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EZCORP, Inc. (EZPW) Q1 2024 Earnings Call Transcript

EZCORP, Inc. (EZPW)

Q1 2024 Earnings Conference Call

Company Participants

Jean Marie Young - IR, Three Part Advisors

Lachlan Given - CEO

Timothy Jugmans - CFO

Conference Call Participants

Ibrahim Kargbo - Jefferies

Madison Callinan - Canaccord Genuity

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to the EZCORP First Fiscal Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded.

I'd now like to turn the conference over to Jean Marie Young, Investor Relations with Three Part Advisers. Please go ahead, Jean.

Jean Marie Young

Thank you, and good morning, everyone. During our prepared remarks, we will be referring to slides, which are available for viewing or download from our website at investors.ezcorp.com.

Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations. Actual results for future periods may differ materially from those expressed due to a number of risks or other factors that are discussed in our annual, quarterly and other reports filed with the Securities and Exchange Commission.

And as noted in our presentation materials, unless otherwise identified, results are presented on an adjusted basis to remove the effect of foreign currency fluctuations and other discrete items. Joining us on the call today are EZCORP's Chief Executive Officer, Lachie Given and Tim Jugmans, Chief Financial Officer.

Now I'd like to turn the call over to Lachie Given. Lachie?

Lachlan Given

Thanks, Jean, and good morning, everyone. We began fiscal 2024 with an outstanding quarter. Total revenue of $293 million was the highest in the company's history. Our PLO continues to grow, with our highest first quarter PLO ever. Bottom line net income also grew very strongly to $28 million, up 30% on Q1 2023.

Beginning on Slide 3. We are a global leader in pawn broking and preowned and recycled retail. We operate 1,237 stores in the U.S. and Latin America, having added another 6 stores this quarter. The macroeconomic environment continues to be a challenge for our customer base, with inflationary pressure increasing the demand for pawn as consumers seek cash to satisfy their short-term needs. In addition, consumers seek value by purchasing preowned merchandise and jewelry, which also represents a more environmentally responsible way to shop. We strive to provide an industry-leading experience to our customers through continuous innovation.

Moving to Slide 4. We opened 5 de novo stores in Latin America and acquired one store in Texas during the quarter. Record-setting Q1 PLO balance of $238.4 million was up 14%, driving a 13% increase in PSC. When comparing the first quarter with the fourth quarter, earning assets are typically impacted by strong holiday sales, lowering inventory as well as consumers in Latin America receiving additional compensation in December, applying downward pressure on PLO balances.

Our cash balance was up to $219 million, primarily due to strong cash inflows from operating activities, partially offset by increased PLO inventory, strategic investments, share repurchases and new store acquisitions. We repurchased $3 million of shares and invested $15 million in Founders to fund SMG acquisitions in Central America.

Slide 5 shows our excellent financial metrics for the quarter, with total revenues up 11%, merchandise sales up 7%, gross profit up 11% and adjusted EBITDA up 21%. Strong consumer demand and excellent customer service continues to propel PLO and PSC up 14% and 13%, respectively.

Turning to our key business strategies for Q1 on Slide 6. We continue to strengthen our core pawn operations during the quarter, investing in people and technology. In addition to launching a rebuild of intelligent pricing systems globally, we continue to upgrade merchandising, tagging, pricing, point-of-sale system and e-commerce capabilities to drive faster transaction times and deliver better customer service. EZ+ Rewards members grew to 4.2 million globally with 1.4 million people transacting in Q1, almost evenly split between the U.S. and Latin America. Across all geographies, transacting customers increased 4%.

Team members are at the core of our operating theme of people, pawn and passion. We are committed to investing in recruitment, retention and incentivization to ensure that our team remains highly engaged. The Workday Human Capital Management system was implemented globally during the quarter and will further improve access to human capital data and enhance our training, career development and recruitment processes. Innovation and growth are critical to our future. Online payments grew $8.6 million to $20.3 million in the U.S. We launched online app features to securely save payment card details with promotional giveaways, which attracted engagement from over 50% of users, reflecting the successful adoption and positive reception of these enhancements.

Online payments launched in Mexico with the buy online pickup in-store initiatives, expanding to 23 additional stores in Houston. Furthermore, we enhanced Max Pawn luxury e-commerce capabilities on eBay.

Slide 7. During the quarter, we sold 1.4 million pre-owned general merchandise and jewelry items and provided critical financial services to customers in the hundreds of local communities in which we serve. We are excited to share that Newsweek recognized EZCORP as one of America's greatest workplaces for diversity. This study highlights the top large and midsized companies recognized by their employees for dedication to supporting a diverse workforce.

At EZCORP, we foster an environment that values diversity, inclusion and development for all, with initiatives promoting affinity groups in the U.S. and Latin America, enhancing diversity awareness, encouraging inclusive conversations and more. We launched an inaugural round of local giving, which included U.S. districts donating to charitable organizations that support financial literacy, eradicating food and security, empowering young people or engaging in poverty intervention. In addition, we hosted company-sponsored volunteer events at local food banks....

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