All amounts in this release are from EZCORP continuing operations and 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.

Austin, Texas (February 2, 2017) - EZCORP, Inc. (NASDAQ: EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its first quarter ended December 31, 2016.

HIGHLIGHTS FOR FIRST QUARTER FISCAL 2017

Improvements to earning assets generated revenue and profit growth:

• Positive PLO growth in U.S. and Mexico:

  • Market leading growth in same store pawn loans outstanding (PLO) up 3% in U.S. and down 4% in Mexico (up 14% on a constant currency basis).
  • Leading the U.S. market with average PLO of $287,000 per store.

• Delivering profitable growth:

  • Growth in revenue and profit before tax, four consecutive quarters of YOY profit growth.
  • Corporate expense savings of 30%; on track for $50 million in FY18.
  • Significant investment in field leadership and customer-facing team members in U.S. Pawn, adding 224 store Team Members, nine field human resources managers, six District Managers and two Divisional Vice Presidents to improve customer experience, particularly during peak sales season; offset impacts of staff turnover; and better coach & mentor store managers.

Strong liquidity position to support growth:

• $63.7 million cash balance at quarter-end plus $50 million undrawn on our credit facility.

• Collected $7.8 million in principal on notes receivable from the Grupo Finmart sale during the current quarter, and anticipate collection of an additional $37.4 million in principal during the remainder of fiscal 2017.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP's Chief Executive Officer, said: 'Our first quarter results reflect the continued intense focus on market leadership in meeting our customers' desire for cash whenever they want it, combined with consistent execution in pawn fundamentals. We delivered strong operating results in our pawn businesses in the U.S. and Mexico with continued growth in same store pawn loans outstanding (PLO), the most influential driver of revenue and profitability.

'We continue to drive corporate expense savings as we move to a leaner business model and remain on track to reduce corporate expense to $50 million in FY18 from $68 million in FY16. We are reinvesting a portion of the savings into initiatives to better serve our customers, including product and customer data analytics and feedback; upgrading our technology; and training, coaching and mentoring programs for our field team. We have also made significant investments in field leadership and customer-facing Team Members. We plan to open about ten new stores in Mexico in FY17.

'We are confident that all these initiatives will continue to improve our pawn operating performance and provide a platform for profitable growth.'

CONSOLIDATED RESULTS

• Total revenue up $5.1 million to $192.6 million, and income from continuing operations net of tax increased $4.8 million to $8.3 million. (On a constant currency basis, total revenue was up $9.8 million to $197.4 million and income from continuing operations net of tax was up $5.6 million to $9.1 million.) These results were driven by continued intense focus on market leadership in meeting our customers' desire for cash.

• Total operating expenses decreased $7.4 million, or 7% (5% on a constant currency basis). This included a corporate expense decrease of $6.1 million to $13.9 million, or 30% lower, driven by a leaner business model.

OPERATING METRICS

U.S. Pawn Segment

• Continued focus on meeting customers' desire for cash resulted in an increase in total PLO of 4% to $148.6 million, up 3% on a same store basis.

• Pawn Service Charges (PSC) increased 4% to $61.0 million, up 3% on a same store basis.

• Merchandise sales increased 3%, both in total and on a same store basis. The merchandise sales gross margin of 36% remained within our target range of 35-38%, although it was 400bps lower than the prior-year quarter.

•

• Operations expense increased $3.8 million, or up 6%, primarily due to:

▪ 224 customer-facing store Team Members, and field leadership positions including two Divisional Vice Presidents, six District Managers and nine field Human Resources Managers; and

▪ Commenced store preventative maintenance program.

▪ Segment profit before tax decreased $1.7 million, or 6%, to $27.1 million as a result of increased investments in store operations (as shown above).

Mexico Pawn Segment

• PLO decreased 3% to $14.1 million, compared to an increase of 13% in the prior-year quarter (up 16% to $16.8 million on a constant currency basis. PSC remained flat at $8.0 million, but was up 18% to $9.4 million on a constant currency basis.

• Merchandise sales were flat, both in total and on a same store basis (up 19% in constant currency). Merchandise margin of 31%, 400bps lower than the prior-year quarter

• Segment profit before tax increased 194%, or $2.8 million, to $4.2 million (up 249%, or $3.6 million on a constant currency basis).

• Maintained aged inventory levels at 5% of gross inventory, although slight increase from 3% at the end of the .

CONFERENCE CALL

EZCORP will host a conference call on Friday, February 3, 2017, at 7:30am Central Time to discuss first quarter results. Analysts and institutional investors may participate on the conference call by dialing (877) 201-0168, Conference ID: 62600120, international dialing (647) 788-4901. 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 call.

ABOUT EZCORP

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.

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 or 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.

Contact:

Jeff Christensen

Vice President, Investor Relations

Email: jeff_christensen@ezcorp.com

Phone: (512) 437-3545

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended December 31,

2016

2015

(Unaudited)

(in thousands, except per share amounts)

Revenues:

Merchandise sales

$

111,513

$

108,584

Jewelry scrapping sales

9,798

9,621

Pawn service charges

69,013

66,594

Other revenues

2,300

2,758

Total revenues

192,624

187,557

Merchandise cost of goods sold

71,732

66,259

Jewelry scrapping cost of goods sold

8,344

8,076

Other cost of revenues

583

612

Net revenues

111,965

112,610

Operating expenses:

Operations

77,646

76,018

Administrative

13,927

19,983

Depreciation and amortization

6,373

7,542

(Gain) loss on sale or disposal of assets

(77

)

33

Restructuring

-

1,692

Total operating expenses

97,869

105,268

Operating income

14,096

7,342

Interest expense

5,565

4,127

Interest income

(2,616

)

(9

)

Equity in net income of unconsolidated affiliate

(1,478

)

(2,055

)

Other (income) expense

(423

)

102

Income from continuing operations before income taxes

13,048

5,177

Income tax expense

4,782

1,758

Income from continuing operations, net of tax

8,266

3,419

Loss from discontinued operations, net of tax

(1,228

)

(11,685

)

Net income (loss)

7,038

(8,266

)

Net loss attributable to noncontrolling interest

(127

)

(792

)

Net income (loss) attributable to EZCORP, Inc.

$

7,165

$

(7,474

)

Basic earnings per share attributable to EZCORP, Inc. - continuing operations

$

0.15

$

0.06

Diluted earnings per share attributable to EZCORP, Inc. - continuing operations

$

0.15

$

0.06

Weighted-average basic shares outstanding

54,158

54,895

Weighted-average diluted shares outstanding

54,214

54,909

EZCORP, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

December 31,
2016

September 30,
2016

(Unaudited)

Assets:

Current assets:

Cash and cash equivalents

$

63,707

$

65,737

Pawn loans

162,696

167,329

Pawn service charges receivable, net

30,967

31,062

Inventory, net

143,440

140,224

Notes receivable, net

36,180

41,946

Income taxes receivable

1,518

2,533

Prepaid expenses and other current assets

34,724

33,312

Total current assets

473,232

482,143

Investment in unconsolidated affiliate

39,875

37,128

Property and equipment, net

54,881

58,455

Goodwill

253,585

253,976

Intangible assets, net

31,708

30,681

Non-current notes receivable, net

39,365

41,119

Deferred tax asset, net

34,667

35,303

Other assets, net

37,187

44,439

Total assets

$

964,500

$

983,244

Liabilities and equity:

Current liabilities:

Accounts payable, accrued expenses and other current liabilities

$

68,694

$

84,285

Customer layaway deposits

9,729

10,693

Total current liabilities

78,423

94,978

Long-term debt, net

278,936

283,611

Other long-term liabilities

8,259

10,450

Total liabilities

365,618

389,039

Commitments and contingencies

Stockholders' equity:

Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of December 31, 2016 and September 30, 2016; issued and outstanding: 51,306,608 as of December 31, 2016 and 51,129,144 as of September 30, 2016

513

511

Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171

30

30

Additional paid-in capital

319,825

318,723

Retained earnings

326,973

319,808

Accumulated other comprehensive loss

(47,577

)

(44,089

)

EZCORP, Inc. stockholders' equity

599,764

594,983

Noncontrolling interest

(882

)

(778

)

Total equity

598,882

594,205

Total liabilities and equity

$

964,500

$

983,244

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended December 31,

2016

2015

(Unaudited)

(in thousands)

Operating activities:

Net income (loss)

$

7,038

$

(8,266

)

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

Depreciation and amortization

6,373

8,090

Amortization of debt discount and deferred financing costs

2,826

3,195

Amortization of prepaid commissions

-

4,023

Accretion of notes receivable discount

(1,029

)

-

Consumer loan loss provision

583

9,691

Deferred income taxes

750

(4,744

)

Other adjustments

295

(1,966

)

(Gain) loss on sale or disposal of assets

(77

)

33

Stock compensation

1,808

833

Income from investment in unconsolidated affiliate

(1,478

)

(2,055

)

Changes in operating assets and liabilities:

Service charges and fees receivable

(83

)

6,381

Inventory

(615

)

(2,107

)

Prepaid expenses, other current assets and other assets

(3,856

)

(5,592

)

Accounts payable and other, deferred gains and other long-term liabilities

(21,948

)

(10,776

)

Customer layaway deposits

(881

)

(310

)

Income taxes receivable and payable, current, net of excess tax benefit from stock compensation

5,004

4,045

Payments of restructuring charges

-

(4,943

)

Net cash used in operating activities

(5,290

)

(4,468

)

Investing activities:

Loans made

(156,457

)

(173,162

)

Loans repaid

91,283

106,372

Recovery of pawn loan principal through sale of forfeited collateral

64,430

58,566

Additions to property and equipment

(2,326

)

(1,139

)

Principal collections on notes receivable

7,831

-

Net cash provided by (used in) investing activities

4,761

(9,363

)

Financing activities:

Taxes paid related to net share settlement of equity awards

(706

)

-

Payout of deferred consideration

-

(8,915

)

Proceeds from settlement of forward currency contracts

-

3,557

Change in restricted cash

-

(1,261

)

Proceeds from borrowings, net of issuance costs

-

14,302

Payments on borrowings

-

(29,358

)

Net cash used in financing activities

(706

)

(21,675

)

Effect of exchange rate changes on cash and cash equivalents

(795

)

(837

)

Net decrease in cash and cash equivalents

(2,030

)

(36,343

)

Cash and cash equivalents at beginning of period

65,737

59,124

Cash and cash equivalents at end of period

$

63,707

$

22,781

EZCORP, Inc.

OPERATING SEGMENT RESULTS (UNAUDITED)

Three Months Ended December 31, 2016

U.S. Pawn

Mexico Pawn

Other

International

Total Segments

Corporate Items

Consolidated

(in thousands)

Revenues:

Merchandise sales

$

94,861

$

16,652

$

-

$

111,513

$

-

$

111,513

Jewelry scrapping sales

8,845

953

-

9,798

-

9,798

Pawn service charges

61,045

7,968

-

69,013

-

69,013

Other revenues

51

131

2,118

2,300

-

2,300

Total revenues

164,802

25,704

2,118

192,624

-

192,624

Merchandise cost of goods sold

60,248

11,484

-

71,732

-

71,732

Jewelry scrapping cost of goods sold

7,550

794

-

8,344

-

8,344

Other cost of revenues

-

-

583

583

-

583

Net revenues

97,004

13,426

1,535

111,965

-

111,965

Segment and corporate expenses (income):

Operations

67,350

8,640

1,656

77,646

-

77,646

Administrative

-

-

-

-

13,927

13,927

Depreciation and amortization

2,617

631

50

3,298

3,075

6,373

Gain on sale or disposal of assets

(71

)

(6

)

-

(77

)

-

(77

)

Interest expense

-

2

-

2

5,563

5,565

Interest income

-

(67

)

-

(67

)

(2,549

)

(2,616

)

Equity in net income of unconsolidated affiliate

-

-

(1,478

)

(1,478

)

-

(1,478

)

Other (income) expense

(5

)

11

(1

)

5

(428

)

(423

)

Segment contribution

$

27,113

$

4,215

$

1,308

$

32,636

Income from continuing operations before income taxes

$

32,636

$

(19,588

)

$

13,048

EZCORP, Inc.

OPERATING SEGMENT RESULTS (UNAUDITED)

Three Months Ended December 31, 2015

U.S. Pawn

Mexico Pawn

Other

International

Total Segments

Corporate Items

Consolidated

(in thousands)

Revenues:

Merchandise sales

$

91,994

$

16,586

$

4

$

108,584

$

-

$

108,584

Jewelry scrapping sales

9,600

-

21

9,621

-

9,621

Pawn service charges

58,621

7,973

-

66,594

-

66,594

Other revenues

193

191

2,374

2,758

-

2,758

Total revenues

160,408

24,750

2,399

187,557

-

187,557

Merchandise cost of goods sold

55,461

10,798

-

66,259

-

66,259

Jewelry scrapping cost of goods sold

8,060

-

16

8,076

-

8,076

Other cost of revenues

-

-

612

612

-

612

Net revenues

96,887

13,952

1,771

112,610

-

112,610

Segment and corporate expenses (income):

Operations

63,545

11,193

1,280

76,018

-

76,018

Administrative

-

-

-

-

19,983

19,983

Depreciation and amortization

3,560

801

51

4,412

3,130

7,542

Loss on sale or disposal of assets

7

26

-

33

-

33

Interest expense

86

40

-

126

4,001

4,127

Interest income

(1

)

-

-

(1

)

(8

)

(9

)

Equity in net income of unconsolidated affiliate

-

-

(2,055

)

(2,055

)

-

(2,055

)

Restructuring

891

328

204

1,423

269

1,692

Other expense (income)

-

128

(3

)

125

(23

)

102

Segment contribution

$

28,799

$

1,436

$

2,294

$

32,529

Income from continuing operations before income taxes

$

32,529

$

(27,352

)

$

5,177

EZCORP, Inc.

STORE COUNT ACTIVITY (UNAUDITED)

Three Months Ended December 31, 2016

Company-owned Stores

U.S. Pawn

Mexico Pawn

Other International

Consolidated

As of September 30, 2016

520

239

27

786

New locations opened

-

-

-

-

Locations sold, combined or closed

(3

)

-

-

(3

)

As of December 31, 2016

517

239

27

783

Three Months Ended December 31, 2015

Company-owned Stores

U.S. Pawn

Mexico Pawn

Other International

Consolidated

Franchises

As of September 30, 2015

522

237

27

786

1

New locations opened

-

1

-

1

-

Locations sold, combined or closed

(6

)

(1

)

-

(7

)

-

As of December 31, 2015

516

237

27

780

1

Non-GAAP Financial Information (Unaudited)

In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States of America ('GAAP'), we provide certain other non-GAAP financial information on a constant currency basis ('constant currency'). We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos and believe that presentation of constant currency results are meaningful and useful in understanding the activities and business metrics of our Mexico Pawn 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 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 Mexican pesos 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 exchange rate as of December 31, 2016 and 2015 was 20.7 to 1 and 17.3 to 1, respectively. The approximate average exchange rate for the three months ended December 31, 2016 and 2015 was 19.8 to 1 and 16.8 to 1, respectively, however our statement of operations constant currency results reflect the impact of monthly effects of exchange rates and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss and the related foreign currency derivative gain or loss impact.

The following information provides reconciliations of certain non-GAAP financial measures presented in this press release to the most directly comparable financial measures calculated and presented in accordance with GAAP as of and for the three months ended December 31, 2016.

Miscellaneous Non-GAAP Financial Measures

U.S. Dollar Amount

Percentage Change YOY

(in millions)

Consolidated revenue

$

192.6

3

%

Currency exchange rate fluctuations

4.8

Constant currency consolidated revenue

$

197.4

5

%

Consolidated income from continuing operations before income taxes

$

13.0

152

%

Currency exchange rate fluctuations

0.9

Constant currency income from continuing operations before income taxes

$

13.9

167

%

Mexico Pawn same store loans outstanding

$

13.7

(4

)%

Currency exchange rate fluctuations

2.6

Constant currency Mexico Pawn same store loans outstanding

$

16.3

14

%

Consolidated income from continuing operations, net of tax

$

8.3

142

%

Currency exchange rate fluctuations

0.8

Constant currency income from continuing operations, net of tax

$

9.1

165

%

Consolidated operating expenses

$

97.9

(7

)%

Currency exchange rate fluctuations

1.7

Constant currency consolidated operating expenses

$

99.6

(5

)%

Mexico Pawn loans outstanding

$

14.1

(3

)%

Currency exchange rate fluctuations

2.7

Constant currency Mexico Pawn loans outstanding

$

16.8

16

%

Mexico Pawn service charges

$

8.0

-

%

Currency exchange rate fluctuations

1.4

Constant currency Mexico Pawn service charges

$

9.4

18

%

Mexico Pawn merchandise revenue

$

16.7

-

%

Currency exchange rate fluctuations

3.1

Constant currency Mexico Pawn merchandise revenue

$

19.8

19

%

Mexico Pawn same store merchandise revenue

$

16.1

-

%

Currency exchange rate fluctuations

3.0

Constant currency Mexico Pawn same store merchandise revenue

$

19.1

19

%

Mexico Pawn segment profit before tax

$

4.2

194

%

Currency exchange rate fluctuations

0.8

Constant currency Mexico Pawn segment profit before tax

$

5.0

249

%

EZCORP Inc. published this content on 02 February 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 03 February 2017 01:02:03 UTC.

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