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    EZPW   US3023011063

EZCORP, INC.

(EZPW)
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EZCORP : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/05/2021 | 05:21pm EDT
Management's Discussion and Analysis of Financial Condition and Results of
Operations is intended to inform the reader about matters affecting the
financial condition and results of operations of EZCORP, Inc. and its
subsidiaries (collectively, "we," "us", "our", "EZCORP" or the "Company"). The
following discussion should be read together with our condensed consolidated
financial statements and related notes included elsewhere within this report.
This discussion contains forward-looking statements. Our actual results could
differ materially from those anticipated in these forward-looking statements.
See   "Part I, Item 1A - Risk Factors" of our Annual Report on Form 10-K for the
year ended September 30, 2020  , as supplemented by the information set forth in
"Part I, Item 3 - Quantitative and Qualitative Disclosures about Market Risk"
and "Part II, Item 1A - Risk Factors" of this Report for a discussion of certain
risks, uncertainties and assumptions associated with these statements.
Business Overview
EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a
leading provider of pawn loans in the United States and Latin America. Pawn
loans are non-recourse loans collateralized by personal property. We also sell
merchandise, primarily collateral forfeited from unpaid loans or goods purchased
directly from customers.
We exist to serve our customers' short-term cash needs, helping them to live and
enjoy their lives. We are focused on three strategic pillars:
           Strengthen the Core           Renewed focus on the unique and 

essential elements of our pawn

                                         business
           Cost Reduction and            Significant and sustained 

adjustment of cost base through

           Simplification                ongoing simplification
           Innovate and Grow             Broaden customer engagement to service more customers more
                                         frequently in more locations


Pawn Activities
At our pawn stores, we offer pawn loans, which are typically small, nonrecourse
loans collateralized by tangible personal property. We earn pawn service charges
on our pawn loans, which varies by state and loan size. Collateral for our pawn
loans consists of tangible personal property, generally jewelry, consumer
electronics, tools, sporting goods and musical instruments. Security for our
pawn loans is provided via the estimated resale value of the collateralized
personal property and the perceived probability of the loans' redemption.
Our ability to offer quality pre-owned goods at prices significantly lower than
original retail prices attracts value-conscious customers. The gross profit on
sales of inventory depends primarily on our assessment of the loan or purchase
value at the time the property is either accepted as loan collateral or
purchased and our ability to sell that merchandise in a timely manner. As a
significant portion of our inventory and sales involve gold and jewelry, our
results can be influenced by the market price of gold and diamonds.
Growth and Expansion
Our strategy is to expand the number of locations we operate through opening new
("de novo") locations and through acquisitions in both Latin America and the
United States and potential new markets. Our ability to add new stores is
dependent on several variables, such as projected achievement of internal
investment hurdles, the availability of acceptable sites or acquisition
candidates, the alignment of acquirer/seller price expectations, the regulatory
environment, local zoning ordinances, access to capital and the availability of
qualified personnel. We see opportunity for further expansion through
acquisitions and de novo openings in Latin America and acquisitions in the
United States.
Seasonality and Quarterly Results
In the United States, pawn service charges are historically highest in our
fourth fiscal quarter (July through September) due to a higher average loan
balance during the summer lending season and lowest in our third fiscal quarter
(April through June) following the tax refund season and merchandise sales are
highest in our first and second fiscal quarters (October through March) due to
the holiday season, jewelry sales surrounding Valentine's Day and the
availability of tax refunds. In Latin America, most of our customers receive
additional compensation from their employers in December, and many receive
additional compensation in June or July, applying downward pressure on loan
balances and fueling some merchandise sales in those periods. As a net effect of
these and other factors and excluding discrete charges, our consolidated profit
before tax is generally highest in our first fiscal quarter (October through
December) and lowest in our third
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fiscal quarter (April through June). These historical trends have been impacted
by COVID-19. However, we expect these historical trends to return in the future.
Financial Highlights
We remain focused on optimizing our balance of pawn loans outstanding ("PLO")
and the resulting higher pawn service charges ("PSC"). The following chart
presents sources of net revenues, including PSC, merchandise sales gross profit
("Merchandise sales GP") and jewelry scrapping gross profit ("Jewelry Scrapping
GP") for the three and six months ended March 31, 2021 and 2020:
                    [[Image Removed: ezpw-20210331_g2.jpg]]

The following chart presents sources of net revenues by geographic disbursement for the three and six months ended March 31, 2021 and 2020:

                    [[Image Removed: ezpw-20210331_g3.jpg]]

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Business Developments
COVID-19
The COVID-19 pandemic continues to affect the U.S. and global economies, and as
disclosed in our 2020 Annual Report on Form 10-K, the pandemic also affected our
business in a variety of ways beginning in the second quarter of fiscal 2020 and
continuing into fiscal 2021.
Our business was negatively impacted by COVID-19 during the current quarter
largely due to increased loan redemptions as compared to the prior-year quarter,
resulting in decreased loan balances in both the U.S. and Latin America.
Additionally, the impact of sustained lower pawn loan portfolios has led to
reduced inventory available for sale. Retail sales margins increased
significantly during the current quarter in both the U.S. and Latin America
compared to the prior-year quarter as a result of continued retail demand for
value priced pre-owned merchandise and lower levels of aged inventory, all of
which limited the need for normal discounting. In Latin America, we are seeing
continued impact as the result of constrained traffic, limited operating hours
and increased remittances from the U.S. As a result, our net revenues for the
three months ended March 31, 2021 were down $13.6 million as compared to the
prior-year quarter.
The full extent and duration of the COVID-19 impact on the global economy
generally, and on our business specifically, is currently unknown. We expect the
impact of the pandemic, and the recovery therefrom, will continue to adversely
affect net revenues and earnings in fiscal 2021. A prolonged pandemic and
recovery may have an adverse effect on our results of operations, financial
position and liquidity in future periods.
Reinvestment of Dividends
On February 21, 2021, Cash Converters International announced that its board of
directors declared an interim dividend of AUD $0.01 per share, which was payable
on April 14, 2021 to ordinary shareholders of record as of the close of business
on March 25, 2021. We elected to receive our dividend entitlement in the form of
additional ordinary shares pursuant to Cash Converters International's
pre-existing Dividend Reinvestment Plan. Under that plan, on April 14, 2021, we
received an additional 9,519,277 shares, bringing our total ownership to
223,702,991 shares, representing 35.65% of Cash Converters International's total
outstanding ordinary shares.
Results of Operations
Non-GAAP Constant Currency Financial Information
To supplement our condensed consolidated financial statements, which are
prepared and presented in accordance with GAAP, we provide certain other
non-GAAP financial information on a constant currency basis ("constant
currency"). We use constant currency results to evaluate our Latin America Pawn
operations, which are denominated primarily in Mexican pesos, Guatemalan
quetzals and other Latin American currencies. We believe presentation of
constant currency results is meaningful and useful in understanding the
activities and business metrics of our Latin America Pawn operations and reflect
an additional way of viewing aspects of our business that, when viewed with GAAP
results, provide a better understanding and evaluation 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 rather than 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. Our statement of operations constant currency results reflect
the monthly exchange rate fluctuations and are not directly calculable from the
rates below. Constant currency results, where presented, also exclude the
foreign currency gain or loss. 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 six months ended March 31, 2021 and March 31, 2020 were as
follows:
                                                     Three Months Ended              Six Months Ended
                            March 31,                    March 31,                      March 31,
                       2021           2020        2021               2020         2021              2020

Mexican peso          20.5           23.8        20.3               20.0         20.4               19.6
Guatemalan quetzal     7.6            7.6         7.6                7.5          7.6                7.5
Honduran lempira      23.7           24.4        23.8               24.3         23.9               24.3
Peruvian sol           3.7            3.4         3.6                3.4          3.6                3.3



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Operating Results
Segments
We manage our business and report our financial results in three reportable
operating segments;
•U.S. Pawn - Represents all pawn activities in the United States;
•Latin America Pawn - Represents all pawn activities in Mexico and other parts
of Latin America; and
•Other International - Represents our equity interest in the net income of Cash
Converters International and Rich Data Corporation and our financial services
stores in Canada, operating under the CASHMAX brand. In the fourth quarter of
fiscal 2020, we closed our stores in Canada, and closing activities related to
CASHMAX in fiscal year 2021 are not material.
See Note 12 (Segment Information) for information regarding changes in
reportable segments. Our historical segment results have been recast to conform
to current presentation.
Store Data by Segment
                                     Three Months Ended March 31, 2021
                           U.S. Pawn               Latin America Pawn                  Consolidated

As of December 31, 2020      505                           502                           1,007
New locations opened           -                             4                               4

As of March 31, 2021         505                           506                           1,011


                                                                                   Three Months Ended March 31, 2020
                                                U.S. Pawn                Latin America Pawn              Other International               Consolidated

As of December 31, 2019                              512                          484                               22                         1,018
New locations opened                                   -                            9                                -                             9

As of March 31, 2020                                 512                          493                               22                         1,027


                                       Six Months Ended March 31, 2021
                            U.S. Pawn               Latin America Pawn                  Consolidated

As of September 30, 2020      505                           500                           1,005
New locations opened            -                             6                               6

As of March 31, 2021          505                           506                           1,011


                                                                                   Six Months Ended March 31, 2020
                                                U.S. Pawn                Latin America Pawn              Other International              Consolidated

As of September 30, 2019                             512                          480                               22                        1,014
New locations opened                                   -                           13                                -                           13

As of March 31, 2020                                 512                          493                               22                        1,027



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Three Months Ended March 31, 2021 vs. Three Months Ended March 31, 2020
These tables, as well as the discussion that follows, should be read in
conjunction with the accompanying condensed consolidated financial statements
and related notes.
U.S. Pawn
The following table presents selected summary financial data for our U.S. Pawn
segment:
                                                               Three Months Ended March 31,
(in thousands)                                                    2021                  2020               Change

Net revenues:
Pawn service charges                                       $       49,577           $  61,700               (20)%

Merchandise sales                                                  93,827             102,447               (8)%
Merchandise sales gross profit                                     42,015              37,161                13%
Gross margin on merchandise sales                                      45   %              36  %           900bps

Jewelry scrapping sales                                             3,581               9,659               (63)%
Jewelry scrapping sales gross profit                                  432               1,859               (77)%
Gross margin on jewelry scrapping sales                                12   %              19  %          (700)bps

Other revenues                                                         29                  31               (6)%
Net revenues                                                       92,053             100,751               (9)%

Segment operating expenses:
Store expenses                                                     63,657              67,619               (6)%
Impairment of goodwill, intangibles and other assets                    -              10,000                 *
Depreciation and amortization                                       2,636               2,711               (3)%

Segment contribution                                       $       25,760           $  20,421                26%

Other data:
Net earning assets (a)                                     $      165,151           $ 263,112               (37)%
Inventory turnover                                                    2.9                 2.0                45%

Average monthly ending pawn loan balance per store (b) $ 214

         $     271               (21)%
Monthly average yield on pawn loans outstanding                        15   %              14  %           100bps
Pawn loan redemption rate                                              87   %              86  %           100bps

* Represents a percentage computation that is not mathematically meaningful. (a) Balance includes pawn loans and inventory. (b) Balance is calculated based upon the average of the monthly ending balances during the

        applicable period.



Pawn service charges decreased by 20% due to a decrease in pawn loans
outstanding resulting from the effects of the COVID-19 pandemic. Same stores
pawn service charges decreased by 19%.
Merchandise sales decreased 8% on both a total and same store basis driven by
lower inventory levels. Merchandise sales gross profit increased 13% to $42.0
million driven by a 900 bps improvement in merchandise sales gross profit
margin, primarily due to reduced aged inventory levels and improved inventory
turnover.
Store expenses decreased by 6% driven by a reduction in labor expense.
Segment contribution increased $5.3 million or 26% due to a $4.0 million
decrease in store expenses and a $10.0 million impairment charge taken in the
prior year quarter with no similar charge in the current year quarter, partially
offset by a $8.7 million decrease in net revenues driven by the decrease in pawn
service charges described above.
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Latin America Pawn
The following table presents selected summary financial data for the Latin
America Pawn segment, including constant currency results, after translation to
U.S. dollars from its functional currencies noted above under "Results of
Operations - Non-GAAP Financial Information."
                                                                            

Three Months Ended March 31,

                                                                                                              2021 (Constant        Change (Constant
(in thousands)                              2021 (GAAP)          2020 (GAAP)           Change (GAAP)             Currency)              Currency)

Net revenues:
Pawn service charges                       $    13,859          $   18,522                 (25)%              $   14,096                  (24)%

Merchandise sales                               21,398              27,383                 (22)%                  21,804                  (20)%
Merchandise sales gross profit                   7,420               6,893                  8%                     7,567                   10%
Gross margin on merchandise sales                   35  %               25  %            1,000bps                     35    %           1,000bps

Jewelry scrapping sales                          2,494               2,219                  12%                    2,472                   11%
Jewelry scrapping sales gross profit               242                 402                 (40)%                     248                  (38)%
Gross margin on jewelry scrapping sales             10  %               18  %            (800)bps                     10    %           (800)bps

Other revenues, net                                  -                 (12)               (100)%                       -                 (100)%
Net revenues                                    21,521              25,805                 (17)%                  21,911                  (15)%

Segment operating expenses:
Store Expenses                                  17,492              18,469                 (5)%                   17,834                  (3)%
Impairment of goodwill, intangible and
other assets                                         -              35,936                (100)%                       -                 (100)%
Depreciation and amortization                    1,793               1,940                 (8)%                    1,830                  (6)%
Segment operating contribution                   2,236             (30,540)                107%                    2,247                  107%

Other segment income (a)                          (385)               (399)                (4)%                     (425)                  7%
Segment contribution                       $     2,621          $  (30,141)                109%               $    2,672                  109%

Other data:
Net earning assets (b)                     $    46,331          $   70,318                 (34)%              $   41,845                  (40)%
Inventory turnover                                 4.0                 2.5                  60%                      4.0                   60%
Average monthly ending pawn loan balance
per store (c)                              $        56          $       83                 (33)%              $       56                  (33)%
Monthly average yield on pawn loans
outstanding                                         17  %               15  %             200bps                      17    %            200bps
Pawn loan redemption rate (d)                       82  %               78  %             400bps                      82    %            400bps


(a) Fiscal 2021 constant currency amount excludes a nominal net GAAP basis foreign

currency transaction adjustment resulting from movement in exchange rates. The net

foreign currency transaction adjustment for fiscal 2020 was nominal and are included

      in the above results.
(b)   Balance includes pawn loans and inventory.
(c)   Balance is calculated based upon the average of the monthly ending balances during
      the applicable period.
(d)   Rate is solely inclusive of results from Mexico Pawn.


In the current quarter, our Latin America pawn segment opened four de novo
stores.
Pawn service charges decreased 25% (24% on a constant currency basis). Same
stores pawn service charges also decreased by 25% (24% on a constant currency
basis). The average ending monthly pawn loan balance outstanding during the
current quarter was down 33%. We have experienced a substantial decline in new
loans activity and associated loan balances as the result of the impact of
constrained traffic, limited operating hours and increased remittances from the
U.S.
Merchandise sales decreased 22% (20% on a constant currency basis) and 22% on a
same store basis (21% on a constant currency basis) driven by lower inventory
levels. This decrease in merchandise sales was offset by an increase in
merchandise sales gross profit of 8% to $7.4 million (10% to $7.6 million on a
constant currency basis) driven by a 1,000 basis points improvement in
merchandise sales gross profit margin primarily due to reduced aged inventory
levels and improved inventory turnover.
Store expenses decreased by 5% (3% on a constant currency basis) driven by a
reduction in labor expense.
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Segment contribution increased $32.8 million primarily due to a $35.9 million
impairment charge of goodwill, intangible and other assets taken in the prior
year quarter with no similar charge in the current quarter.
Other International
The following table presents selected financial data for our Other International
segment after translation to U.S. dollars from its functional currency of
primarily Australian and Canadian dollars:
                                                                 Three Months Ended March 31,
(in thousands)                                                     2021                  2020               Change

Net revenues:
Consumer loan fees, interest and other                       $          174          $   1,294              (87)%
Consumer loan debt                                                        -                488                *
Net revenues                                                            174                806              (78)%

Segment operating expenses:
Store expenses                                                            -              1,560                *
Impairment of goodwill, intangibles and other assets                      -              1,124                *
Depreciation and amortization                                             -                 23                *
Equity in net income on unconsolidated affiliates                    (1,250)            (1,184)               6%
Segment operating contribution                                        1,424               (717)              299%

Other segment expense                                                     9                174              (95)%
Segment contribution (loss)                                  $        1,415          $    (891)              259%

* Represents a percentage computation that is not mathematically meaningful.



Segment contribution was $1.4 million, an increase of $2.3 million from the
prior-year quarter primarily due to a $1.1 million impairment charge of certain
long-lived assets in the second quarter of fiscal 2020 and $1.0 increase in net
segment operating contribution resulting from the closure of our Canada
operations.
We operated 22 financial services stores in Canada under the CASHMAX brand
during fiscal year 2020. During the fourth quarter of fiscal year 2020, we
closed our CASHMAX business and are no longer operating stores in Canada.
Other Items
The following table reconciles our consolidated segment contribution discussed
above to net income attributable to EZCORP, Inc., including items that affect
our consolidated financial results but are not allocated among segments:
                                                                 Three Months Ended March 31,
(in thousands)                                                     2021                  2020             Percentage Change

Segment contribution (loss)                                  $       29,796          $ (10,611)                  381%
Corporate expenses (income):
General and administrative                                           13,771             15,341                  (10)%
Depreciation and amortization                                         3,660              3,088                   19%
Gain on sale or disposal of assets and other                             11                384                  (97)%
Interest expense                                                      5,518              5,325                    4%
Interest income                                                         (14)              (572)                 (98)%

Other expense                                                            51                (52)                   *
Income before income taxes                                            6,799            (34,125)                  120%
Income tax expense                                                    1,469              6,749                  (78)%

Net income                                                   $        5,330          $ (40,874)                  113%

* Represents a percentage computation that is not mathematically meaningful.



Segment contribution increased $40.4 million over the prior-year quarter
primarily due to a $47.1 million impairment charge of certain long-lived assets
in the second quarter of fiscal 2020. Excluding the impairment charges, segment
contribution decreased by $6.7 million or 18% primarily due to reduced pawn
service charges from a decline in new loan activity and associated loan balances
as a result of a change in customer borrowing behaviors due to COVID-19,
partially offset by increased merchandise sales gross profit and decreased store
expenses.
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General and administrative expenses decreased $1.6 million or 10% due to
strategic initiatives implemented in the fourth quarter of fiscal year 2020 to
optimize our cost structure at the corporate level.
Income tax expense decreased $5.3 million for the quarter primarily due to a
decrease in income tax expense of approximately $14.0 million due to
non-deductible goodwill impairments booked in the prior year quarter, offset by
an increase in income taxes for the current year due to an approximately $43.0
million increase in income from continuing operations.
Income tax expense includes other items that do not necessarily correspond to
pre-tax earnings and create volatility in our effective tax rate. These items
include the net effect of state taxes, non-deductible items and changes in
valuation allowances for certain foreign operations.
Six Months Ended March 31, 2021 vs. Six Months Ended March 31, 2020
The tables below and discussion that follows should be read in conjunction with
the accompanying condensed consolidated financial statements and related notes.
U.S. Pawn
The following table presents selected summary financial data for the U.S. Pawn
segment:
                                                               Six Months Ended March 31,
(in thousands)                                                   2021                 2020               Change

Net revenues:
Pawn service charges                                       $     99,797           $ 125,790              (21)%

Merchandise sales                                               176,080             197,801              (11)%
Merchandise sales gross profit                                   76,209              71,151                7%
Gross margin on merchandise sales                                    43   %              36  %           700bps

Jewelry scrapping sales                                           7,585              15,776              (52)%
Jewelry scrapping sales gross profit                              1,592               3,221              (51)%
Gross margin on jewelry scrapping sales                              21   %              20  %           100bps

Other revenues                                                       51                  67              (24)%
Net revenues                                                    177,649             200,229              (11)%

Segment operating expenses:
Store expenses                                                  125,749             135,678               (7)%
Impairment of goodwill, intangibles and other assets                  -              10,000                *
Depreciation and amortization                                     5,372               5,576               (4)%
Segment operating contribution                                   46,528              48,975               (5)%

Other segment expense                                                27                   -                *
Segment contribution                                       $     46,501           $  48,975               (5)%

Other data:
Average monthly ending pawn loan balance per store (a)     $        224           $     286              (22)%
Monthly average yield on pawn loans outstanding                      15   %              14  %           100bps
Pawn loan redemption rate                                            86   %              86  %            -bps

* Represents a percentage computation that is not mathematically meaningful. (a) Balance is calculated based upon the average of the monthly ending balances during the

applicable period.

Pawn service charges decreased 21% (20% on a same store basis) due to a substantial decline in new loans activity and associated loan balances as a result of a change in customer borrowing behaviors as a result of COVID-19. Merchandise sales decreased 11% (10% on a same store basis) due to lower inventory levels. Merchandise sales gross profit increased 7% to $76.2 million driven by a 700 bps improvement in merchandise sales gross profit margin, primarily driven by reduced aged inventory levels and improved inventory turnover.

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Store expenses decreased by 7% due to a reduction in labor expense.
Segment contribution decreased $2.5 million primarily due to the goodwill
impairment charge recorded during the prior year quarter. Excluding the goodwill
impairment charge, segment contribution decreased $12.5 million, or 21%, to
$46.5 million. This decrease was primarily due to the changes in revenue and
store expenses described above.
Latin America Pawn
The following table presents selected summary financial data our Latin America
Pawn segment, including constant currency results, after translation to U.S.
dollars from functional currencies. See "Results of Operations - Non-GAAP
Financial Information" above.
                                                                            

Six Months Ended March 31,

                                                                                                              2021 (Constant        Change (Constant
(in thousands)                              2021 (GAAP)          2020 (GAAP)           Change (GAAP)             Currency)              Currency)

Net revenues:
Pawn service charges                       $    27,128          $   39,157                 (31)%              $   28,045                  (28)%

Merchandise sales                               46,928              58,757                 (20)%                  48,588                  (17)%
Merchandise sales gross profit                  16,466              15,555                  6%                    17,013                   9%
Gross margin on merchandise sales                   35  %               26  %             900bps                      35    %            900bps

Jewelry scrapping sales                          5,249               5,630                 (7)%                    5,327                  (5)%
Jewelry scrapping sales gross profit               639                 814                 (21)%                     666                  (18)%
Gross margin on jewelry scrapping sales             12  %               14  %            (200)bps                     13    %           (100)bps

Other revenues, net                                  7                  13                 (46)%                       7                  (46)%
Net revenues                                    44,240              55,539                 (20)%                  45,731                  (18)%

Segment operating expenses:
Store expenses                                  34,709              38,452                 (10)%                  35,931                  (7)%
Depreciation and amortization                    3,653               3,829                 (5)%                    3,785                  (1)%
Impairment of goodwill, intangibles and
other assets                                         -              35,936                (100)%                       -                 (100)%
Segment operating contribution (loss)            5,878             (22,678)                126%                    6,015                  127%

Other segment income (a)                        (1,705)               (664)                157%                   (1,684)                 154%
Segment contribution (loss)                $     7,583          $  (22,014)                134%               $    7,699                  135%

Other data:
Average monthly ending pawn loan balance
per store (b)                              $        55          $       89                 (38)%              $       56                  (37)%
Monthly average yield on pawn loans
outstanding                                         17  %               16  %             100bps                      17    %            100bps
Pawn loan redemption rate                           82  %               78  %             400bps                      82    %            400bps

(a) Fiscal 2021 constant currency amount excludes a nominal net GAAP basis foreign

currency transaction adjustment resulting from movement in exchange rates. The net

foreign currency transaction adjustment for fiscal 2020 was nominal and are included

in the above results. (b) Balance is calculated based upon the average of the monthly ending balances during

the applicable period.



During the six months ended March 31, 2021, our Latin America pawn segment
opened six de novo stores.
The change in net revenue attributable to same stores and new stores added since
the prior-year is summarized as follows:
Pawn service charges decreased 31% (28% on a constant currency basis). Same
stores pawn service charges also decreased by 31% (29% on a constant currency
basis). The average ending monthly pawn loan balance outstanding during the
current quarter was down 38% (37% on a constant currency basis). We have
experienced a substantial decline in new loans activity and associated loan
balances as the result of the impact of constrained traffic, limited operating
hours and increased remittances from the U.S.
Merchandise sales decreased 20% (17% on both a same store and constant currency
basis) and 21% on a same store constant currency basis due to lower inventory
levels. This decrease in merchandise sales was offset by an increase in
merchandise sales gross profit of 6% to
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$16.5 million (9% to $17.0 million on a constant currency basis) driven by a 900
bps improvement in merchandise sales gross profit margin primarily due to
reduced aged inventory levels and improved inventory turnover.
Store expenses decreased by 10% (7% on a constant currency basis) driven by a
reduction in labor expense.
Segment contribution increased $29.6 million primarily due to the impairment
charges recorded during the prior year quarter. Excluding the impairment
charges, segment contribution decreased $6.3 million, or 46%, to $13.9 million.
This decrease was primarily due to the changes in revenue and store expenses
described above.
Other International
The following table presents selected financial data for our Other International
segment after translation to U.S. dollars from its functional currency of
primarily Australian and Canadian dollars:
                                                                 Six Months Ended March 31,
(in thousands)                                                     2021                 2020               Change

Net revenues:
Consumer loan fees, interest and other                       $         249          $   2,686              (91)%
Consumer loan debt                                                       -              1,024              (100)%
Net revenues                                                           249              1,662              (85)%

Segment operating expenses:
Store expenses                                                           -              2,850              (100)%
Impairment of goodwill, intangible and other assets                      -              1,124              (100)%
Equity in net (income) loss on unconsolidated affiliates            (1,766)             4,713               137%
Segment operating contribution                                       2,015             (7,025)              129%

Other segment (income) expense                                        (201)               343               159%
Segment contribution (loss)                                  $       2,216          $  (7,368)              130%



Segment contribution was $2.2 million, an increase of $9.6 million from the
prior-year quarter primarily due to a $6.5 million increase in the net income
from our unconsolidated affiliates, $1.4 decrease in net revenues and a $2.8
million decrease in store expenses resulting from the closure of our Canada
operations. We operated 22 financial services stores in Canada under the CASHMAX
brand during fiscal year 2020. During the fourth quarter of fiscal year 2020, we
closed our CASHMAX business and are no longer operating stores in Canada.
Other Items
The following table reconciles our consolidated segment contribution discussed
above to net income attributable to EZCORP, Inc., including items that affect
our consolidated financial results but are not allocated among segments:
                                                                 Six Months Ended March 31,
(in thousands)                                                     2021                 2020             Percentage Change

Segment contribution                                         $      56,300          $  19,593                   187%
Corporate expenses (income):

General and administrative                                          26,281             34,179                  (23)%
Depreciation and amortization                                        6,636              6,033                   10%
Loss on sale or disposal of assets                                      63              1,100                  (94)%
Interest expense                                                    10,973             10,456                    5%
Interest income                                                        (71)            (1,027)                 (93)%

Other expense (income)                                                 117                (20)                  685%

Income (loss) from continuing operations before income taxes 12,301

           (31,128)                  140%
Income tax expense                                                   2,672              8,508                  (69)%

Net income (loss) attributable to EZCORP, Inc.               $       9,629          $ (39,636)                  124%


Segment contribution increased $36.7 million or 187% over the prior-year period,
primarily due to a $47.1 million impairment charge of certain long-lived assets
in the second quarter of fiscal 2020. Excluding the impairment charges, segment
contribution decreased by $10.4 million or 16% primarily due to reduced pawn
service charges from a decline in new loan activity and associated loan balances
as a result of a change in customer borrowing behaviors due to COVID-19,
partially offset by increased merchandise sales gross profit and decreased store
expenses.
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General and administrative expenses decreased $7.9 million due to strategic
initiatives implemented in the fourth quarter of fiscal year 2020 to optimize
our cost structure at the corporate level.
Income tax expense decreased $5.8 million primarily due to a decrease in income
tax expense of approximately $14.0 million due to non-deductible goodwill
impairments booked in the quarter ended March 31, 2020, offset by an increase in
income taxes for the current year due to an approximately $43.0 million increase
in income from continuing operations.
Income tax expense includes other items that do not necessarily correspond to
pre-tax earnings and create volatility in our effective tax rate. These items
include the net effect of state taxes, non-deductible items and changes in
valuation allowances for certain foreign operations.
Liquidity and Capital Resources
We currently believe that, based on available capital resources and projected
operating cash flow, we have adequate capital resources to fund working capital
needs, currently anticipated capital expenditures, currently anticipated
business growth and expansion, tax payments, and current and projected debt
service requirements.
Cash and Cash Equivalents
Our cash and equivalents balance was $335.6 million at March 31, 2021 compared
to $304.5 million at September 30, 2020. At March 31, 2021, our cash and
equivalents were held in cash depository accounts with major banks or invested
in high quality, short-term liquid investments.
Cash Flows
The table and discussion below presents a summary of the selected sources and
uses of our cash:

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