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EZCORP Announces Strong Fourth Quarter and Full Fiscal 2017 Earnings

AUSTIN, Texas, Nov. 15, 2017 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW) today announced results for its fourth quarter and fiscal year ended September 30, 2017.

All amounts in this release are from EZCORP continuing operations and conform with U.S. generally accepted accounting principles (GAAP) unless otherwise noted. Comparisons are made to the same period in the prior year unless otherwise noted.

FOURTH QUARTER HIGHLIGHTS

  • Seventh consecutive quarter of year-over-year (YOY) earnings and profit growth. Earnings per share improved $0.52 to $0.21 in the fourth quarter and grew $0.77 to $0.62 in the full fiscal year.

  • Net income from continuing operations improved $27.6 million to $10.1 million in the fourth quarter, and grew $41.0 million to $32.0 million in the full fiscal year. Adjusted EBITDA1 improved $19.1 million to $22.1 million in the fourth quarter, and grew 39%, or $24.6 million, to $88.5 million in the full fiscal year.

  • Continue to lead the U.S. market in same store pawn loans outstanding (PLO) YOY growth. PLO increased 19% in Mexico (11% on a constant currency basis2).

  • Operating contribution from the Mexico Pawn segment improved significantly — up 153% to $5.8 million. Highest growth segment now 20% of company’s total pawn profit contribution.

  • Cash balance at September 30 up 150% to $164.4 million.

  • Successfully completed $143.8 million offering of convertible notes, improving liquidity with an attractive coupon rate of 2.875% and seven-year term.

  • Favorable restructuring of the notes receivable repayment arrangement with AlphaCredit improved the return and risk profile and increases future cash flow and profit.

In October 2017, the company significantly expanded its footprint in the emerging Latin American pawn market by acquiring 112 pawn stores in Guatemala, El Salvador, Honduras and Peru for $60 million cash, with an additional $2.25 million earn-out possible based on post-acquisition performance. This acquisition will be accretive to earnings starting the first quarter of fiscal 2018 and provides a platform for further growth and expansion in the high growth rate region.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Stuart Grimshaw said, “Even though our results were somewhat impacted by the hurricane activity in Texas and Florida, we are proud of our operating performance during the fourth quarter, which capped off a fiscal year that showed a dramatic turnaround on the bottom line. We delivered significant earnings growth in both the U.S and Mexico pawn segments during the quarter and the year, driven by continued execution on our strategic initiatives to create long-term profitable growth.

“First, we continue the diversification of our revenue base and operations, increasing our mix of business from Latin America. Our Mexico Pawn segment is our fastest growing business and is now providing 20% of our total pawn operating contribution. We added 10 new stores in Mexico during the year and see plenty of opportunity to open and acquire more. And we are increasing our presence in Latin America beyond Mexico. The recent acquisition of 112 pawn stores in four new countries expands our Latin American store base, which now comprises 41% of our total pawn stores. It provides compelling opportunities for further growth through the expansion of general merchandise pawn loan and retail activities, the opening of new stores in attractive and under-penetrated markets, and the pursuit of complementary acquisitions in the region.

“Second, we are improving the experience customers have in our stores,” Grimshaw continued. “Our customers represent a large, underserved market. We are updating our technology, better training our field staff and refreshing our stores to meet their needs and exceed their expectations.

“Third, we’re strengthening our balance sheet and liquidity, reducing our corporate expenses, better analyzing and acting on customer data and process improvements, and optimizing loan values and merchandise pricing. These actions are expected to further increase our market share and profitability and provide us with the ability to continue to capitalize on attractive growth opportunities.”

1EBITDA is earnings before interest, taxes, depreciation and amortization. “Adjusted EBITDA” includes EBITDA attributable to continuing operations, further adjusted to exclude the estimated impact of the hurricanes that affected the Texas Gulf Coast and Florida in the fourth quarter, as well as certain other discrete items. See "Non-GAAP Financial Information" at the end of this release.

2In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (GAAP), we provide financial information on a “constant currency” and "adjusted EBITDA" basis, which excludes the impact of foreign currency exchange rate fluctuations, and provides a different way to view the operational results of our business, respectively. For additional information about the constant currency calculations, as well as a reconciliation of the constant currency financial measures to the comparable GAAP financial measures and calculation of our adjusted EBITDA, see “Non-GAAP Financial Information” at the end of this release.

CONSOLIDATED RESULTS

Temporary Impact of U.S. Hurricanes

During the fourth quarter, the U.S. Pawn segment was affected by Hurricanes Harvey and Irma resulting in the temporary closure of stores in the affected areas, all of which have since reopened. In addition to the loss of inventory and loan collateral and the damage to physical facilities, all totaling $1.0 million, the company estimates that the effects of the hurricanes include a reduction in U.S. pawn loan balances of $5.0 million as of September 30, 2017, with a resulting reduction in pawn service charge (PSC) revenues and merchandise sales gross profit. The company expects pawn loan demand to return to normal levels after the annual tax refund season in the U.S.

Three Months Ended September 30, 2017 Results

  • Despite the impacts of the hurricanes, net revenue improved 1% to $108.1 million (flat at $107.4 million on a constant currency basis), due largely to a 4% increase in PSC revenue (up 3% on a constant currency basis). Same store PLO was down 1% in the U.S. (up 3% in stores unaffected by the hurricanes). Same store PLO rose 19% in Mexico (up 11% in Mexico on a constant currency basis). Merchandise sales gross margins held at 35%, within the 35-38% target range.

  • Continued discipline in cost control reduced operations expenses 2% to $78.3 million (down 3% to $77.8 million on a constant currency basis) and reduced corporate expenses 34% to $11.9 million.

  • The company restructured the repayment of the remaining $60.9 million of principal from AlphaCredit, improving its risk and return profile, as well as significantly increasing future cash flow and profit. Under the restructured arrangement, the company expects to collect $32.6 million of principal in fiscal 2018 and $28.3 million in fiscal 2019. The restructured arrangement includes a higher interest rate and an incremental deferred compensation fee of up to $14.0 million to be received in 2019 and 2020.

  • Interest expense includes a $5.3 million debt extinguishment charge offset by a $3.0 million pre-tax benefit from the restructuring of the AlphaCredit notes. The AlphaCredit note restructuring drove an additional one-time income tax benefit of $3.0 million in the quarter.

  • Improvements in net revenues and cost discipline have increased operating leverage and the resulting bottom line. Earnings per share increased YOY for the seventh-consecutive quarter. EPS from continuing operations is $0.21, up from a loss of $0.31 a year ago.

Fiscal Year Ended September 30, 2017

  • The continued focus on investment in customer experience increased net revenue 2% to $435.5 million (up 3% to $439.3 million on a constant currency basis), driven primarily by a 4% rise in PSC revenue (up 5% on a constant currency basis). Merchandise sales gross margins were down slightly to 36%, but within the 35-38% target range.

  • Corporate expenses were down 22% to $53.3 million. The company remains on track to reduce corporate expenses to no more than $50 million in FY18.

  • During the year and prior to the note restructuring, EZCORP collected a total of $34 million from AlphaCredit ($29.5 million in principal and $4.5 million in interest).

  • Earnings per share from continuing operations reached $0.62, a significant turnaround from the loss of ($0.15) in the prior year. The strategic transformation initiatives achieved during fiscal 2017 set the stage for further success in fiscal 2018 and beyond.

PAWN RESULTS

U.S. Pawn Segment

Three Months Ended September 30, 2017

  • PLO was down 1% in total and on a same store basis, to $148.1 million (up 3% in stores unaffected by the hurricanes). Changes in PLO resulted in PSC increasing 1% in total and 2% on a same-store basis to $61.0 million.

  • The merchandise sales gross margin of 36% was consistent with the prior-year quarter and within the target range of 35-38%. Inventory aged over one year improved to 10% from 11%.

  • Operations expenses decreased 3% to $65.5 million driven by cost control initiatives and lower variable compensation.

  • Segment contribution increased 7% to $22.8 million. Initiatives are underway to continue improving long-term net revenue and profitability. These include investing in upgrading the POS system, enhancing product and customer data analytics, and enhancing the customer experience by refreshing stores.

Fiscal Year Ended September 30, 2017

  • Driven by the impact of PLO outlined above, PSC rose 4% in total and on a same store basis to $238.4 million.

  • Merchandise sales increased 1% in total and on a same store basis. The merchandise sales gross margin of 36% is within the 35-38% U.S. target.

  • Operations expenses grew 2% to $260.0 million as a result of investment in customer facing labor and higher benefit claims.

  • Segment contribution was up 3% to $103.5 million.

Mexico Pawn Segment

Three Months Ended September 30, 2017

  • The company continues to experience significant growth in the Mexico Pawn segment, taking advantage of market opportunities primarily from its existing store footprint. PLO expanded 20% to $21.1 million (up 13% to $19.8 million on a constant currency basis), which drove a 22% increase in PSC to $10.1 million (up 16% to $9.7 million on a constant currency basis).

  • Merchandise sales increased 10% in total and 7% on a same store basis (up 4% in total and 1% in same stores on a constant currency basis). The 30% merchandise sales gross margin was slightly above the prior-year quarter, while aged inventory balances decreased to 2% from 6% in the fiscal 2017 third quarter.

  • Segment contribution increased 153% to $5.8 million (up 140% to $5.5 million on a constant currency basis) driven by an 18% improvement in net revenue, with only a 3% increase in operations expense due to continued discipline in cost control.

  • The company opened four new stores in the fourth quarter, for a total of 10 in fiscal 2017. There is a significant runway for continued store openings and acquisitions, in addition to the growth potential of the existing store base.

Fiscal Year Ended September 30, 2017

  • The PLO changes described above drove a 9% increase in PSC to $34.6 million (up 15% to $36.8 million on a constant currency basis).

  • Merchandise sales grew 4% in total and 3% on a same store basis (up 12% in total and 10% in same stores on a constant currency basis). Merchandise margin was 32%, consistent with the prior year.

  • Segment contribution yielded a 119% increase to $18.7 million (up 130% to $19.6 million on a constant currency basis) as a result of a 7% net revenue expansion while operations expenses dropped 6%.

CONFERENCE CALL

EZCORP will host a conference call on Thursday, November 16, 2017, at 7:30 a.m. Central Time to discuss fourth quarter and fiscal year-end results. Analysts and institutional investors may participate by dialing (877) 201-0168, Conference ID: 8074459, international dialing (647) 788-4901. The call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay 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 Latin America. It also sells merchandise, primarily collateral forfeited from pawn lending operations, and used merchandise purchased from customers. EZCORP is a member of the Russell 2000 Index, S&P SmallCap 600 Index, S&P 1000 Index and Nasdaq Composite Index.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements on the company’s strategy, initiatives and expected performance. These statements are based on management’s current expectations on the outcome and timing of future events. All statements other than historical facts-including those on the company's strategy, initiatives and future performance, which 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 here, due to a number of uncertainties and other factors. These include 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 EZCORP’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.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, Fiscal Year Ended September 30,
2017
2016 2017 2016
(Unaudited)
(in thousands, except per share amounts)
Revenues:
Merchandise sales$95,166 $97,166 $414,838 $409,107
Jewelry scrapping sales13,531 16,482 51,189 50,113
Pawn service charges71,097 68,603 273,080 261,800
Other revenues2,275 2,334 8,847 9,485
Total revenues182,069 184,585 747,954 730,505
Merchandise cost of goods sold61,685 63,540 266,525 258,271
Jewelry scrapping cost of goods sold11,736 13,768 43,931 42,039
Other cost of revenues555 416 1,988 1,965
Net revenues108,093 106,861 435,510 428,230
Operating expenses:
Operations78,284 79,941 304,636 301,387
Administrative11,949 18,016 53,254 68,101
Depreciation and amortization5,415 6,120 23,661 26,542
Loss on sale or disposal of assets348 465 359 1,106
Restructuring 11 1,921
Total operating expenses95,996 104,553 381,910 399,057
Operating income12,097 2,308 53,600 29,173
Interest expense10,956 4,463 27,803 16,477
Interest income(5,194) (15) (12,103) (81)
Equity in net (income) loss of unconsolidated affiliate(1,148) 5,881 (4,916) 255
Impairment of investments 10,957 10,957
Other (income) expense(129) 387 (423) 1,202
Income (loss) from continuing operations before income taxes7,612 (19,365) 43,239 363
Income tax (benefit) expense(2,457) (1,863) 11,206 9,361
Income (loss) from continuing operations, net of tax10,069 (17,502) 32,033 (8,998)
Income (loss) from discontinued operations, net of tax43 19,636 (1,825) (79,432)
Net income (loss)10,112 2,134 30,208 (88,430)
Net loss attributable to noncontrolling interest(1,298) (1,097) (1,650) (7,686)
Net income (loss) attributable to EZCORP, Inc.$11,410 $3,231 $31,858 $(80,744)
Basic earnings per share attributable to EZCORP, Inc. — continuing operations$0.21 $(0.31) $0.62 $(0.15)
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations$0.21 $(0.31) $0.62 $(0.15)
Weighted-average basic shares outstanding54,298 53,991 54,260 54,427
Weighted-average diluted shares outstanding54,428 53,991 54,368 54,427



EZCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
September 30,
2017
September 30,
2016
Assets:
Current assets:
Cash and cash equivalents$164,393 $65,737
Pawn loans169,242 167,329
Pawn service charges receivable, net31,548 31,062
Inventory, net154,411 140,224
Notes receivable, net32,598 41,946
Prepaid expenses and other current assets28,765 35,845
Total current assets580,957 482,143
Investment in unconsolidated affiliate43,319 37,128
Property and equipment, net57,959 58,455
Goodwill254,760 253,976
Intangible assets, net32,420 30,681
Notes receivable, net28,377 41,119
Deferred tax asset, net16,856 35,303
Other assets, net9,715 44,439
Total assets$1,024,363 $983,244
Liabilities and equity:
Current liabilities:
Accounts payable, accrued expenses and other current liabilities$61,543 $84,285
Customer layaway deposits11,032 10,693
Total current liabilities72,575 94,978
Long-term debt, net284,807 283,611
Other long-term liabilities7,055 10,450
Total liabilities364,437 389,039
Stockholders’ equity:
Class A Non-Voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued
and outstanding: 51,427,832 as of September 30, 2017 and 51,129,144 as of September 30, 2016
514 511
Class B Voting Common Stock, convertible, par value $.01 per share; shares authorized: 3 million;
issued and outstanding: 2,970,171
30 30
Additional paid-in capital348,532 318,723
Retained earnings351,666 319,808
Accumulated other comprehensive loss(38,367) (44,089)
EZCORP, Inc. stockholders’ equity662,375 594,983
Noncontrolling interest(2,449) (778)
Total equity659,926 594,205
Total liabilities and equity$1,024,363 $983,244



EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended September 30,
2017 2016
(in thousands)
Operating activities:
Net income (loss)$30,208 $(88,430)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization23,661 28,651
Amortization of debt discount and deferred financing costs12,303 12,375
Amortization of prepaid commissions 13,083
Accretion of notes receivable discount(3,788)
Consumer loan loss provision1,988 27,917
Deferred income taxes6,046 2,674
Impairment of goodwill 73,244
Other adjustments17 7,289
Gain on restructured notes receivable(3,048)
Gain on disposition of Grupo Finmart, net of loss on extinguishment (32,172)
Loss on extinguishment of debt and other5,250
Loss on sale or disposal of assets359 1,106
Stock compensation expense5,866 5,346
Income from investment in unconsolidated affiliate(4,916) 255
Impairment of investments in unconsolidated affiliate 10,957
Changes in operating assets and liabilities:
Service charges and fees receivable(224) 7,677
Inventory721 (3,735)
Prepaid expenses, other current assets and other assets5,166 (15,397)
Accounts payable, accrued expenses and other liabilities(31,041) (26,297)
Customer layaway deposits241 329
Income taxes, net of excess tax benefit from stock compensation3,027 37,334
Dividends from unconsolidated affiliate 2,197
Net cash provided by operating activities51,836 64,403
Investing activities:
Loans made(646,625) (676,375)
Loans repaid386,383 428,196
Recovery of pawn loan principal through sale of forfeited collateral244,632 235,168
Additions to property and equipment(18,853) (9,550)
Acquisitions, net of cash acquired(2,250) (6,000)
Proceeds from disposition of Grupo Finmart, net of cash disposed 35,277
Principal collections on notes receivable29,458
Net cash (used in) provided by investing activities(7,255) 6,716
Financing activities:
Taxes paid related to net share settlement of equity awards(767) (172)
Payout of deferred consideration (15,000)
Proceeds from settlement of forward currency contracts 3,557
Change in restricted cash 8,199
Proceeds from borrowings, net of issuance costs139,506 64,133
Payments on borrowings(85,388) (112,123)
Repurchase of common stock (11,750)
Net cash provided by (used in) financing activities53,351 (63,156)
Effect of exchange rate changes on cash and cash equivalents724 (1,350)
Net increase in cash and cash equivalents98,656 6,613
Cash and cash equivalents at beginning of period65,737 59,124
Cash and cash equivalents at end of period$164,393 $65,737
Non-cash investing and financing activities:
Pawn loans forfeited and transferred to inventory$257,388 $249,316
Dividend reinvestment acquisition of additional ownership in unconsolidated affiliate1,153



EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
Three Months Ended September 30, 2017
U.S. Pawn Mexico
Pawn
Other
International
Total
Segments
Corporate
Items
Consolidated
(in thousands)
Revenues:
Merchandise sales$78,753 $16,410 $3 $95,166 $ $95,166
Jewelry scrapping sales13,045 486 13,531 13,531
Pawn service charges60,957 10,140 71,097 71,097
Other revenues62 188 2,025 2,275 2,275
Total revenues152,817 27,224 2,028 182,069 182,069
Merchandise cost of goods sold50,240 11,445 61,685 61,685
Jewelry scrapping cost of goods sold11,320 416 11,736 11,736
Other cost of revenues 555 555 555
Net revenues91,257 15,363 1,473 108,093 108,093
Segment and corporate expenses (income):
Operations65,478 9,772 3,034 78,284 78,284
Administrative 11,949 11,949
Depreciation and amortization2,684 765 47 3,496 1,919 5,415
Loss on sale or disposal of assets252 69 321 27 348
Interest expense 2 2 10,954 10,956
Interest income (1,041) (1,041) (4,153) (5,194)
Equity in net income of unconsolidated affiliate (1,148) (1,148) (1,148)
Other income(5) (8) (68) (81) (48) (129)
Segment contribution (loss)$22,848 $5,804 $(392) $28,260
Income from continuing operations before income taxes $28,260 $(20,648) $7,612


EZCORP, Inc.
OPERATING SEGMENT RESULTS
Twelve Months Ended September 30, 2017
U.S. Pawn
Mexico
Pawn

Other
International
Total
Segments
Corporate
Items
Consolidated
(in thousands)
Revenues:
Merchandise sales$351,878 $62,957 $3 $414,838 $ $414,838
Jewelry scrapping sales48,203 2,986 51,189 51,189
Pawn service charges238,437 34,643 273,080 273,080
Other revenues219 645 7,983 8,847 8,847
Total revenues638,737 101,231 7,986 747,954 747,954
Merchandise cost of goods sold223,475 43,050 266,525 266,525
Jewelry scrapping cost of goods sold41,434 2,497 43,931 43,931
Other cost of revenues 1,988 1,988 1,988
Net revenues373,828 55,684 5,998 435,510 435,510
Segment and corporate expenses (income):
Operations259,977 36,211 8,448 304,636 304,636
Administrative 53,254 53,254
Depreciation and amortization10,171 2,675 191 13,037 10,624 23,661
Loss on sale or disposal of assets198 134 332 27 359
Interest expense 9 9 27,794 27,803
Interest income (1,930) (1,930) (10,173) (12,103)
Equity in net income of unconsolidated affiliate (4,916) (4,916) (4,916)
Other income(19) (69) (96) (184) (239) (423)
Segment contribution$103,501 $18,654 $2,371 $124,526
Income from continuing operations before income taxes $124,526 $(81,287) $43,239



EZCORP, Inc.
OPERATING SEGMENT RESULTS (UNAUDITED)
Three Months Ended September 30, 2016
U.S. Pawn Mexico
Pawn
Other
International
Total
Segments
Corporate
Items
Consolidated
(in thousands)
Revenues:
Merchandise sales$82,211 $14,955 $ $97,166 $ $97,166
Jewelry scrapping sales15,693 789 16,482 16,482
Pawn service charges60,263 8,340 68,603 68,603
Other revenues50 154 2,130 2,334 2,334
Total revenues158,217 24,238 2,130 184,585 184,585
Merchandise cost of goods sold52,980 10,560 63,540 63,540
Jewelry scrapping cost of goods sold13,105 663 13,768 13,768
Other cost of revenues 416 416 416
Net revenues92,132 13,015 1,714 106,861 106,861
Segment and corporate expenses (income):
Operations67,803 9,520 2,618 79,941 79,941
Administrative 18,016 18,016
Depreciation and amortization2,753 680 55 3,488 2,632 6,120
Loss on sale or disposal of assets162 53 4 219 246 465
Restructuring11 11 11
Interest expense 6 6 4,457 4,463
Interest income (7) (7) (8) (15)
Equity in net loss of unconsolidated affiliate 5,881 5,881 5,881
Impairment of investments 10,957 10,957 10,957
Other expense (income) 465 (1) 464 (77) 387
Segment contribution (loss)$21,403 $2,298 $(17,800) $5,901
Loss from continuing operations before income taxes $5,901 $(25,266) $(19,365)


EZCORP, Inc.
OPERATING SEGMENT RESULTS
Twelve Months Ended September 30, 2016
U.S. Pawn Mexico
Pawn
Other
International
Total
Segments
Corporate
Items
Consolidated
(in thousands)
Revenues:
Merchandise sales$348,771 $60,331 $5 $409,107 $ $409,107
Jewelry scrapping sales47,810 2,282 21 50,113 50,113
Pawn service charges229,893 31,907 261,800 261,800
Other revenues331 385 8,769 9,485 9,485
Total revenues626,805 94,905 8,795 730,505 730,505
Merchandise cost of goods sold217,268 41,002 1 258,271 258,271
Jewelry scrapping cost of goods sold40,138 1,885 16 42,039 42,039
Other cost of revenues 1,965 1,965 1,965
Net revenues369,399 52,018 6,813 428,230 428,230
Segment and corporate expenses (income):
Operations255,321 38,481 7,585 301,387 301,387
Administrative 68,101 68,101
Depreciation and amortization12,242 2,965 218 15,425 11,117 26,542
Loss on sale or disposal of assets664 169 4 837 269 1,106
Restructuring993 543 202 1,738 183 1,921
Interest expense125 109 234 16,243 16,477
Interest income(2) (30) (32) (49) (81)
Equity in net income of unconsolidated affiliate 255 255 255
Impairment of investments 10,957 10,957 10,957
Other expense (income) 1,273 2 1,275 (73) 1,202
Segment contribution (loss)$100,056 $8,508 $(12,410) $96,154
Income from continuing operations before income taxes $96,154 $(95,791) $363



EZCORP, Inc.
STORE COUNT ACTIVITY (UNAUDITED)
Three Months Ended September 30, 2017
U.S. Pawn Mexico Pawn Other
International
Consolidated
As of June 30, 2017515 244 27 786
New locations opened 4 4
Locations acquired2 2
Locations sold, combined or closed(4) (2) (6)
As of September 30, 2017513 246 27 786


Three Months Ended September 30, 2016
U.S. Pawn Mexico Pawn Other
International
Consolidated
As of June 30, 2016522 238 27 787
New locations opened 2 2
Locations acquired
Locations sold, combined or closed(2) (1) (3)
As of September 30, 2016520 239 27 786


Twelve Months Ended September 30, 2017
U.S. Pawn Mexico Pawn Other
International
Consolidated
As of September 30, 2016520 239 27 786
New locations opened 10 10
Locations acquired2 2
Locations sold, combined or closed(9) (3) (12)
As of September 30, 2017513 246 27 786


Twelve Months Ended September 30, 2016
U.S. Pawn Mexico Pawn Other
International
Consolidated
As of September 30, 2015522 237 27 786
New locations opened 3 3
Locations sold, combined or closed(8) (1) (9)
As of September 30, 2016520 239 27 786

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, including adjusted EBITDA and “constant currency” results solely for our Mexico Pawn operations. We use adjusted EBITDA to evaluate the operating and financial performance of the company and period-over-period growth. We derive the financial calculations of adjusted EBITDA, primarily by excluding from a comparable GAAP measure certain items we do not consider to be representative of our actual operating performance. We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos. We believe presenting constant currency results is meaningful and useful in understanding our Mexico Pawn operations, activities and business metrics. We provide non-GAAP financial data for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use non-GAAP information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to-not instead of or superior to-our GAAP financial statements. 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 here are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in Mexican pesos to U.S. dollars. We use the exchange rate from the prior-year comparable period, as opposed to the current period, to exclude the effects of foreign currency rate fluctuations. We use 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 for September 30, 2017 and 2016 was 18.2 to 1 and 19.4 to 1, respectively. The approximate average exchange rate for the years ended September 30, 2017, 2016 and 2015 was 19.1 to 1, 17.9 to 1, and 15.1, respectively. However, our statement of operations constant currency results reflect the impact of monthly effects of exchange rates, so can’t be directly calculated from the above rates. Constant currency results also exclude the foreign currency gain or loss, and the related foreign currency derivative gain or loss impact. There has been a prolonged weakening of the Mexican peso to the U.S. dollar. We may continue to experience further weakening in future reporting periods, which may adversely affect our operating results when stated on a GAAP basis.

The following information reconciles certain non-GAAP financial measures presented in this news release to the most directly comparable financial measures calculated and presented in accordance with GAAP, for the three and 12 months ended September 30, 2017.

Adjusted EBITDA (Unaudited)
Three Months Ended
September 30,
Fiscal Year Ended
September 30,
2017 2016 2017 2016
(in millions)
Income (loss) from continuing operations, net of tax $10.1 $(17.5) $ 32.0 $(9.0)
Interest expense11.0 4.5 27.8 16.5
Interest income(5.2) (12.1) (0.1)
Income taxes(2.5) (1.9) 11.2 9.4
Depreciation and amortization5.4 6.1 23.7 26.5
Estimated impact of natural disasters2.9 2.9
Acquisition costs0.8 1.2
Impairment of investments 11.0 11.0
Restatement related costs 6.2
Mexico buy/sell stores 0.9 4.2
Other*(0.4) (0.1) 1.8 (0.8)
Adjusted EBITDA$22.1 $3.0 $88.5 $63.9

* Other items include foreign currency impacts and strategic plan costs as well as a one-time legal credit in fiscal 2016.


Other Miscellaneous Non-GAAP Financial Measures (Unaudited)
U.S. Dollar
Amount
Percentage
Change YOY
(in millions)
Mexico Pawn same store PLO$20.7 19%
Currency exchange rate fluctuations(1.3)
Constant currency Mexico Pawn same store PLO$19.4 11%
Mexico Pawn segment profit before tax (three months ended September 30, 2017)$5.8 153%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.3)
Constant currency Mexico Pawn segment profit before tax (three months ended September 30, 2017)$5.5 140%
Consolidated net revenue (three months ended September 30, 2017)$108.1 1%
Currency exchange rate fluctuations(0.7)
Constant currency consolidated net revenue (three months ended September 30, 2017)$107.4 %
Consolidated PSC revenue (three months ended September 30, 2017)$71.1 4%
Currency exchange rate fluctuations(0.5)
Constant currency consolidated PSC revenue (three months ended September 30, 2017)$70.6 3%
Consolidated operations expenses (three months ended September 30, 2017)$78.3 (2)%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.5)
Constant currency consolidated operations expenses (three months ended September 30, 2017)$77.8 3%
Consolidated net revenue (twelve months ended September 30, 2017)$435.5 2%
Currency exchange rate fluctuations3.8
Constant currency consolidated net revenue (twelve months ended September 30, 2017)$439.3 3%
Consolidated PSC revenue (twelve months ended September 30, 2017)$273.1 4%
Currency exchange rate fluctuations2.2
Constant currency consolidated PSC revenue (twelve months ended September 30, 2017)$275.3 5%
Mexico Pawn PLO$21.1 20%
Currency exchange rate fluctuations(1.3)
Constant currency Mexico Pawn PLO$19.8 13%
Mexico Pawn PSC revenue (three months ended September 30, 2017)$10.1 22%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.4)
Constant currency Mexico Pawn PSC revenue (three months ended September 30, 2017)$9.7 16%
Mexico Pawn merchandise sales (three months ended September 30, 2017)$16.4 10%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.8)
Constant currency Mexico Pawn merchandise sales (three months ended September 30, 2017)$15.6 4%
Mexico Pawn same store merchandise sales (three months ended September 30, 2017)$15.9 7%
Currency exchange rate fluctuations (three months ended September 30, 2017)(0.8)
Constant currency Mexico Pawn same store merchandise sales (three months ended September 30, 2017)$15.1 1%
Mexico Pawn PSC revenue (twelve months ended September 30, 2017)$34.6 9%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)2.2
Constant currency Mexico Pawn PSC revenue (twelve months ended September 30, 2017)$36.8 15%
Mexico Pawn merchandise sales (twelve months ended September 30, 2017)$63.0 4%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)4.6
Constant currency Mexico Pawn merchandise sales (twelve months ended September 30, 2017)$67.6 12%
Mexico Pawn same store merchandise sales (twelve months ended September 30, 2017)$61.0 3%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)4.6
Constant currency Mexico Pawn same store merchandise sales (twelve months ended September 30, 2017)$65.6 10%
Mexico Pawn segment profit before tax (twelve months ended September 30, 2017)$18.7 119%
Currency exchange rate fluctuations (twelve months ended September 30, 2017)0.9
Constant currency Mexico Pawn segment profit before tax (twelve months ended September 30, 2017)$19.6 130%


Source:EZCORP, Inc.