PLO Up 19%; Revenue up 24%; Net Income up 266%

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, 2021.

All amounts in this release are in conformity with U.S. generally accepted accounting principles ("GAAP") unless otherwise noted. Comparisons shown in this release are to the same period in the prior year unless otherwise noted.

FIRST QUARTER HIGHLIGHTS

Pawn loans outstanding (PLO) was up 19%.

Total revenue increased 24%, and net revenue increased 22%.

Merchandise sales gross profit margin remains high at 40%.

Diluted earnings per share of $0.21 were up significantly from $0.08. On an adjusted basis¹, diluted earnings per share were $0.22, compared to diluted earnings per share of $0.13.

Return on earning assets (ROEA) remains strong at 177%.

CEO COMMENTARY AND OUTLOOK

Co-Interim Chief Executive Officer Lachie Given stated, "It was a very strong first quarter, as our passionate and productive team continued to execute on the plan we put in place at the end of fiscal 2020. These initiatives are driving better returns and improved financial metrics. PLO continues to recover, getting closer to pre-pandemic levels, and margins remain strong as our team has adopted the changes we implemented 18 months ago to improve inventory turns and reduce aged merchandise.

"In the first quarter we invested in a company with interests in 20 pawn stores primarily in the Caribbean with plans for further expansion. Our acquisition pipeline remains robust and we will continue to look for opportunities to diversify into new pawn markets.

"We are truly proud to provide a unique and essential service to our customers, that by its very nature contributes to the circular economy by extending the useful life of items and reducing waste. I am very excited to continue working with this team as we go forward to collectively grow the business and increase value for our shareholders," concluded Given.

Co-Interim Chief Executive Officer Blair Powell said, "In my 30 plus years at EZCORP I have never before seen the level of enthusiasm and pride throughout the organization. Our team has thoroughly embraced our operating themes of People, Pawn and Passion. At every level the focus is on looking for ways to be more efficient and cost effective and to provide the optimal customer experience. Our refocused efforts continue to deliver tangible results, as we have seen our store level operating metrics continue to improve.

"Improving the customer experience is essential to our mission. The launch of our points-based loyalty program incentivizes customers to transact with us and has performed better than expected in the first quarter. We continue to enhance our online payment options and roll out our online showcase in selected markets for customers to view inventory. Our team members and customers drive our success, and we are laser focused on doing everything we can to optimize the customer and team member experience throughout the company," concluded Powell.

CONSOLIDATED RESULTS

Three Months Ended December 31	As Reported				Adjusted¹
in millions, except per share amounts	2021		2020		2021		2020

Total revenues	$	221.0	$	178.1	$	221.5	$	178.1
Net revenues	$	132.1	$	108.4	$	132.3	$	108.4
Income before tax	$	21.3	$	5.5	$	21.5	$	8.3
Net income	$	15.7	$	4.3	$	16.0	$	7.2
Diluted earnings per share	$	0.21	$	0.08	$	0.22	$	0.13
EBITDA (non-GAAP measure)	$	31.0	$	17.7	$	31.2	$	17.2

Diluted earnings per share were $0.21 for the first quarter, compared to $0.08. On an adjusted basis, diluted earnings per share were $0.22, compared to $0.13.

Income before taxes improved to $21.3 million from $5.5 million, while adjusted EBITDA increased 81% to $31.2 million.

PLO increased 19% to $176.6 million, up $28.7 million. On a same-store basis², PLO increased 15% year-over-year and 1% sequentially.

Total revenues increased 24%, and net revenues increased 22%, reflecting improved pawn service charge (PSC) revenue and merchandise sales gross profit.

PSC increased 20% due to an increase in the average PLO balance during the quarter.

Merchandise sales gross profit margin remains high at 40%, reflecting the commitment to improving the core business by decreasing aged general merchandise (now less than 1% of total general merchandise inventory) and focusing on selling inventory in the first 90 days.

Net inventory increased 26% year-over-year and 7% sequentially, reflecting a return towards normalized inventory levels. Inventory turnover remained strong at 3.0x for the quarter, up from 2.9x.

Store expenses increased $7.5 million or 9%, primarily due to increased store count and rising labor costs resulting from growing transaction volume. On a same-store basis, store expenses increased 4%.

General and administrative expenses increased $3.0 million or 24%, primarily due to timing of fiscal year 2021 expenses.

Cash and cash equivalents at the end of the quarter was $233.3 million, down $57.2 million or 20% year-over-year and down $20.4 million or 8% on a sequential basis. The decrease is primarily due to the increase in PLO and inventory and the acquisition of new stores.

SEGMENT RESULTS

U.S. Pawn

PLO continued to increase, ending the quarter up 16% (15% on a same store basis) year-over-year and up 4% on a sequential basis.

Total revenue was up 20% and net revenues increased 19%, reflecting increasing PSC, higher sales and improved merchandise sales gross profit.

PSC increased 13% in the first quarter as a result of higher average PLO.

Merchandise sales gross profit gross margins improved to 43% from 42%, reflecting a continued focus on improving retailing and maintaining lower levels of aged general merchandise inventory (which improved to 0.4% from 3.4% of total merchandise inventory).

Net inventory increased 16% year-over-year and 10% sequentially. Inventory turnover continued to improve, increasing to 2.8x from 2.6x for the prior-year quarter.

Store expenses increased 4%, or $2.6 million, to $64.7 million, primarily due to rising labor costs resulting from growing transaction volume and store count.

Segment contribution increased to $34.5 million, up $13.8 million.

Latin America Pawn

PLO improved 37% to $35.5 million (up 40% on constant currency basis). On a same store basis, PLO increased 18% (20% on a constant currency basis) year-over-year and decreased 10% (down 8% on a constant currency basis) sequentially consistent with seasonality.

Total revenue was up 38% (39% on a constant currency basis), while net revenues increased 33% (34% on a constant currency basis).

PSC increased 47% to $19.5 million (up 47% to $19.6 million on a constant currency basis) as a result of higher average PLO for the quarter.

Merchandise sales gross profit margins decreased from 35% to 29% reflecting a return to more normalized margins.

Net inventory increased 67% (71% on a constant currency basis), but was up only 1% sequentially (3% on a constant currency basis). Inventory turnover remains strong at 3.6x down from 3.8x for the prior-year quarter.

Store expenses increased $4.9 million or 28% ($5.0 million or 29% on a constant currency basis) primarily due to growth in store count and rising labor costs resulting from growing transaction volume. Same-store expenses increased $0.9 million or 5% ($1.0 million or 6% on a constant currency basis).

Segment contribution was $6.5 million ($6.6 million on a constant currency basis), compared to $5.0 million in the prior-year quarter. On an adjusted basis, the increase in segment contribution was $1.8 million to $6.6 million.

Segment store count increased by one de novo store opened during the quarter.

FORM 10-Q

EZCORP's Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 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. EZCORP shareholders may obtain a paper copy of the report, free of charge, by sending a request to the investor relations contact below.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, February 3, 2022, at 7:00 am Central Time to discuss First Quarter Fiscal 2022 results. Analysts and institutional investors may participate on the conference call by dialing (833) 579-0921, Conference ID: 3989568, or internationally by dialing (778) 560-2579. 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 Russell 2000 Index, 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.

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.


EZCORP, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended December 31,
(in thousands, except per share amounts)	2021			2020
	(Unaudited)
Revenues:
Merchandise sales	$	137,720		$	107,783
Jewelry scrapping sales		6,944			6,759
Pawn service charges		76,025			63,489
Other revenues		305			104
Total revenues		220,994			178,135
Merchandise cost of goods sold		83,111			64,543
Jewelry scrapping cost of goods sold		5,772			5,202
Net revenues		132,111			108,390
Operating expenses:
Store expenses		86,771			79,309
General and administrative		15,545			12,510
Depreciation and amortization		7,574			7,572
Loss (gain) on sale or disposal of assets and other		5			(22	)
Total operating expenses		109,895			99,369
Operating income		22,216			9,021
Interest expense		2,431			5,455
Interest income		(304	)		(821	)
Equity in net income of unconsolidated affiliates		(1,138	)		(516	)
Other income		(120	)		(599	)
Income before income taxes		21,347			5,502
Income tax expense		5,626			1,203
Net income	$	15,721		$	4,299

Basic earnings per share	$	0.28		$	0.08
Diluted earnings per share	$	0.21		$	0.08

Weighted-average basic shares outstanding		56,183			55,361
Weighted-average diluted shares outstanding		81,948			55,428

EZCORP, Inc. CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)	December 31, 2021			December 31, 2020			September 30, 2021

	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	233,274		$	290,450		$	253,667
Restricted cash		8,692			8,011			9,957
Pawn loans		176,586			147,852			175,901
Pawn service charges receivable, net		29,765			24,825			29,337
Inventory, net		119,313			94,980			110,989
Prepaid expenses and other current assets		31,209			32,824			31,010
Total current assets		598,839			598,942			610,861
Investments in unconsolidated affiliates		42,513			31,773			37,724
Other investments		16,500			—			—
Property and equipment, net		52,201			55,204			53,811
Right-of-use asset, net		201,527			177,308			200,990
Goodwill		284,619			258,453			285,758
Intangible assets, net		61,458			58,794			62,104
Notes receivable, net		1,190			1,156			1,181
Deferred tax asset, net		15,623			10,000			9,746
Other assets		5,851			5,534			4,736
Total assets	$	1,280,321		$	1,197,164		$	1,266,911

Liabilities and equity:
Current liabilities:
Current maturities of long-term debt, net	$	—		$	213		$	—
Accounts payable, accrued expenses and other current liabilities		75,531			67,777			90,268
Customer layaway deposits		13,142			9,904			12,557
Lease liability		51,843			45,351			52,263
Total current liabilities		140,516			123,245			155,088
Long-term debt, net		311,844			254,322			264,186
Deferred tax liability, net		221			172			3,684
Lease liability		161,841			143,620			161,330
Other long-term liabilities		11,398			11,303			10,385
Total liabilities		625,820			532,662			594,673
Commitments and Contingencies
Stockholders' equity:
Class A Non-voting Common Stock, par value $0.01 per share; shares authorized: 100 million; issued and outstanding: 53,344,218 as of December 31, 2021; 52,628,588 as of December 31, 2020; and 53,086,438 as of September 30, 2021		533			526			530
Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171		30			30			30
Additional paid-in capital		339,955			398,269			403,312
Retained earnings		369,359			322,468			326,781
Accumulated other comprehensive loss		(55,376	)		(56,791	)		(58,415	)
Total equity		654,501			664,502			672,238
Total liabilities and equity	$	1,280,321		$	1,197,164		$	1,266,911

EZCORP, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended December 31,
(in thousands)	2021			2020

Operating activities:
Net income	$	15,721		$	4,299
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization		7,574			7,572
Amortization of debt discount and deferred financing costs		374			3,329
Amortization of lease right-of-use asset		12,694			11,504
Deferred income taxes		587			(1,421	)
Other adjustments		(30	)		(167	)
Provision for inventory reserve		(820	)		(1,510	)
Stock compensation expense		1,698			524
Equity in net income of unconsolidated affiliates		(1,138	)		(516	)
Changes in operating assets and liabilities:
Service charges and fees receivable		(419	)		(4,034	)
Inventory		(2,314	)		1,323
Prepaid expenses, other current assets and other assets		(2,330	)		(713	)
Accounts payable, accrued expenses and other liabilities		(29,531	)		(23,460	)
Customer layaway deposits		551			(1,311	)
Income taxes		4,741			68
Dividends from unconsolidated affiliates		1,660			—
Net cash provided by (used in) operating activities		9,018			(4,513	)
Investing activities:
Loans made		(166,480	)		(142,936	)
Loans repaid		95,542			77,116
Recovery of pawn loan principal through sale of forfeited collateral		65,297			53,981
Capital expenditures, net		(4,985	)		(3,223	)
Issuance of note receivable		(1,000	)		—
Investment in unconsolidated affiliates		(2,477	)		—
Investment in other investments		(16,500	)		—
Net cash used in investing activities		(30,603	)		(15,062	)
Financing activities:
Taxes paid related to net share settlement of equity awards		(792	)		(730	)
Payments on assumed debt and other borrowings		—			(53	)
Net cash used in financing activities		(792	)		(783	)
Effect of exchange rate changes on cash and cash equivalents and restricted cash		719			6,266
Net decrease in cash, cash equivalents and restricted cash		(21,658	)		(14,092	)
Cash, cash equivalents and restricted cash at beginning of period		263,624			312,553
Cash, cash equivalents and restricted cash at end of period	$	241,966		$	298,461

Supplemental disclosure of cash flow information
Cash and cash equivalents	$	233,274		$	290,450
Restricted cash		8,692			8,011
Total cash and cash equivalents and restricted cash	$	241,966		$	298,461


Non-cash investing and financing activities:
Pawn loans forfeited and transferred to inventory	$	70,966		$	50,921

EZCORP, Inc. OPERATING SEGMENT RESULTS (Unaudited)

	Three Months Ended December 31, 2021
(in thousands)	U.S. Pawn		Latin America Pawn			Other Investments			Total Segments			Corporate Items			Consolidated

Revenues:
Merchandise sales	$	102,078	$	35,642		$	—		$	137,720		$	—		$	137,720
Jewelry scrapping sales		4,980		1,964			—			6,944			—			6,944
Pawn service charges		56,557		19,468			—			76,025			—			76,025
Other revenues		22		240			43			305			—			305
Total revenues		163,637		57,314			43			220,994			—			220,994
Merchandise cost of goods sold		57,832		25,279			—			83,111			—			83,111
Jewelry scrapping cost of goods sold		3,975		1,797			—			5,772			—			5,772
Net revenues		101,830		30,238			43			132,111			—			132,111
Segment and corporate expenses (income):
Store expenses		64,689		22,082			—			86,771			—			86,771
General and administrative		—		—			—			—			15,545			15,545
Depreciation and amortization		2,670		1,980			—			4,650			2,924			7,574
Loss on sale or disposal of assets and other		—		5			—			5			—			5
Interest expense		—		—			—			—			2,431			2,431
Interest income		—		(182	)		—			(182	)		(122	)		(304	)
Equity in net income of unconsolidated affiliates		—		—			(1,138	)		(1,138	)		—			(1,138	)
Other (income) expense		—		(134	)		(12	)		(146	)		26			(120	)
Segment contribution	$	34,471	$	6,487		$	1,193		$	42,151
Income (loss) before income taxes									$	42,151		$	(20,804	)	$	21,347

	Three Months Ended December 31, 2020
(in thousands)	U.S. Pawn		Latin America Pawn			Other Investments			Total Segments			Corporate Items			Consolidated

Revenues:
Merchandise sales	$	82,253	$	25,530		$	—		$	107,783		$	—		$	107,783
Jewelry scrapping sales		4,004		2,755			—			6,759			—			6,759
Pawn service charges		50,220		13,269			—			63,489			—			63,489
Other revenues		22		7			75			104			—			104
Total revenues		136,499		41,561			75			178,135			—			178,135
Merchandise cost of goods sold		48,059		16,484			—			64,543			—			64,543
Jewelry scrapping cost of goods sold		2,844		2,358			—			5,202			—			5,202
Net revenues		85,596		22,719			75			108,390			—			108,390
Segment and corporate expenses (income):
Store expenses		62,092		17,217			—			79,309			—			79,309
General and administrative		—		—			—			—			12,510			12,510
Depreciation and amortization		2,736		1,860			—			4,596			2,976			7,572
Loss (gain) on sale or disposal of assets and other		27		(101	)		—			(74	)		52			(22	)
Interest expense		—		—			—			—			5,455			5,455
Interest income		—		(764	)		—			(764	)		(57	)		(821	)
Equity in net income of unconsolidated affiliates		—		—			(516	)		(516	)		—			(516	)
Other (income) expense		—		(455	)		(210	)		(665	)		66			(599	)
Segment contribution	$	20,741	$	4,962		$	801		$	26,504
Income (loss) before income taxes									$	26,504		$	(21,002	)	$	5,502

EZCORP, Inc. STORE COUNT ACTIVITY (Unaudited)

	Three Months Ended December 31, 2021
	U.S. Pawn	Latin America Pawn	Consolidated

As of September 30, 2021	516	632	1,148
New locations opened	—	1	1
As of December 31, 2021	516	633	1,149

	Three Months Ended December 31, 2020
	U.S. Pawn	Latin America Pawn	Consolidated

As of September 30, 2020	505	500	1,005
New locations opened	—	2	2
As of December 31, 2020	505	502	1,007

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. 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 months ended December 31, 2021 and 2020 were as follows:

	December 31,		Three Months Ended December 31,
	2021	2020	2021	2020

Mexican peso	20.5	19.9	20.7	20.5
Guatemalan quetzal	7.5	7.6	7.6	7.6
Honduran lempira	24.1	23.8	23.9	24.1
Peruvian sol	4.0	3.6	4.0	3.6

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

	Three Months Ended December 31,
(in millions)	2021			2020

Net income	$	15.7		$	4.3
Interest expense		2.4			5.4
Interest income		(0.3	)		(0.8	)
Income tax expense		5.6			1.2
Depreciation and amortization		7.6			7.6
EBITDA	$	31.0		$	17.7

	Total Revenues		Net Revenues		Income Before Tax		Tax Effect			Net Income		Diluted EPS		EBITDA

2022 Q1 Reported	$	221.0	$	132.1	$	21.3	$	5.6		$	15.7	$	0.21	$	31.0
FX impact		—		—		0.1		(0.1	)		0.2		—		0.1
Constant currency impact		0.5		0.2		0.1		—			0.1		0.01		0.1
2022 Q1 Adjusted	$	221.5	$	132.3	$	21.5	$	5.5		$	16.0	$	0.22	$	31.2

	Total Revenues		Net Revenues		Income Before Tax			Tax Effect			Net Income			Diluted EPS			EBITDA

2021 Q1 Reported	$	178.1	$	108.4	$	5.5		$	1.2		$	4.3		$	0.08		$	17.7
Contract termination costs		—		—		(0.4	)		(0.1	)		(0.3	)		(0.01	)		(0.4	)
Non cash interest		—		—		3.3			—			3.3			0.06			3.3
Other adjustments		—		—		(0.1	)		—			(0.1	)		—			(3.4	)
2021 Q1 Adjusted	$	178.1	$	108.4	$	8.3		$	1.1		$	7.2		$	0.13		$	17.2

	Three Months Ended December 31, 2021
(in millions)	U.S. Dollar Amount		Percentage Change YOY

Consolidated revenue	$	221.0	24	%
Currency exchange rate fluctuations		0.5
Constant currency consolidated revenue	$	221.5	24	%

Consolidated net revenue	$	132.1	22	%
Currency exchange rate fluctuations		0.2
Constant currency consolidated net revenue	$	132.3	22	%

Consolidated net inventory	$	119.3	26	%
Currency exchange rate fluctuations		0.6
Constant currency consolidated net inventory	$	119.9	26	%

Latin America Pawn net revenue	$	30.2	33	%
Currency exchange rate fluctuations		0.2
Constant currency Latin America Pawn net revenue	$	30.4	34	%

Latin America Pawn PLO	$	35.5	37	%
Currency exchange rate fluctuations		0.7
Constant currency Latin America Pawn PLO	$	36.2	40	%

Latin America Pawn PSC revenues	$	19.5	47	%
Currency exchange rate fluctuations		0.1
Constant currency Latin America Pawn PSC revenues	$	19.6	47	%

Latin America Pawn merchandise sales	$	35.6	40	%
Currency exchange rate fluctuations		0.4
Constant currency Latin America Pawn merchandise sales	$	36.0	41	%

Latin America Pawn segment profit before tax	$	6.5	30	%
Currency exchange rate fluctuations		0.1
Constant currency Latin America Pawn segment profit before tax	$	6.6	32	%

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