Pawn Loans Outstanding and Record Sales Driving Strong Revenue and Earnings Growth

EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn transactions in the United States and Latin America, today announced results for its first quarter ended December 31, 2022.

Unless otherwise noted, all amounts in this release are in conformity with U.S. generally accepted accounting principles ("GAAP") and comparisons shown are to the same period in the prior year.

FIRST QUARTER HIGHLIGHTS

• Pawn loans outstanding (PLO) up 19% to $209.9 million.

• Total revenue increased 20%, and gross profit increased 15%.

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

• Net income for the quarter was $16.8 million, an increase of $1.1 million.

• Diluted earnings per share of $0.25 was up from $0.21. On an adjusted basis¹, diluted earnings per share was $0.28, compared to $0.22 in the prior-year quarter.

• Return on earning assets (ROEA) remains strong at 163%.

• Refinanced convertible debt, that included the repurchase of $109.4 million convertible notes due 2024 and $69.1 million convertible notes due 2025, and the issuance of $230.0 million due 2029.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Lachie Given stated, “We began fiscal 2023 with another outstanding quarter, continuing to execute on our three-year strategic plan. Our PLO was the highest on record for this quarter, and we achieved our strongest ever quarterly sales result. The challenging macro-economic backdrop continues to drive increased demand for our two core products, which are providing solutions for our customers' short-term cash needs and selling second-hand goods. And our team’s relentless focus on improving the performance of every one of our 1,186 stores, continues to drive our excellent financial and operating results.

"We remain committed to market-leading customer service, by investing in our store-based and support teams, technology improvements, process efficiencies and automation, as we provide our customers with a fast, convenient and respectful solution to address their short-term cash needs. Additionally, our neighborhood retail locations provide affordable pre-owned and recycled general merchandise and jewelry to our cost-conscious and environmentally concerned consumers.

“During the first quarter, we acquired nine stores in the Houston, Texas area and one store in Las Vegas, Nevada. We opened two de novo stores in Latin America and expect to open more this quarter. We now have 2.4 million EZ+ Rewards members across all geographies, an increase of 26% over the fourth quarter of 2022.

“We proactively addressed our near-term convertible debt maturities with a successful placement of $230 million of 7-year convertible notes, materially de-risking the balance sheet while providing a stable, low cash-cost capital base from which to continue to grow. We retired approximately $178.5 million of convertible notes maturing in 2024 and 2025 and repurchased approximately $5 million in shares as part of this financing, in addition to the $2 million in shares we acquired during the quarter as part of our announced buy-back program.

“During the quarter, we launched new initiatives to enhance work-life balance for our team members and increase employer competitiveness at all levels. I believe we have the best, most passionate, engaged and productive team members in the industry. We are committed to doing everything we can to retain and incentivize them because it is their operational excellence that drives our financial results and ultimately enhances value for all shareholders,” concluded Given.

CONSOLIDATED RESULTS

• Diluted earnings per share were $0.25, up from $0.21. On an adjusted basis, diluted earnings per share were $0.28, up from $0.22.

• Income before taxes improved to $24.5 million from $21.3 million, while adjusted EBITDA increased 22% to $37.9 million.

• PLO increased 19% to $209.9 million, up $33.3 million. On a same-store basis², PLO increased 16% due to increased loan demand, reflecting growth above pre-COVID levels.

• Total revenues increased 20% and gross profit increased 15%, reflecting improved pawn service charge (PSC) revenue, merchandise sales and merchandise sales gross profit.

• PSC increased 22% as a result of higher average PLO.

• Merchandise sales gross margin remains within our targeted range at 36%. Aged general merchandise has increased to 1.6% of total general merchandise inventory.

• Net inventory increased 31%, reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 2.8x for the quarter, down from 3.0x.

• Store expenses increased 16%, primarily due to increased labor in-line with store activity, and to a lesser extent, expenses related to our loyalty program and rent associated with lease renewals. On a same-store basis, store expenses increased 14%. General and administrative expenses were flat.

• Cash and cash equivalents at the end of the quarter was $207.7 million, down 11% year-over-year. The decrease is primarily due to the increase in PLO and inventory, the acquisition of new stores, and strategic investments, partially offset by the net cash proceeds associated with the convertible debt refinancing.

SEGMENT RESULTS

U.S. Pawn

• PLO ended the quarter at $166.9 million, up 18% or 15% on a same store basis.

• Total revenue was up 19% and gross profit increased 13%, reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.

• PSC increased 23% as a result of higher average PLO.

• Merchandise sales gross margin decreased to 38% from 43%, reflecting a more normalized operating environment. Aged general merchandise remains less than 1% of total general merchandise inventory.

• Net inventory increased 31% reflecting a return towards normalized inventory levels. Inventory turnover decreased to 2.6x from 2.8x.

• Store expenses increased 13%, primarily due to increased labor in-line with store activity, and to a lesser extent, expenses related to our loyalty program and rent associated with lease renewals.

• Segment contribution increased 14% to $39.3 million.

• Segment store count increased by 10 stores during this quarter due to two acquisitions.

Latin America Pawn

• PLO improved to $43.0 million, up 21% (17% on constant currency basis). On a same store basis, PLO increased 19% (15% on a constant currency basis).

• Total revenue was up 21% (16% on constant currency basis) and gross profit increased 23% (18% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit.

• PSC increased 20% (15% on a constant currency basis) as a result of higher average PLO.

• Merchandise sales gross margin increased from 29% to 30%. Aged general merchandise inventory increased to 2.9% from 0.5% of total merchandise inventory.

• Net inventory increased 32% (27% on a constant currency basis), reflecting a return towards normalized inventory levels. Inventory turnover remains strong at 3.3x, down from 3.6x.

• Store expenses increased 25% (20% on a constant currency basis), primarily due to increased labor in-line with store activity, and to a lesser extent, expenses related to our loyalty program and rent associated with lease renewals. Same-store expenses increased 22% (18% on a constant currency basis).

• Segment contribution increased 16% (12% on a constant currency basis) to $7.5 million. On an adjusted basis, segment contribution was up 15% to $7.5 million.

• Segment store count increased by 1 store due to the net impact of opening 2 de novo stores and consolidating 1 store during the quarter.

FORM 10-Q

EZCORP’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 has been filed with the Securities and Exchange Commission. The report is available in the Investor Relations section of the Company’s website at http://investors.ezcorp.com.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, February 2, 2023, at 8:00 am Central Time to discuss First Quarter Fiscal 2023 results. Analysts and institutional investors may participate on the conference call by dialing (844) 200-6205, Conference ID: 341829, or internationally by dialing (929) 526-1599. The conference call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay of the conference call will be available online at http://investors.ezcorp.com/ shortly after the end of the call.

ABOUT EZCORP

Formed in 1989, EZCORP has grown into a leading provider of pawn transactions in the United States and Latin America. We also sell merchandise, primarily collateral forfeited from pawn lending operations and pre-owned and recycled merchandise purchased from customers. We are dedicated to satisfying the short-term cash needs of consumers who are both cash and credit constrained, focusing on an industry-leading customer experience. EZCORP is traded on NASDAQ under the symbol EZPW and is a member of the S&P 1000 Index and Nasdaq Composite Index.

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FORWARD LOOKING STATEMENTS

This announcement contains certain forward-looking statements regarding the company’s strategy, initiatives and expected performance. These statements are based on the Company’s current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the company's strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates, will, should or may occur in the future, including future financial or operating results, are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including operating risks, liquidity risks, legislative or regulatory developments, market factors, current or future litigation and risks associated with the COVID-19 pandemic. For a discussion of these and other factors affecting the Company’s business and prospects, see the Company’s annual, quarterly and other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Note: Percentages are calculated from the underlying numbers in thousands and, as a result, may not agree to the percentages calculated from numbers in millions.

¹“Adjusted” basis, which is a non-GAAP measure, excludes certain items. “Constant currency” basis, which is a non-GAAP measure, excludes the impact of foreign currency exchange rate fluctuations. “Free cash flow”, which is a non-GAAP measure, includes certain adjustments to cash flow from operating activities. For additional information about these calculations, as well as a reconciliation to the most comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.

²“Same Store” basis, which is a financial measure, includes stores open the entirety of the comparable periods.

Non-GAAP Financial Information (Unaudited)

In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency ("constant currency") and adjusted basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzales and other Latin American currencies. We believe that presentation of constant currency and adjusted results is meaningful and useful in understanding the activities and business metrics of our operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use this non-GAAP financial information primarily to evaluate and compare operating results across accounting periods.

Readers should consider the information in addition to, but not instead of or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. In addition, we have an equity method investment that is denominated in Australian dollars and is translated into U.S. dollars. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the three and three months ended December 31, 2022 and 2021 were as follows:

Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss.

Miscellaneous Non-GAAP Financial Measures

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