EZCORP Reports Second Quarter Fiscal 2021 Results

Rhea-AI Impact

(Moderate)

Rhea-AI Sentiment

(Positive)

Tags

earnings

Rhea-AI Summary

EZCORP, Inc. (NASDAQ: EZPW) reported its second-quarter results for fiscal 2021, showing a diluted EPS of $0.10 and an adjusted EPS of $0.17, both steady year-over-year. Total revenues decreased by 17% to $184.9 million, driven by a decline in pawn service charges and merchandise sales. However, merchandise gross profit rose 12% due to improved inventory management. Operating expenses fell 35%, contributing to a significant increase in cash reserves, which stood at $335.6 million, a 73% year-over-year rise. The company is leveraging its balance sheet for growth, including acquisitions and new store openings.

Positive

Diluted EPS increased to $0.10 from $(0.74) year-over-year.
Adjusted EPS remained steady at $0.17.
Merchandise sales gross profit improved by 12%, enhancing margins to 43%.
Operating expenses decreased by 35%, boosting profitability.
Cash and cash equivalents increased by 73% year-over-year to $335.6 million.

Negative

Total revenues decreased by $38.3 million or 17% year-over-year.
Pawn service charges dropped by $16.8 million or 21%.
A $34.9 million or 22% decline in pawn loans outstanding was noted.

05/05/2021 - 04:15 PM

EZCORP, Inc. (NASDAQ: EZPW) today announced results for its second quarter ended March 31, 2021.

All amounts in this release are in conformity with U.S. generally accepted accounting principles ("GAAP") unless otherwise noted. Comparisons shown in this release are to the same period in the prior year unless otherwise noted.

CEO COMMENTARY AND OUTLOOK

Chief Executive Officer Jason Kulas stated, “We remain focused on meeting our customers’ short-term cash needs and providing access to affordable pre-owned general merchandise and jewelry, and we believe we have the right people, platform, footprint and cost structure in place to continue to strengthen and grow our core pawn business. Key highlights for the second quarter of fiscal 2021 included GAAP earnings per share of $0.10 and adjusted EPS of $0.17. The adjusted EPS was steady on a year-over-year basis despite lower pawn loans outstanding, pawn service charges and merchandise sales related to COVID-19 and related stimulus program headwinds. Merchandise sales gross profit continued to grow driven by improving inventory turns and rising merchandise margins, and we made further progress on our expense reduction initiatives. Looking ahead, even assuming store-level costs trend higher consistent with increasing transaction activity, we remain well positioned to drive higher operating margins as revenue rebuilds reflecting ongoing cost savings and simplification efforts across the business.

“In the near term, lingering impacts from the second stimulus package as well as an extended tax filing season have continued to temporarily reduce demand for pawn loans in the U.S., and in Latin America we continue to be challenged with constrained traffic, limited operating hours and increased remittances. That said, we remain confident pawn loans outstanding will rebuild given several ongoing initiatives. First, we continue to broaden customer engagement via our digital pawn servicing platform and expanded payment options. Second, our differentiated technology and data analytics capabilities are increasingly driving improving loan-to-value ratios and redemption rates. Third, we remain committed to optimizing team member development, productivity and retention through enhanced training and diversity and inclusion programs.

"Finally, we remain focused on increasingly leveraging our strong balance sheet to fund pawn loans outstanding growth and capitalize on strategic and financially accretive acquisitions to complement de novo store growth. We have opened 8 de novo stores in Latin America so far this year and recently completed the acquisition of 11 stores in the Houston, Texas metropolitan area.”

RESULTS FOR SECOND QUARTER OF FISCAL 2021

Diluted earnings per share was $0.10, compared to $(0.74) in the prior-year quarter. On an adjusted basis¹, diluted earnings per share was $0.17, consistent with the prior-year quarter. Income before taxes increased by $40.9 million to $6.8 million.
Total revenues decreased $38.3 million or 17%, primarily due to a $16.8 million or 21% decrease in pawn service charges (PSC) and a $14.6 million or 11% decrease in merchandise sales.
The decrease in PSC was due to a $34.9 million or 22% decrease in pawn loans outstanding (PLO). Pawn loan demand was significantly reduced due to the impacts of government stimulus which led to higher loan redemptions compared to the prior year quarter.
Although merchandise sales decreased by $14.6 million, merchandise sales gross profit improved by 12%, driven by effective inventory management and less aged inventory leading to a 900 bps improvement in merchandise sales gross profit margin to 43%. The sales margin in the prior year quarter was negatively impacted by 200 bps due to greater sales volume of aged merchandise.
Total operating expenses were down $55.0 million or 35% to $103.1 million primarily due to a $47.1 million impairment charge in the prior year quarter with no similar charge in the current year quarter. Excluding the prior year impairment charge, total operating expenses decreased by 7% or $7.9 million largely driven by the decrease in store expenses of $6.5 million or 7% due to a continued focus on expense control.
Net inventory was $86.2 million, down 50% year-over-year and 9% sequentially. Inventory turnover improved to 3.1x from 2.1x and on a sequential basis improved 7% from 2.9x.
Cash and cash equivalents at the end of the quarter was $335.6 million, an increase of $141.9 million or 73% from the prior-year quarter due to the year-over-year reduction in earning assets. On a sequential basis, cash and cash equivalents increased $45.2 million or 16%, due to higher loan redemptions and merchandise sales.

CONSOLIDATED RESULTS

Three Months Ended March 31

in millions, except per share amounts

As Reported

Adjusted¹

2021

2020

2021

2020

Total Revenues

184.9

223.3

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