| Depreciation and amortization | 2,505 | 2,572 | (3)% |
| Segment operating contribution | 32,298 | 29,753 | 9% |
| Other segment income | (1) | (1) | —% |
| Segment contribution | $32,299 | $29,754 | 9% |
| Other data: |  |  |  |
| Net earning assets (a) | $293,787 | $261,511 | 12% |
| Inventory turnover | 2.6 | 2.5 | 4% |
| Average monthly ending pawn loan balance per store (b) | $325 | $290 | 12% |
| Monthly average yield on pawn loans outstanding | 14% | 14% | —bps |

\* Represents a percentage computation that is not mathematically meaningful.

(a) Balance includes pawn loans and inventory.

(b) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

PLO ended the quarter at $178.9 million, up 12% (9% on a same store basis).

Total revenue was up 16% and gross profit increased 12%, reflecting increased PSC and higher merchandise sales.

PSC increased 16% as a result of higher average PLO.

Merchandise sales increased 9% and gross margin decreased to 39% from 41%, within our target range. Aged general merchandise was 1.0% of total general merchandise inventory.

Net inventory increased 13%, as expected with the growth in PLO. Inventory turnover increased to 2.6x from 2.5x.

Store expenses increased 14%, 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 9% to $32.3 million, due to the changes noted above.

Segment store count increased by one de novo store during this quarter.

### Latin America Pawn

The following table presents selected summary financial data for the Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currencies noted above under “Results of Operations — Non-GAAP Constant Currency and Same Store Financial Information.”

*(in thousands)*

| Gross profit: | Three Months Ended June 30, 2023 (GAAP) | 2022 (GAAP) | Change (GAAP) | 2023 (Constant Currency) | Change (Constant Currency) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Pawn service charges | $25,029 | $20,969 | 19% | $22,984 | 10% |
| Merchandise sales | 45,803 | 34,329 | 33% | 41,616 | 21% |
| Merchandise sales gross profit | 13,533 | 10,047 | 35% | 12,340 | 23% |
| Gross margin on merchandise sales | 30% | 29% | 100bps | 30% | 100bps |
| Jewelry scrapping sales | 833 | 1,764 | (53)% | 778 | (56)% |
| Jewelry scrapping sales gross profit | (24) | 103 | (123)% | (20) | (119)% |
| Gross margin on jewelry scrapping sales | (3)% | 6% | \* | (3)% | \* |
| Other revenues, net | 40 | 7 | \* | 39 | \* |
| Gross profit | 38,578 | 31,126 | 24% | 35,343 | 14% |
| Segment operating expenses: |  |  |  |  |  |
| Store expenses | 29,543 | 23,394 | 26% | 26,757 | 14% |
| Depreciation and amortization | 2,303 | 1,987 | 16% | 2,084 | 5% |
| Other | (2,632) | — | \* | (2,145) | \* |
| Segment operating contribution | 9,364 | 5,745 | 63% | 8,647 | 51% |
| Other segment income | (350) | (352) | (1)% | (376) | 7% |
| Segment contribution | $9,714 | $6,097 | 59% | $9,023 | 48% |
| Other data: |  |  |  |  |  |
| Net earning assets (a) | $90,536 | $75,357 | 20% | $79,982 | 6% |
| Inventory turnover | 3.4 | 3.7 | (8)% | 3.4 | (8)% |
| Average monthly ending pawn loan balance per store (b) | $74 | $69 | 7% | $67 | (3)% |
| Monthly average yield on pawn loans outstanding | 17% | 16% | 100bps | 17% | 100bps |

\* Represents a percentage computation that is not mathematically meaningful.

(a) Balance includes pawn loans and inventory.

(b) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

| Same Store data: | 2023 Change (GAAP) | 2023 Change (Constant Currency) |
| --- | ---: | ---: |
| PLO | 11% | (2)% |
| PSC | 17% | 7% |
| Merchandise Sales | 27% | 15% |
| Merchandise Sales Gross Profit | 44% | 32% |
| Store Expenses | 21% | 9% |

28

PLO improved to $50.5 million, up 14% (1% on constant currency basis). On a same store basis, PLO increased 11% (decreased 2% on a constant currency basis). PLO balance was lower than expected with a greater pay down during the quarter driven by a change in Mexican law, which significantly increased profit share required to be paid by companies to employees by May 30.

Total revenue was up 26% (15% on constant currency basis), while gross profit increased 24% (14% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.

PSC increased 19% (10% on a constant currency basis) as a result of higher average PLO and yield.

Merchandise sales gross margin increased from 29% to 30%. Aged general merchandise increased to 2.4% from 1.3% of total merchandise inventory.

Net inventory increased 30% (13% on a constant currency basis), as expected with the growth in PLO. Inventory turnover remained strong at 3.4x, down from 3.7x.

Store expenses increased 26% (14% on a constant currency basis), primarily due to rent linked to inflation, higher store count and, to a lesser extent, expenses related to our loyalty program. Same-store expenses increased 21% (9% on a constant currency basis).

Segment contribution increased 59% (48% on a constant currency basis) to $9.7 million, primarily due to the reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other,” and the changes in revenue and store expenses described above.

Segment store count increased by 12 de novo stores during the quarter.

### Other Investments

The following table presents selected financial data for our Other Investments segment after translation to U.S. dollars from its functional currency of primarily Australian dollars:

*(in thousands)*

| Gross profit: | Three Months Ended June 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Consumer loan fees, interest and other | $15 | $21 | (29)% |
| Gross profit | 15 | 21 | (29)% |
| Segment operating expenses: |  |  |  |
| Equity in net income of unconsolidated affiliates | (1,523) | (1,758) | (13)% |
| Segment operating contribution | 1,538 | 1,779 | (14)% |
| Other segment expense | 10 | 19 | (47)% |
| Segment contribution | $1,528 | $1,760 | (13)% |

Segment contribution was $1.5 million, a decrease of $0.2 million due to the decrease in our share of equity in income of Cash Converters.

### Other Items

The following table reconciles our consolidated segment contribution discussed above to net income attributable to EZCORP, Inc., including items that affect our consolidated financial results but are not allocated among segments:

*(in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Segment contribution | $43,541 | $37,611 | 16% |
| Corporate expenses (income): |  |  |  |
| General and administrative | 17,876 | 18,715 | (4)% |
| Depreciation and amortization | 3,218 | 3,187 | 1% |
| Interest expense | 3,414 | 2,693 | 27% |
| Interest income | (2,327) | — | \* |
| Other expense (income) | 50 | (66) | (176)% |
| Income before income taxes | 21,310 | 13,082 | 63% |
| Income tax expense | 3,088 | 867 | \* |
| Net income | $18,222 | $12,215 | 49% |

\* Represents a percentage computation that is not mathematically meaningful.

Segment contribution increased $5.9 million or 16% over the prior year quarter primarily due to improved operating results of the U.S. Pawn and Latin America Pawn segments above.

General and administrative expense decreased $0.8 million or 4%, primarily due to the litigation accrual charge of $2.0 million recorded in prior period, offset by an increase in costs primarily related to our Workday implementation.

Interest income increased $2.3 million, due primarily to our treasury management with increased market interest rates, and, to a lesser extent, loans to certain strategic investees.

Income tax expense increased $2.2 million primarily due to an increase in income before income taxes of $8.2 million this quarter compared to the prior year quarter as a result of improved operating results within the U.S. Pawn segment and the Latin American Pawn segment.

Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations. See Annual Report on Form 10-K for the year ended September 30, 2022 Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.

### Nine Months Ended June 30, 2023 vs. Nine Months Ended June 30, 2022

The tables below and discussion that follows should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.

### U.S. Pawn

The following table presents selected summary financial data for the U.S. Pawn segment:

*(in thousands)*

| Gross profit: | Nine Months Ended June 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Pawn service charges | $208,045 | $174,651 | 19% |
| Merchandise sales | 329,231 | 296,147 | 11% |
| Merchandise sales gross profit | 125,533 | 123,817 | 1% |
| Gross margin on merchandise sales | 38% | 42% | (400)bps |
| Jewelry scrapping sales | 30,088 | 13,864 | 117% |
| Jewelry scrapping sales gross profit | 4,221 | 2,585 | 63% |
| Gross margin on jewelry scrapping sales | 14% | 19% | (500)bps |
| Other revenues | 84 | 67 | 25% |
| Gross profit | 337,883 | 301,120 | 12% |
| Segment operating expenses: |  |  |  |
| Store expenses | 220,639 | 195,217 | 13% |
| Depreciation and amortization | 7,820 | 7,867 | (1)% |
| Loss on sale or disposal of assets and other | 84 | — | \* |
| Segment operating contribution | 109,340 | 98,036 | 12% |
| Other segment income | (2) | (1) | 100% |
| Segment contribution | $109,342 | $98,037 | 12% |
| Other data: |  |  |  |
| Average monthly ending pawn loan balance per store (a) | $317 | $290 | 9% |
| Monthly average yield on pawn loans outstanding | 14% | 14% | —bps |

\* Represents a percentage computation that is not mathematically meaningful.

(a) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

Pawn service charges increased 19% as a result of higher average PLO for the year.

Merchandise sales increased 11% compared to the prior year. Merchandise sales increase was driven primarily by our continued focus on customer engagement and pricing merchandise to maintain strong inventory turnover. Offsetting the sales increase, merchandise sales gross margin decreased 400 bps, within our target range.

Store expenses increased 13%, 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 $11.3 million, primarily due to the changes described above.

### Latin America Pawn

The following table presents selected summary financial data our Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from functional currencies. See “Results of Operations — Non-GAAP Constant Currency and Same Store Financial Information” above.

*(in thousands)*

| Gross profit: | Nine Months Ended June 30, 2023 (GAAP) | 2022 (GAAP) | Change (GAAP) | 2023 (Constant Currency) | Change (Constant Currency) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Pawn service charges | $71,397 | $58,348 | 22% | $67,137 | 15% |
| Merchandise sales | 135,043 | 103,463 | 31% | 125,905 | 22% |
| Merchandise sales gross profit | 41,456 | 30,269 | 37% | 38,640 | 28% |
| Gross margin on merchandise sales | 31% | 29% | 200bps | 31% | 200bps |
| Jewelry scrapping sales | 4,552 | 5,938 | (23)% | 4,296 | (28)% |
| Jewelry scrapping sales gross profit | (394) | 470 | (184)% | (363) | (177)% |
| Gross margin on jewelry scrapping sales | (9)% | 8% | (1,700)bps | (8)% | (1,600)bps |
| Other revenues, net | 75 | 247 | (70)% | 71 | (71)% |
| Gross profit | 112,534 | 89,334 | 26% | 105,485 | 18% |
| Segment operating expenses: |  |  |  |  |  |
| Store expenses | 86,365 | 66,727 | 29% | 80,593 | 21% |
| Depreciation and amortization | 6,850 | 5,858 | 17% | 6,369 | 9% |
| Other | (5,097) | — | \* | (4,481) | \* |
| Segment operating contribution | 24,416 | 16,749 | 46% | 23,004 | 37% |
| Other segment income (a) | (823) | (593) | 39% | (1,099) | 85% |
| Segment contribution | $25,239 | $17,342 | 46% | $24,103 | 39% |
| Other data: |  |  |  |  |  |
| Average monthly ending pawn loan balance per store (a) | $72 | $63 | 14% | $67 | 6% |
| Monthly average yield on pawn loans outstanding | 17% | 16% | 100bps | 17% | 100bps |

\* Represents a percentage computation that is not mathematically meaningful.

(a) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

| Same Store data: | 2023 Change (GAAP) | 2023 Change (Constant Currency) |
| --- | ---: | ---: |
| PLO | 11% | (2)% |
| PSC | 20% | 13% |
| Merchandise Sales | 25% | 17% |
| Merchandise Sales Gross Profit | 52% | 42% |
| Store Expenses | 25% | 16% |

During the nine months ended June 30, 2023, our Latin America pawn segment opened twenty-five de novo stores.

PSC increased 22% to $71.4 million (15% to $67.1 million on a constant currency basis) as a result of higher average PLO for the year.

Merchandise sales increased 31% (22% on a constant currency basis) and 25% on a same store basis (17% on a constant currency basis). Merchandise sales increase was driven primarily by our continued focus on customer engagement, pricing merchandise to maintain strong inventory turnover and increase in stores. Merchandise sales gross margin increased 200 bps from 29% to 31% and on a constant currency basis, within our target range.

Store expenses increased by 29% (21% on a constant currency basis) primarily due to higher store count and increased labor in-line with store activity. On a same-store basis, store expenses increased 25% (16% on a constant currency basis) due to rising labor costs resulting from growing transaction volume.

Segment contribution increased $7.9 million, or 46%, to $25.2 million. This increase was primarily due to the reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other,” and the changes in revenue and store expenses described above.

### Other Investments

The following table presents selected financial data for our Other Investments segment after translation to U.S. dollars from its functional currency of primarily Australian dollars:

*(in thousands)*

| Gross profit: | Nine Months Ended June 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Consumer loan fees, interest and other | 47 | 93 | (49)% |
| Gross profit | 47 | 93 | (49)% |
| Segment operating expenses: |  |  |  |
| Equity in net loss (income) of unconsolidated affiliates | 29,394 | (1,457) | \* |
| Segment operating (loss) contribution | (29,347) | 1,550 | \* |
| Other segment loss | 20 | 15 | 33% |
| Segment (loss) contribution | $(29,367) | $1,535 | \* |

\* Represents a percentage computation that is not mathematically meaningful.

Segment loss was $29.4 million, a decrease of $30.9 million from the prior-year nine months ended June 30, 2022, primarily due to the net loss on our share of Cash Converters related to their non-cash goodwill impairment charge.

### Other Items

The following table reconciles our consolidated segment contribution discussed above to net income attributable to EZCORP, Inc., including items that affect our consolidated financial results but are not allocated among segments:

*(in thousands)*

|  | Nine Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Segment contribution | $105,214 | $116,914 | (10)% |
| Corporate expenses (income): |  |  |  |
| General and administrative | 48,964 | 46,487 | 5% |
| Depreciation and amortization | 9,307 | 9,045 | 3% |
| Gain on sale or disposal of assets | — | (688) | (100)% |
| Interest expense | 12,994 | 7,651 | 70% |
| Interest income | (4,421) | (122) | \* |
| Other income | (138) | (11) | \* |
| Income from continuing operations before income taxes | 38,508 | 54,552 | (29)% |
| Income tax expense | 10,298 | 11,729 | (12)% |
| Net income | $28,210 | $42,823 | (34)% |

\* Represents a percentage computation that is not mathematically meaningful.

Segment contribution decreased $11.7 million or 10% over the prior year nine months ended June 30, 2022, primarily due to the net loss on our share of losses in Cash Converters’ net results related to their non-cash goodwill impairment charge, partially offset by the improved operating results of the segments above.

General and administrative expenses increased $2.5 million or 5%, primarily due to the impact related to the reversal of incentive compensation for the departed CEO in the prior period and to a lesser extent, an overall increase in incentive-based compensation and costs primarily related to our Workday implementation, partially offset by the litigation accrual charge of $2.0 million recorded in prior period.

Interest expense increased $5.3 million, primarily driven by the net loss recorded on the partial extinguishments of the 2024 convertible notes and 2025 convertible notes, and higher average total debt outstanding at overall higher average effective interest rates due to the issuance of the 2029 convertible notes during December 2022. See Note 7: Debt to the consolidated financials for further discussion.

Income tax expense decreased $1.4 million, primarily due to a decrease in income before income taxes of $16.0 million for the nine months ended June 30, 2023 compared to the same prior year nine month period offset by an increase in tax expense for the non-deductible loss realized on the refinancing of the convertible notes in the current year.

Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations. See Annual Report on Form 10-K for the year ended September 30, 2022 Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.

### Liquidity and Capital Resources

### Cash and Cash Equivalents

Our cash and equivalents balance was $238.0 million at June 30, 2023 compared to $206.0 million at September 30, 2022. At June 30, 2023, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.

### Cash Flows

The table and discussion below presents a summary of the selected sources and uses of our cash:

*(in thousands)*

|  | Nine Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | $74,309 | $48,494 | 53% |
| Net cash used in investing activities | (70,547) | (81,589) | (14)% |
| Net cash provided by (used in) financing activities | 26,972 | (792) | \* |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 1,420 | 1,219 | 16% |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $32,154 | $(32,668) | (198)% |

\* Represents a percentage computation that is not mathematically meaningful.

The increase in cash flows provided by operating activities year-over-year was primarily due to an increase in net income (when considering adjustments for non-cash items affecting net income) as well as changes in working capital primarily related to the timing of payments of accounts payable and prepaid expenses.

The $11.0 million decrease in cash flows used in investing activities year-over-year was primarily due to a $60.5 million increase in cash inflows from the sale of forfeited collateral, offset by $20.2 million increase in cash flows used to fund acquisitions and strategic investments and an increase of $19.7 million in net pawn lending outflows. Of the $20.2 million increase year-over-year used in funding acquisitions and other investments, the largest amount is $15.0 million related to a note receivable from Founders, as discussed in Note 5: Strategic Investments in Part I, Item 1 - Notes to Interim Condensed Consolidated Financial Statements.

The $27.8 million increase in cash flows provided by financing activities was primarily related to the December 2022 financing of the 2029 Convertible Notes, in which we issued $230.0 million (less issuance costs) principal amount of 3.750% Convertible Senior Notes Due 2029 offset by the extinguishment of approximately $109.4 million aggregate principal amount of our 2024 Convertible Notes for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of our 2025 Convertible Notes for approximately $62.9 million plus accrued interest. In addition, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase 578,703 shares of our Class A common stock from purchasers of the notes in privately negotiated transactions. Further, the Company repurchased and retired 1,037,703 shares of our Class A Common Stock for $9.0 million under the Common Stock Repurchase Program for the nine month period ended June 30, 2023.

The net effect of these changes was a $32.2 million increase in cash on hand during the current year to date period, resulting in a $246.5 million ending cash and restricted cash balance.

### Sources and Uses of Cash

In December 2022, we issued $230.0 million aggregate principal amount of 2029 Convertible Notes. In conjunction with the issuance of the 2029 Convertible Notes, we extinguished approximately $109.4 million aggregate principal amount of our 2024 Convertible Notes for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of our 2025 Convertible Notes for approximately $62.9 million plus accrued interest. In addition, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase 578,703 shares of our Class A common stock from purchasers of the notes in privately negotiated transactions. See Note 7 of Notes to Interim Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.” The shares repurchased in conjunction with the transactions discussed above were authorized separately from, and not considered part of, the publicly announced share repurchase program referred to below.

On May 3, 2022, our Board authorized the repurchase of up to $50 million of our Class A Common Stock over three years. As of June 30, 2023, we have repurchased 1,275,646 shares of our Class A Common Stock under the program for $11.0 million. 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, we 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, we 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. See Note 8 of Notes to Interim Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.”

We anticipate that cash flows from operations and cash on hand will be adequate to fund ongoing operations, debt service requirements, tax payments, any future stock repurchases, strategic investments, our contractual obligations, planned de novo store growth, capital expenditures and working capital requirements through the next twelve months. We continue to explore acquisition opportunities, both large and small, and may choose to pursue additional debt, equity or equity-linked financings in the future should the need arise. Depending on the level of acquisition activity and other factors, our ability to repay our longer-term debt obligations, including the convertible debt maturing in 2024, 2025 and 2029, may require us to refinance these obligations through the issuance of new debt securities, equity securities, convertible securities or through new credit facilities.

### Contractual Obligations

In “Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2022, we reported that we had $608.0 million in total contractual obligations as of September 30, 2022. There have been no material changes to this total obligation since September 30, 2022, other than the convertible debt refinancing and lease liabilities changes as further discussed in Note 7: Debt and Note 4: Leases, respectively, of Notes to Interim Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.”

We are responsible for the maintenance, property taxes and insurance at most of our locations. In the fiscal year ended September 30, 2022, these collectively amounted to $15.2 million.

### Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements

We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on our Condensed Consolidated Financial Statements.

### Cautionary Statement Regarding Risks and Uncertainties that May Affect Future Results

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements, other than statements of historical facts, regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans and objectives are forward-looking statements. These statements are often, but not always, made with words or phrases like “may,” “should,” “could,” “will,” “predict,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “projection” and similar expressions. Such statements are only predictions of the outcome and timing of future events based on our current expectations and currently available information and, accordingly, are subject to substantial risks, uncertainties and assumptions. Actual results could differ materially from those expressed in the forward-looking statements due to a number of risks and uncertainties, many of which are beyond our control. In addition, we cannot predict all of the risks and uncertainties that could cause our actual results to differ from those expressed in the forward-looking statements. Accordingly, you should not regard any forward-looking statements as a representation that the expected results will be achieved. Important risk factors that could cause results or events to differ from current expectations are identified and described in “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2022 and “Part II, Item 1A — Risk Factors” of this Report.

We specifically disclaim any responsibility to publicly update any information contained in a forward-looking statement except as required by law. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

## Market risk

As filed, 504 characters.

Market risks relating to our operations result primarily from changes in interest rates, gold values and foreign currency exchange rates, and are described in detail in “Part II, Item 7A — Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K for the year ended September 30, 2022. There have been no material changes in our reported market risks or risk management policies since the filing of our Annual Report on Form 10-K for the year ended September 30, 2022.

## Controls and procedures

As filed, 3,173 characters.

This report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Our principal executive officer and principal financial officer have concluded that as of June 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 1,236 characters.

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2022, as supplemented by the information set forth below.

### A recent law change in Australia could adversely impact Cash Converters’ business

In December 2022, the Australian Parliament passed the Financial Sector Reform Bill 2022, which establishes lending limits on small amount credit contracts. The bill became effective in June 2023, and could adversely impact the financial position or results of operations of Cash Converters, in which the Company has an equity investment. Cash Converters recognized a one-time, non-cash impairment expense of AUD$110.5 million against goodwill in their financial statements for the period ended December 31, 2022 and, based upon our 43.7% ownership of Cash Converters, after translation to USD, we recorded a $32.5 million equity method loss during the quarter ended March 31, 2023. A decline in the operating results of Cash Converters, if any, resulting from the change of law could adversely affect our investment.

Filed Aug 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000876523-23-000032. Last ingested by Listed: Oct 24, 2026, 14:58 ET. No prices; not investment advice.