Post on 03-Jun-2020
Investor Update
Business Transformation
Delivering Results
September 13, 2016
Preliminary Statements
2
Forward Looking Statements
This document contains certain forward-looking statements. 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, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates will, should or may occur in the future 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 and current or future litigation. 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.
Other Information
This information should be read in conjunction with, and not in lieu of, the company’s annual, quarterly and other reports filed with the Securities and Exchange Commission.
Those reports contain important information about the company’s business and performance, including financial statements prepared in accordance with U.S. generally accepted accounting principles, as well as a description of the important risk factors that may materially and adversely affect our business, financial condition or results of operations.
Company Overview
Unless otherwise noted, all financial information included in this presentation is as of June 30, 2016 and is presented on an “adjusted basis,” which
includes presentation of amounts on a constant currency basis; excludes closed Mexico buy/sell business; and certain other discrete items.
See the Appendix for a reconciliation to the comparable GAAP information.
All comparisons unless stated are Q3FY16 relative to Q3FY15. See appendix for definition of terms.
* Assumes completion of Grupo Finmart sale
** Continuing operations excluding closed Mexico buy/sell business
3
KEY STATISTICS
Founded 1989
IPO Date 8/27/1991
Headquarters Austin, TX
Market Capitalization (as of 9/2/16) $537m
Institutional Holdings 88%
52 Week Price Range (as of 9/2/16) $2.44 to $10.62
Adjusted Total Revenue (LTM)** $728.9m
Adjusted EBITDA (LTM)** $65.7m
Employees ~5,600
Index inclusion: Russell 2000, S&P SmallCap 600, S&P 1000, NASDAQ Composite
PAWN STORE LOCATIONS
United States 522
Mexico 238
FINANCIAL SERVICES LOCATIONS*
Cash Max in Canada 27
U.S. Pawn
84%
Other
1%
Mexico Pawn 15%
EZCORP Revenue by Type*
After the sale of Grupo Finmart, 99% of EZCORP
revenue will be generated from our U.S. and Mexico
pawn businesses.
EZCORP is a leading provider of pawn loans in the
United States and Mexico. At our pawn stores we
also sell merchandise, primarily collateral forfeited
from pawn lending operations and used
merchandise purchased from customers.
EZCORP Has Exited Most Non-Pawn Businesses
And Driving Shareholder Value
4
EZCORP September 2014
U.S. Pawn
Mexico Pawn
Canada Cash Max
U.S. Financial Services
Tuyo U.S.
Online Lending
U.K.
Online Lending
Cash Converters
Grupo Finmart
Canada Mexico
*After the sale of Grupo, 99% of EZCORP revenue will be generated from
our U.S. and Mexico pawn businesses
EZCORP Share Price Performance September 2014 to September 2016
EZCORP September 2016* Simplifying, Focusing and Optimizing the Business
U.S. PAWN
84%
MEXICO PAWN
15%
CANADA
CASH MAX
1%
5
This Slide Intentionally Left Blank
Our Focus On Customer
6
Lead the market in serving and satisfying short-term cash
needs of consumers unable to access traditional credit
products
CUSTOMER FEEDBACK
Q3FY16* EZCORP U.S. Customer Feedback
• Comprehensive Mystery Shop program measures up 6%
• Net Promoter Score to 46 points from 39 points
Q3FY16* EZCORP Mexico Customer Feedback
• Comprehensive Mystery Shop program measures up 12%
• Net Promoter Score improved to 50 from 48
* Sequential scores in U.S. and Mexico. U.S. was previously measured in Q2FY16 and Mexico in Q1FY16.
U.S. Pawn Industry
Remains Highly Fragmented and Attractive
Continued opportunities for
accretive acquisitions
EZCORP Adding Value
To Acquisitions • Systems
• Processes
• Capital
• People
7
Pawn Stores
EZCORP
4%
Pawn Stores
FirstCash
9%
Pawn Stores
Held By
Independent
Owner
Operators
87%*
Total U.S. Pawn Stores Estimated About 13,000
* 2013 FDIC National Survey of Unbanked and Underbanked Households;” published October 2014
EZCORP Serves a Large U.S. Market
20% of U.S. Households
are underbanked
(~25 million households)*
8% of U.S. Households
are unbanked
(~10 million households)*
U.S. Pawn Store Map
8
EZCORP pawn platform supports geographic diversity of store mix
Stable state regulation; rate setting authority is at state level
NY
WA
MT ND
SD
WY
ID
CA
NM
KS
NE
MO KY
LA
SC
NC
WV
OH
MI
ME
VT
MA
NH
CT RI
PA
VA
2
5
8
GA
99
FL
AL
5
2
MS
1
AR
1
OK
21
TX
218
AZ
20
CO
37
UT
10
NV
16
OR
5
MN
7 WI
3
IA
11 IL
22
IN
16
TN 13
NJ
DE
MD
33
12
27
7
3
1
18
438
24
8 46
77
27
41
6
26
25
25 44
120
44
29
3
AK
6
522 EZCORP U.S. Pawn store locations
EZCORP Stores
FirstCash Stores
TX
42%
FL
19%
CO
7% IL
4%
OK
4% AZ
4%
NV
3%
Other
17%
EZCORP U.S. Store Mix
35
31
1. Coahuila (5)
2. Nuevo León (7)
3. Tamaulipas (6)
4. San Luis Potosí (1)
5. Veracruz (31)
6. Aguascalientes (4)
7. Jalisco (16)
8. Guanajuato (15)
9. Querétaro (6)
10. Hidalgo (6)
11. Michoacán (7)
12. Estado de México (42)
13. Ciudad de México (41)
14. Morelos (4)
15. Tlaxcala (3)
16. Puebla (11)
17. Guerrero (7)
18. Oaxaca (4)
19. Chiapas (7)
20. Tabasco (7)
21. Campeche (4)
22. Quintana Roo (4)
9
EZCORP Mexico Pawn Store Map
Morelos
1
2
3
4 5
6
7 11
16
17 18 19
20 21
22
12 13
14
15
16
8 9 10
238 EZCORP Mexico Pawn store locations
Strong Corporate Performance
Driven By Continued Momentum In Pawn Operations
10
EZCORP Continuing Operations Adjusted Results (Excludes Grupo Finmart)**
High operating leverage and efficiently managing the business drove $9.8m
increase in Net Revenue and $8.3m increase in Profit Before Tax Net Revenue increase with strong same store metrics in Q3:
• PLO increased 11% • PSC revenue increased 10% • Merchandise sales gross profit increased
10% Continued expense management with corporate costs15% lower in Q3; tracking
toward annual corporate expense of ~$50m by FY18*** EBITDA percentage increase in Q3 and YTD higher than net revenue growth, evidenced by strong operational leverage
* Represents an increase or decrease in excess of 1500% or not meaningful ** Adjusted for restructuring and restatement charges, other discrete items and constant currency. Mexico Pawn excludes closed buy/sell businesses. See GAAP to non-GAAP reconciliation. All amounts in millions. ***Corporate expense” in this presentation refers to the “Administrative” line in SEC quarterly reports.
et Re
Pawn 101: Understanding Pawn Growth Drivers
11
+ - = =
INCOME STATEMENT ASSETS
Purchases +
Forfeitures NET REVENUE
Pawn Loans Outstanding are secured loans, typically small, and fully collateralized by tangible personal property. No personal recourse to customers or negative credit reporting.
We earn Pawn Service Charge revenue on our pawn loans which varies primarily based upon statutory rates by state and loan valuations.
Inventory for retail sales occur through pawn loan forfeitures and purchases of customers’ merchandise. If customer does not repay, renew or extend a loan, the collateral is forfeited to us and becomes inventory available for sale to drive sales gross profit.
Same Store basis is the most effective measure of pawn growth.
TOTAL EXPENSES
PROFIT BEFORE
TAX
Key Growth Drivers
Pawn Service Charges
#3
Pawn Loans Outstanding
#2
Merchandise & Scrap Gross
Profit
#5
Pawn Loans Outstanding (PLO) is the most influential driver to revenue and profitability. EZCORP had market leading Same Store PLO growth in Q3FY16 relative to publicly traded pawn companies driven by intense focus on market leadership in serving and satisfying customers’ needs for cash
Inventory
#4
Quality Store
Manager
#1
Purchases +
Forfeitures
Earning Assets Drive Strong Profitable Growth
12 Adjusted for restructuring charges and other discrete items. See GAAP to non-GAAP reconciliation
+ - = =
INCOME STATEMENT
Pawn Service Charges Total
Up 10% to $54m PLO Monthly Yield
14%
Merch & Scrap Gross Profit Total Up 8%
to $31m
Merch margin to 37% from 35%
ASSETS SAME STORE UP 8%
SAME STORE UP
6% Inventory
Total Up 18%
to $113m
NET REVENUE Up 9% to $86m
• Continued growth in U.S. pawn, Same Store PLO up
10%
• Redemption rate consistent at 85%
• PLO monthly yield unchanged at 14%
TOTAL EXPENSES Up 5% to $66m
PROFIT BEFORE TAX
Up 25% to $20m
• Pawn loan forfeitures increased proportional to increase in PLO,
resulted in growth in inventory during period of lower sales demand;
resulted in:
- Inventory annual turns to 2.2x from 2.4x
- Inventory monthly yield of 9% compared to 10% last year
U.S. Pawn Q3FY16
Pawn Loans Outstanding
Total Up 13%
to $144m
SAME STORE UP
10%
Quality Store
Manager
SAME STORE UP 16%
#1
Earning Assets Drive Strong Profitable Growth
13
+ - = =
INCOME STATEMENT
Pawn Service Charges Total
Up 20% to $9.5m
PLO Monthly Yield 16%
Merch & Scrap Gross Profit
Total Up 48% to $5.5m
Merch margin to
33% from 27%
ASSETS
SAME STORE UP 20%
SAME STORE UP
45%
Purchases +
Forfeitures
Pawn Loans Outstanding
Total Up 19% to $19m
Inventory Total
Up 21% to $20m
SAME STORE UP 19%
NET REVENUE Up 28% to $15m
TOTAL EXPENSES Up 1% to $11m
PROFIT BEFORE TAX
Up 237% to $4m
• Continued growth in Mexico Pawn, Same Store PLO up
19%
• Redemption rate increased to 77% from 76%
• PLO monthly yield unchanged at 16%
• Inventory monthly yield increased to 9% from 8%
• Inventory annual turns of 2.3x from 2.7x last year driven by clearing of aged merchandise in prior year
Mexico Pawn Q3FY16
Adjusted for restructuring charges, other discrete items, constant currency and excludes closed Mexico buy/sell business. See GAAP to non-GAAP reconciliation.
Quality Store
Manager
SAME STORE UP 21%
#1
1
Pawn fundamentals
continue to improve Financial
restatement
U.S. Financial Services
business closed
Renewed Executive
Leadership Team
including CEO, CFO,
President of Pawn
Execution of 3-Year Strategic Plan:
Building Platform For Profitable Growth
14
25 Pawn Stores
acquired in FY15
Closed 25 underperforming
pawn stores in U.S.
and Mexico in FY15
Definitive
Agreement to sell
Grupo Finmart
Investment in District
Managers (to 67 from 55)
enabling more coaching &
mentoring
Transformational customer focused
3-year strategic plan released
6 U.S. pawn stores
acquired in Q2FY16 Procurement
opportunities identified
Store incentive
plans revised
Upgrading
POS technology
Investing in customer
data analytics
Mexico Buy/Sell
business closed
JULY
2015
Implementing
workforce
management system
Received commitment
for a $100 million
secured credit facility to
support business Tracking toward annual
corporate expense of
~$50m by FY18
JULY
2016
Process
Reengineering
Program
15
Largely new Executive team in place with incentives primarily tied to EBITDA
Store incentive programs revised
Increased investment in District Managers (to 67 from 55) enabling more coaching
& mentoring
Investing in additional training at all levels
Track Record of Execution
Disciplined Growth &
Strong Performance
Attractive Industry
Dynamics
• High operating leverage and efficiently managing pawn businesses with strong
growth in Net Revenue and Profit Before Tax in recent quarters
• Continued growth in Same Store PLO in Q3, up 10% in U.S. and up 19% in Mexico
• Continued expense management with corporate costs 15% lower in Q3;
tracking toward annual corporate expense of ~$50m by FY18
• Closing non-performing stores and disciplined acquisition program
EZCORP Strengths
Improving Talent &
Capability
Consistently executing on 3-Year Strategic Plan, announced in July 2015:
Closure of U.S. Financial Services business, ahead of time and budget
Sale of Grupo Finmart business on track to be completed by September 30,
2016
Commitment for new $100m secured credit facility
• Large and highly fragmented consumer market in U.S. and Mexico
• Solid demand for pawn services across economic cycles
• Fully collateralized performing loan portfolio
• No personal recourse to customers or negative credit reporting
• Stable pawn regulatory environment
– Rate setting authority in U.S. is at state level, no government rate setting in
Mexico
16
Additional Information
Investor Resources
(http://investors.ezcorp.com)
• Helpful links to presentations,
transcripts, and financial results
• Three Year Strategic Program
announced in July 2015
Definition of Terms
18
PLO Yield =
pawn service charges
days in period average PLO
X 365
Inventory Yield =
merch. SGP + scrap SGP days in period
average net inventory
X 365
Return on Earning Assets
merch. SGP + scrap SGP + PSC days in period
average net inventory + average PLO
X 365
Inventory Turnover =
total cost of sales days in period
average net inventory
X 365
=
Leverage on Operations with Net Revenue Up $6.6 million to $100 million, and
Income From Continuing Operations Before Taxes Up $7.6 million to $3.8 million
19 * Represents an increase or decrease in excess of 1500% or not meaningful All amounts in millions
EZCORP GAAP Results
Commitment to customer experience driving improved Net Revenue and higher
Profit Before Tax with improved same store metrics in Q3:
– Pawn Loans Outstanding (PLO) up 9% – Pawn Service Charges (PSC) up 8% – Merchandise Sales Gross Profit up 8%
YTD total revenue driven by $11m
improvement in PSC Revenue offset by lower Scrap Sales of $14m Negative FX impact of $14m on revenue and $8m on net revenue Efficiently managing the business, leveraging a 7% growth in Net Revenue to
a 200% increase in Profit Before Tax YTD corporate expense increase primarily due to restatement costs of $4.2m
et Re
Serving and Satisfying Customers’ Desire for Access
to Cash Is Fueling Performance
Adjusted for discrete items All amounts in millions
20
Encouraging results in early stages of our
three-year strategic
plan
Strategic Plan
Announcement
• Continued focus on customer experience has led to double-digit Same Store PLO growth in Q3, driving a $4.8M or 10% increase in PSC, the largest component of net revenue
• Merchandise gross profit increase reflects ongoing improvements in loan valuation and pricing disciplines
• Continued improvement in aged inventory reduced to 9% • EZCORP historically has higher first half net revenue, merchandise
gross profit and profitability reflective of seasonal impact of tax refunds to customers, Christmas and Valentines Day
U.S. Pawn
Serving and Satisfying Customers’ Desire for Access
to Cash Is Fueling Performance
$ 1
Adjusted for discrete items, constant currency and excludes closed Mexico buy/sell business All amounts in millions
21
• Continued focus on customer experience has led to eight consecutive quarters of double-digit PLO growth
• Strong PLO growth resulted in 20% growth in PSC
• Continued strong merchandise gross profit up 48% and margin
expansion up 600bps to 33% driven by discipline in pawn loan valuation, retail pricing cadences, and lower aged inventory levels
Mexico Pawn
*See GAAP to non-GAAP reconciliation.
All comparisons unless stated are to Q3FY15. See appendix for definition of terms 22
GAAP to Non-GAAP Reconciliations
23
GAAP to Non-GAAP Reconciliation Q3 – Continuing Operations*
Footnote * - Includes immaterial presentation reclassifications and rounding
Footnote (A) Amount includes $(0.1) million for Corporate expenses related to restatement
Footnote (B) Amount includes $0.2 million Gain/ Loss on FX in Corporate
Footnote (C) Amount includes $0.4 million Gain/ Loss on FX in Corporate
*For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For
condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and nine-
months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively.
Constant currency results, where presented, also exclude foreign currency gain or loss.
(C)
(A)
(B)
24
GAAP to Non-GAAP Reconciliation YTD June – Continuing Operations*
Footnote * - Includes immaterial presentation reclassification and rounding
Footnote (A) Amount includes $4.2 million related to restatement and $(0.1) million of discrete Corporate items
Footnote (B) Amount includes $1.4 million of restructuring expenses ($1.0 million of U.S. Pawn, $0.2 million of Corporate, and $0.2 million of Other International) and ($0.2) million of discrete
adjustments in Corporate
Footnote (C) Amount includes $0.1 million of Corporate discrete items
Footnote (D) Amount includes $0.8 million Corporate restructuring expense, $0.6 million of discrete items ($0.1 million of U.S. Pawn, $0.3 million of Mexico Pawn and $0.2 million of Corporate)
*For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For
condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and nine-
months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively.
Constant currency results, where presented, also exclude foreign currency gain or loss.
(C) (D) (E) (F)
(A)
(B)
(C)
(D)
25
GAAP to Non-GAAP Reconciliation Q3 – U.S. Pawn*
Footnote * - Includes immaterial presentation reclassification and rounding
Footnote (A) Amount includes $0.1 million of asset write-offs
(A)
(D)
26
GAAP to Non-GAAP Reconciliation YTD June – U.S. Pawn*
Footnote * - Includes immaterial presentation reclassification and rounding
Footnote (A) Amount includes $1.0 million of restructuring expense
Footnote (B) Amount includes $0.1 million of asset write-offs
(A)
(D) (E) (F)
(B)
27
GAAP to Non-GAAP Reconciliation Q3 – Mexico Pawn*
Footnote * - Includes $0.3 million presentation reclassification between other revenues/operating expenses and rounding
*For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30,
2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average
exchange rates for the current three and nine-months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months
ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss.
28
GAAP to Non-GAAP Reconciliation YTD June – Mexico Pawn*
(A)
Footnote * - Includes $0.3 million presentation reclassification between other revenues/operating expenses and rounding
Footnote (A) Amount includes $0.3 million of discrete items
*For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30,
2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average
exchange rates for the current three and nine-months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months
ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss.
29
Trailing Twelve Month Reconciliations*
* Includes immaterial presentation reclassifications and rounding
Investor Relations Contact
30
Jeff Christensen, CPA Vice President, Investor Relations EZCORP, Inc. Email: jeff_christensen@ezcorp.com Phone: (512) 437-3545