Fourth Quarter and Full-Year Fiscal 2016 Conference Call ...€¦ · Fourth Quarter and Full-Year...

Fourth Quarter and Full-Year Fiscal 2016 Conference Call

December 8, 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.

Key Messages Continued Growth in Revenue and Profitability

Capturing market share and leading the market in PLO growth in U.S. and Mexico

1 Same Store PLO growth:

• U.S. up 4% YOY and 4 consecutive quarters

• Mexico up 20% YOY and 9 consecutive

double-digit quarters

Market leading U.S. PLO of $288k per store

Proven track record of pawn execution and strong operating leverage

2 Highlights (YOY):

• Total revenue up $34m to $748m

• Net revenue up $37m to $438m

• Profit before tax up $20m to $23m 3 Strong liquidity position to support growth

$66m cash balance at year-end plus $50m

undrawn credit facility; anticipate receiving

in FY17 $45.7m of the $89.8m total notes

receivable from Grupo Finmart sale 4

Intense focus on market leadership in

meeting our customers’ desire for cash whenever they want it

Further investments in field leadership

Strong customer metrics:

• Positive Mystery Shop Program

measurements and improvements since

launch in Q1’FY16

• Net Promoter Scores improved in FY16

3 • Adjusted for restructuring and restatement charges, other discrete items and constant currency. Mexico Pawn excludes closed buy/sell businesses.

See GAAP Financials and GAAP to non-GAAP reconciliation in appendix. • Mexico PLO balance both increased and decreased over the same period on a GAAP basis.

4

Leading the Market - Fiscal Year 2016

* Adjusted for restructuring and restatement charges, other discrete items and constant currency. Mexico Pawn excludes closed buy/sell businesses. See GAAP Financials and GAAP to non-GAAP reconciliation in appendix.

Comparisons in this slide are FY16 relative to FY15

Intense focus on customer leadership delivers market leading same store pawn fundamentals,

including PLO – the most influential driver of revenue and profitability *

INVENTORY

U.S.: Up 12%

Mexico: Up 28%

PAWN SERVICE CHARGES

U.S.: Up 4%

Mexico: Up 22%

SALES GROSS PROFIT

U.S.: Up 6%

Mexico: Up 35%

PAWN LOANS OUTSTANDING

U.S.: Up 4%

Mexico: Up 20%

Operating Leverage*

Total Revenue $748m $34m 5%

Net Revenue $438m $37m 9%

Profit Before Tax $23m $20m 663%

Same Store

1

Financial

restatement

U.S. Financial Services

business closed

Renewed Executive

Leadership Team

including CEO, CFO,

President of Pawn

Track Record of Consistent Execution

5

25 Pawn Stores

acquired in FY15

Closed 25 underperforming

pawn stores in U.S.

and Mexico in FY15

Sold

Grupo Finmart

Investment in

field management 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

technology structure

and POS

Further Investment in product

and customer data analytics

Mexico Buy/Sell

business closed

JULY

2015

New $100 million

secured credit facility

to support

business growth

Tracking toward annual

corporate expense of

~$50m in FY18

OCTOBER

2016

Store Refurbishment

Program

Investing in

process analysis and

improvements

Improving Pawn Profitability

EZCORP Continuing Operations Adjusted Results*

Other International Segment reflects equity

accounting impact of CCV

6 * Adjusted for restructuring and restatement charges, other discrete items and constant currency. Mexico Pawn excludes closed buy/sell businesses. GAAP financials are included in the “GAAP to Non-GAAP Reconciliation.”

PLO growth of 6.2% and merchandise gross

profit up 17% in FY16 drove net revenue up 9%

to $438.2m and pawn segments pre-tax profit

up 18% to $116.3m

Disciplined pawn loan values drove PSC up 8%,

effective merchandise pricing and aged

inventory management drove improvement in

merchandise margin 400bps to 37% in FY16

Q4 underlying corporate expenses reduced by

~$2m that will annualize into FY17. FY16 annual

underlying expenses down $8m offset by STI &

LTI variable compensation expense which

increased ~$8m

Other Expenses reflect equity accounting

impact of CCV

Purchases +

Forfeitures

Strong Growth in Earning Assets Drive Profitable Growth

7

+ - = =

INCOME STATEMENT

Pawn Service Charges Total

Up 6% to $230m PLO Monthly Yield

14%

Sales Gross Profit Total Up 9%

to $139m

Merch margin to 38% from 35%

ASSETS SAME STORE UP 4%

SAME STORE UP

6%

Inventory Total

Up 13% to $121m

NET REVENUE Up 7% to $369m

• Continued growth in U.S. Pawn, Same Store PLO up 4%

• Average PLO per store improved 5% to industry-leading $288k

• PLO monthly yield at 14%, consistent to last year

• Expense increase primarily attributable to investments in

acquired stores and targeted store incentives

TOTAL EXPENSES Up 6% to $268m

PROFIT BEFORE TAX

Up 11% to $101m

• Pawn service charges up 6%

• Merchandise margin up 300bps to 38% from 35%

• Inventory yield of 121% compared to 120% last year

• Return on Earnings Assets of 144%, consistent with last year

U.S. Pawn FY16

Pawn Loans Outstanding

Total Up 4%

to $150m

SAME STORE UP

4%

Quality Store

Manager

SAME STORE UP 12%

Adjusted for restructuring charges and other discrete items. GAAP financials are included in the “GAAP to Non-GAAP Reconciliation.” Sales Gross Profit includes Merchandise and Scrap Gross Profit.

Strong Compounded Growth in Earning Assets

Drive Profitable Growth

8

+ - = =

INCOME STATEMENT


Up 22% to $38m

PLO Monthly Yield 16%

Sales Gross Profit

Total Up 40% to $23m

Merch margin to

32% from 27%

ASSETS

SAME STORE UP 22%

SAME STORE UP

35%

Purchases +

Forfeitures



Inventory Total

Up 32% to $22m

SAME STORE UP 20%



PROFIT BEFORE TAX

Up 118% to $15m

• Continued growth in Mexico Pawn, Same Store PLO up 20%,

compounded on 20% growth last year

• PLO monthly yield consistent at 16%

• Expense increase primarily attributable to investments in new

stores, targeted store incentives and marketing



• Inventory yield increased to 112% from 94%

• Return on earning assets grew to 152% from 142%

Mexico Pawn FY16

Adjusted for restructuring charges, other discrete items, constant currency and excludes closed Mexico buy/sell business. GAAP financials are included in the “GAAP to Non-GAAP Reconciliation.” Sales Gross Profit includes Merchandise and Scrap Gross Profit.

Quality Store

Manager

SAME STORE UP 28%

$89.8 million Notes Receivable From Grupo Finmart Sale

9 * Notes receivable that are secured by loan portfolio. Amounts above are in U.S. dollars and based on exchange rates in effect as of September 30, 2016

$89.8m USD of Notes Receivable plus interest created

as a result of the Grupo Finmart sale

$6.4m USD cash received to date for repayment of

notes, on schedule

In total $45.7m USD inflow expected in FY17

Minimal exchange exposure. Notes Receivable

breakdown by denomination:

• $76m in USD due in U.S. dollars

• MXN $162m (~$8m in USD) due in pesos to

Mexico subsidiary – no direct FX exposure

• MXN $106m (~$6m in USD) due in pesos in

FY17, hedged to 90%

(millions)

$6.4 $6.4

$39.3

$26.0

$18.1

$83.4

$0

$20

$40

$60

$80

$100

FY17 FY18 FY19 Total

U.S

. $

MIL

Notes Receivable

Cash Received

As of December 8, 2016

$45.7

$89.8

% of Notes Secured* 60% 7% 0% 33%

Cash Interest Income $4.4 $1.9 $0.8 $7.2

10

Focus on Pawn Fundamentals To Continue Growth

Targeted incentives, training, coaching and mentoring of field team

is evolving and improves engagement

with customers

Disciplined store acquisitions and

de novo store openings, efficient capital

utilization supports profitable growth

Intense focus on market leadership in meeting our

customers’ desire for access to cash whenever they want it drives continued growth

Product & customer data analytics and feedback

will improve understanding of

behaviors to drive higher

revenue and profitability

Process analysis and

improvements will deliver greater

consistency and improved productivity

Ongoing discipline in pawn loan values

will improve

pawn results

Technology upgrades will deliver

improved Team Member and customer

experience, and increased productivity

Store refurbishment program will improve customer

and Team Member experience

Merchandise pricing cadence and aged

inventory levels

improve sales margins

11

• Initiatives to improve customer experience and deliver higher revenue & profitability:

– Targeted incentives, coaching and mentoring field team members

– Customer data analytics and feedback

– Ongoing discipline in pawn loan values, merchandise pricing cadence and

aged inventory levels

– Technology and process improvements

Track Record of Execution

Disciplined Growth &

Strong Performance

Attractive Industry

Dynamics

• Strong operating leverage and efficiently managing pawn businesses with strong

growth in Net Revenue and Profit Before Tax consistently throughout FY16

• Strong liquidity position with $66 million cash balance at year-end plus $50m undrawn

credit facility; anticipate receiving in FY17 $45.7m of the $89.8m total notes

receivable from Grupo Finmart sale

• Disciplined store acquisitions and de novo store openings

EZCORP Strengths

Intense Focus on

Customer Leadership

• Consistently executing on 3-Year Strategic Plan, announced in July 2015:

– Closure of U.S. Financial Services business, ahead of time and budget

– Completed sale of Grupo Finmart business in September 2016

• Continued growth in Same Store PLO in Q4, up 4% in U.S. and up 20% in Mexico in FY16

• 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

12

Additional Information

Company Overview

* Continuing operations excluding closed Mexico buy/sell business

13

KEY STATISTICS

IPO Date 8/27/1991

Headquarters Austin, TX

52 Week Market Capitalization Range (as of 12/6/16)

$133m to $634m

52 Week Price Range (as of 12/6/16) $2.44 to $11.90

Adjusted Total Revenue in FY16* $747.9m

Adjusted Profit Before Tax in FY16* $23.1m

Institutional Holdings 88%

Employees ~5,600

Index inclusion: Russell 2000, S&P SmallCap 600, S&P 1000, NASDAQ Composite

PAWN STORE LOCATIONS

United States 520

Mexico 239

FINANCIAL SERVICES LOCATIONS*

Cash Max in Canada 27

U.S. Pawn

84%

Other

1%

Mexico Pawn 15%

EZCORP Revenue by Type

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.

Purchases +

Forfeitures


14

+ - = =

INCOME STATEMENT


Up 5% to $60m PLO Monthly

Yield 13%

Sales Gross Profit


Merch margin to 36% from

35%

ASSETS SAME STORE UP 4%

SAME STORE UP

10% Inventory Total

Up 13% to $121m


• Continued growth in U.S. pawn, Same Store PLO up 4%

• Average PLO per store improved 5% to industry-leading $288k

• PLO monthly yield at 13%, consistent to last year

• Expense increase primarily attributable to investments in

acquired stores and targeted store incentives


PROFIT BEFORE TAX

Up 4% to $21m


• Sales gross profit up 11%

• Inventory yield of 104% compared to 110% last year

• Return on Earning Assets of 137% compared to 143% last year

U.S. Pawn Q4FY16


Total Up 4%

to $150m

SAME STORE UP

4%

Quality Store

Manager

SAME STORE UP 12%

Adjusted for restructuring charges and other discrete items. GAAP financials are included in the “GAAP to Non-GAAP Reconciliation.” Sales Gross Profit includes Merchandise and Scrap Gross Profit.

Serving and Satisfying Customers’ Desire for Access to Cash

Is Fueling Performance

15

Encouraging results in

early stages of three-

year strategic plan

Strategic Plan

Announcement

• Continued focus on customer experience led to Same Store PLO up 4%; Same Store PSC up 4% in Q4

• Merchandise gross profit increase of 9% in Q4 and 14% for the year reflects ongoing discipline in pawn loan valuation, retail price reduction cadence, and lower aged inventory levels

• Continued improvement in aged inventory reduced to 8%

U.S. Pawn

Adjusted for discrete items


16

+ - = =

INCOME STATEMENT


Up 21% to $10.0m

PLO Monthly Yield 16%

Sales Gross Profit

Total Up 50% to $5m

Merch margin to 29% from 24%

ASSETS

SAME STORE UP 19%

SAME STORE UP

34%

Purchases +

Forfeitures



Inventory Total

Up 32% to $22m

SAME STORE UP 20%



PROFIT BEFORE TAX

Up 82% to $4m

• Continued growth in Mexico Pawn, Same Store PLO up 20%

• PLO monthly yield consistent at 16%

• Expense increase primarily attributable to new stores,

targeted store incentives and advertising



• Inventory yield increased to 99% from 85%

• Return on earning assets grew to 144% from 139%

Mexico Pawn Q4FY16

Adjusted for restructuring charges, other discrete items, constant currency and excludes closed Mexico buy/sell business. GAAP financials are included in the “GAAP to Non-GAAP Reconciliation.” Sales Gross Profit includes Merchandise and Scrap Gross Profit.

Quality Store

Manager

SAME STORE UP 28%

Strong Compounded Growth

$ 1

• Adjusted for discrete items and constant currency and excludes Mexico buy/sell business. GAAP financials are included in the “GAAP to Non-GAAP Reconciliation.”

• Mexico PLO balance both increased and decreased over the same period on a GAAP basis.

17

• Continued focus on customer experience has led to nine consecutive quarters of double-digit Same Store PLO growth

• Strong PLO growth of 23% resulted in PSC growth of 21% in Q4

• Continued strong merchandise gross profit up 48% and margin

expansion up 500bps to 29% in Q4 driven by ongoing discipline in pawn loan valuation, retail price reduction cadence, and low aged inventory levels

Mexico Pawn

21% CAGR

Pawn 101: Understanding Pawn Growth Drivers

18

+ - = =

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 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


#2

Sales Gross Profit

#5

Pawn Loans Outstanding (PLO) is the most influential driver to revenue and profitability. EZCORP had market leading Same Store PLO growth again in Q4FY16 driven by intense focus on market leadership in meeting our customers’ desire for access to cash whenever they want it.

Inventory

#4

Quality Store

Manager

#1

19

Definition of Terms:

PLO Yield =

pawn service charges days in period average PLO

X 365

Inventory Yield =

Sales Gross Profit days in period

average net inventory

X 365

Return on Earning Assets

Sales Gross Profit + 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

=

20

GAAP to Non-GAAP Reconciliation

Pawn Fundamentals Continue to Improve

EZCORP GAAP Results

21

FY16 total revenue growth driven by $15m

improvement in PSC Revenue, offset by lower

Scrap Sales of $8m

Other International performance primarily due

to investment impairment and equity

investment loss from CCV International

U.S. and Mexico Pawn Profit of $108.6m in

FY16, up 38% from FY15

FY16 Corporate expenses include $4.2m of

restatement related expenses

Q4FY15 included $4.1m of restatement related

expenses and $4.8m of strategic plan write-offs

22

GAAP to Non-GAAP Reconciliation Q4 – Continuing Operations*

Footnote * - Includes immaterial presentation reclassifications and rounding

Footnote (A) Amount includes $0.2m for discrete adjustments in Corporate

Footnote (B) Amount includes $11.0m impairment on investment in Other International and $0.2m loss on asset impairments in Corporate

Footnote (C) Amount includes $1.4m of store closure expense in U.S. Pawn and $6.7m loss on asset impairments ($5.3m in U.S. Pawn & $1.4m in Mexico Pawn)

Footnote (D) Amount includes $4.1m of restatement expenses, $2.8m of asset impairments and $2.1m of discrete adjustments Corporate

Footnote (E) Amount includes $26.8m impairment on investment in Other International, $16.3m of restructuring expense ($4.0m in U.S. Pawn, $0.8m Mexico Pawn, $2.6m in Other International

and $8.9m in Corporate), $1.9m of asset disposal ($0.9m in U.S. Pawn and $1.0m in Corporate) and $0.3m Loss on FX in Corporate

*For consolidated balance sheet items, the end of period rate as of September 30, 2016 of 19.4 to 1 was used, compared to the end of period rate as of September 30, 2015 of 17.1 to 1. For

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

twelve-months ended September 30, 2016 were 18.7 to 1 and 17.9 to 1, respectively, as compared to the prior year three and twelve-months ended September 30, 2015 rates of 16.3 to 1

and 15.1 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss.

(C)

(A)

(B) (E)

(D)

23

GAAP to Non-GAAP Reconciliation Full Year – Continuing Operations*

Footnote * - Includes immaterial presentation reclassification and rounding

Footnote (A) Amount includes $4.2m of restatement expense and $(0.3)m of discrete adjustments in Corporate

Footnote (B) Amount includes $11.0m impairment on investment in Other International, $1.4m of restructuring expenses ($1.0m of U.S. Pawn, $0.2m of Corporate, and $0.2m of Other

International) and $0.1m of discrete adjustments in Corporate

Footnote (C) Amount includes $1.4m of store closure expense in U.S. Pawn and $6.7m loss on asset impairments ($5.3m in U.S. Pawn & $1.4m in Mexico Pawn)

Footnote (D) Amount includes $4.1m of restatement expenses, $2.6m of asset impairments and $2.1m of discrete adjustments in Corporate

Footnote (E) Amount includes $26.8m impairment on investment in Other International, $17.1m of restructuring expense ($4.0m in U.S. Pawn, $0.8m Mexico Pawn, $2.6m in Other International

and $9.7m in Corporate), $2.7m of asset disposal ($1.0m in U.S. Pawn, $0.3m in Mexico Pawn and $1.4m in Corporate), and $0.2m Loss on FX in Corporate





(A)

(B)

(C)

(D)

(E)

24

GAAP to Non-GAAP Reconciliation Q4 – U.S. Pawn*


Footnote (A) Amount includes $1.4m of store closure expense and $5.3m loss on asset impairments

Footnote (B) Amount includes $4.0 of restructuring expense and $0.9m of asset disposal

(A)

(B)

25

GAAP to Non-GAAP Reconciliation Full Year – U.S. Pawn*

Footnote * - Includes immaterial presentation reclassification and rounding

Footnote (A) $1.0 million of restructuring expense

Footnote (B) Amount includes $1.4m of store closure expense and $5.3m loss on asset impairments

Footnote (C) Amount includes $4.0m of restructuring expense, $1.0m of asset disposal

(A)

(B)

(C)

26

GAAP to Non-GAAP Reconciliation Q4 – Mexico Pawn*


Footnote (A) $1.4m loss on asset impairments

Footnote (B) Amount includes $0.8m of restructuring expense





(A)

(B)

27

GAAP to Non-GAAP Reconciliation Full Year – Mexico Pawn*

(A)


Footnote (A) $1.4m loss on asset impairments and $0.1m discrete adjustment

Footnote (B) Amount includes $0.8m of restructuring expense, $0.3 of asset disposal and $(0.1)m discrete adjustment

*For consolidated balance sheet items, the end of period rate as of September 30, 2016 of 19.4 to 1 was used, compared to the end of period rate as of September 30, 2015 of

17.1 to 1. For 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 twelve-months ended September 30, 2016 were 18.7 to 1 and 17.9 to 1, respectively, as compared to the prior year three and twelve-months ended

September 30, 2015 rates of 16.3 to 1 and 15.1 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss.

(B)

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