Q4 2022 EZCORP Inc Earnings Call
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Good morning, ladies and gentlemen, welcome to the easy Corp, fourth quarter and full year fiscal 'twenty change to earnings call. At this time, all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, this call maybe recorded.
I'll turn the conference call over to Jean Marie Young Investor Relations with <unk> Advisors. Please go ahead Jean.
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. I think that's just that easy Corp dotcom.
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 Companys current expectation.
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 and unless otherwise identified results are presented on an adjusted.
<unk> to remove the effect of foreign currency fluctuations and other discrete items joining us on the call today are E. C Corp's, Chief Executive Officer, Lucky, Kevin and Tim judgments, Chief Financial Officer, now I'd like to turn the call over to Lucky given lucky.
Thanks, Jay and good morning, everyone.
Our team continues to consistently execute on the strategic plan put in place at the end of fiscal 2020.
We ended fiscal 2022 with an excellent fourth quarter I want to thank our passionate and productive team members for their continued focus on operational excellence, which has driven a consistently very strong financial results.
All lines offsetting the key driver of our business.
$210 million a quarter in the non <unk> percent year over year increase.
Hello is once again a cost level ever.
Merchandise gross profit margin was 37%, which is within our targeted range with aged general merchandise continues to be less than 1% of total inventory.
Beginning on slide three.
We are a global leader in Poland Broking in pre owned and rethought of retail we operate 1100 75 stores in the U S and Latin America with strategic investments in adjacent businesses, which expand our geographic footprint worldwide.
Across our best store growth, we opened two co products to our consumers.
Thanks Omar.
Second hand goods.
Sgro economic environment continues to be a challenge for our customer base.
License refreshes increasing interest rates.
Gas prices.
Going to your credit from alternative lenders drive increased demand for four months.
The demand the secondhand goods also increases.
See with increasingly seek value for money and environmentally responsible alternative.
Our goal is to provide the best most convenient experience for our customers through continuous innovation, while positively impacting the environment and the communities in which we set it up.
Moving on to slide four.
We continue to invite people, Poland and passion as our cooperating thing.
We noted that our guidance team drives our success. So we are committed to investing in recruitment retention and centralization.
We strive to be the best option for our customers, while providing outstanding customer service.
<unk> been well positioned store footprint deferral.
<unk> digital platform for.
Proprietary pulse system, and importantly, ample liquidity on our balance sheet to provide <expletive> loan across all regions in which we operate.
Slide five shows our progression toward our three year strategic goals.
We have the most passionate productive and committed team in the industry and we continue to find ways to motivate and retain them by enhancing their experience.
In addition to our team we are also committed to enhancing customer experience.
We are modernizing the operations and a points based loyalty program and online payment option continue to improve and grow.
Turning to our key financial themes for Q4 on slide six.
As mentioned the most significant driver for revenue and earnings was up 19% year over year with an associate at 21% increase in PSC.
As you can see yoga financial metrics were positively impacted.
Total revenue for the quarter was 234 million up 22% due to higher sales in PSC that EBITDA was $24 6 million up 33%.
Very pleasingly U S pawn EBITDA was 43% up year over year.
Cielo on a same store basis continues to remain strong.
<unk> pre COVID-19 financial year 2019 levels.
Same store sales and merchandise sales gross profits are up.
Hot styles and continued focus on effective inventory management.
The reduction in cash on the balance sheet was the result of an increase of an increase in earning assets.
Additionally, we were able to repurchase $2 billion worth of shares in the quarter.
And an additional $1 million in October .
On slide seven total expenses increased primarily due to labor cost.
The percentage of gross profit for the year expenses decrease from 86% to 80%.
Store expenses also increased year over year, primarily due to labor increases and rent associated with lease renewals. The decrease as a percentage of gross profit from 73% to 68% compared to the previous year.
<unk> increased $3 $1 million year over year, but remained flat as a percentage of gross profit of 12% as we increased our investment in marketing and digital activity.
On slide eight we talk about strengthening the call with a primary focus on people and systems.
Ted has driven excellent operating and financial results.
As mentioned, we are focused company wide recruitment retention inclusion and centralization.
Our team is enthusiastic and engaged.
In addition to investing in our people we continue to invest in technology. We believe we are leading the industry in this area.
Our technology and digital initiatives are improving our operational efficiency at the store level and the ease of use of our products and services for our customers.
For example investments in our store networks resulted in a second straight quarter without it.
And overall pause availability of 99, 9%.
We continue to invest in Riyadh protecting a pause.
In a micro services architecture for increased agility and flexibility.
In addition, we launched mobile technology in our stores that automates manual processes for reviewing laws, so having madison upon and providing immediate team member feedback and tried it.
On slide nine.
And growth is the third pillar of our three year strategy and we continue to execute on our plan.
We launched our <unk> plus loyalty program in Honduras, and El Salvador, the fourth quarter, and we now have over $1 9 million customers enrolled.
About $1 4 million last quarter.
We also collected $9 $7 million in online payments this quarter.
7 million last quarter.
Moving payments online not only freed up time for our team members to service new business, but also provides our existing customers convenient options polo and lightweight and promotes engagement and loyalty.
Additionally, we introduced the ability for our Mexico customers to view their loan and latter ways online.
We received more than 15000, Google reviews, this quarter, averaging fourth non stop in the U S and Latin America.
Website visits for the full line brands were up 16% under the previous quarter and we believe we are attracting new customers, while making shopping more convenient.
From an inorganic perspective, we opened 16 de Novo stores in Latin America during the quarter.
Claude nine stores in the Houston area totaled.
Continued continue to be disciplined in evaluating acquisition opportunities in the pipeline remains robust.
We increased uptake in CCD from 41%, 42% during the quarter and in November we received a cash dividend from CTV for $1 $7 million and further increased to 44% with the net outlay of $2 million with its increased position.
Slide 10 outlines how ESG highlights for the fiscal year.
Our bid lift by very nature makes us a neighborhood recycler.
Telling component of the local circular economy.
We are a significant recycler of secondhand goods and hundreds of local neighborhoods.
We sold over $5 6 million pre owned items in fiscal 2022, including top consumer electronic volumes, such as computers televisions salaries.
As well as tools musical instruments household goods and jewelry saving them from landfill.
We use sound recycling and waste processing in the U S. We do not use factories distribution facilities or heavy trucking.
Importantly, we provide an essential simple regulated and transparent financial results for those who are underserved by traditional sources.
Diversity and inclusion are a significant targets.
This year, we launched slap empowerment and women's empowerment affinity groups, which have all had excellent engagement from our people.
Slide 11 as mentioned, we continue to invest in improving the experience of our team members and customers.
Oil trading and development program talent review and succession planning processes, new long term cash incentive programs in our stores.
And reinforced focus on employee health and safety of some of our initiatives.
Offering customers with online payment options have successfully reduced the need to travel some of those.
We're always in search of innovative ways in which we can meaningfully impact our team members.
And the communities in which we serve.
I'd now like to turn over the call to Tim Johnson, Chief Financial Officer to provide more details on our financial results.
Thanks Rocky.
Slide 12 details our consolidated financial results for the fourth quarter.
<unk> ended the period at $209 5 million up 19% on a year over year basis, which is the highest need to cope with St.
Revenue was up 21% over last year with growth driven by both increased same store PLO growth and acquisitions.
Merchandise sales was up 20%, but as expected margins fell back to 37%, which is within our normal range.
Our focus on selling inventory in the first 90 days has kept inventory turnover was strong at two six times it.
It was another great quarter with consolidated EBITDA of $24 6 million up 33%.
For the full year consolidated EBITDA improved to $112 9 million up 66%.
Turning to our U S corn operations on slide 13.
<unk> rose, 20% driven by the continued focus on our enhanced corn operating model and better serving our customers' needs.
AUC was up 25% year over year, primarily driven by same store PLO growth.
On the retail side of the business merchandise sales were up 18% with merchandise sales gross profit up 8% with a 300 basis point drop in sales margin as expected.
Store expenses increased 9% due to labor in line with tour activity as well as an increasing rental expense.
U S pawn EBITDA for the quarter was $33 7 million up 43% on the prior year.
For the full year U S pawn EBITDA improved to $139 6 million up 45%.
Slide 14 focuses on our Latin American operations.
PLO grew 15% for the fourth quarter or 13% on a same store basis, with resulting PSC up 9%.
Merchandise sales was up 22% and up 20% on a same store basis.
Merchandise sales gross profit was up 10% due to increased offset by margin down 300 basis points.
So our expenses were up 10% and up 5% on a same store basis.
Mainly due to increased labor in line with Saar activity as well as an increasing rental expense.
For the fourth quarter, Latin America pawn EBITDA improved by.
$1 million.
For the year, Latin American corn, EBITDA improved to $31 4 million up 33%.
We began our board approved three year $50 million.
Buyback program this quarter repurchasing $2 million worth of shares with an additional $1 million worth of shares in October .
We continue to execute these programming and opportunistic in a responsible way.
Into consideration general market conditions liquidity and capital needs and the availability of attractive alternative investment opportunities.
Looking forward on a consolidated basis.
We should see PLO levels continue to increase beyond these record levels as we move back to pre COVID-19 seasonality as well as seeing the effects of an improved business model.
As we have suggested in prior quarters, we are likely to continue you see further reduction in sales gross margin as inventory levels increased in line with cielo and sales discounting practices continue to return to normal levels.
Also as we have seen this quarter expense growth is likely to continue on a sequential basis is inflationary and wage pressures continue to rise.
We are pleased that the execution on our strategic initiatives continues to drive our strong and consistent financial results each quarter.
We are excited to see our business continue to break records CLR levels and achieve earnings results above what we had pre COVID-19 with a superior operating model that has put us in an exciting position to scale the business for me.
I will now turn it over to Lucky for a few closing comments.
Thanks, Tim.
Congratulations to our <unk> team for another outstanding quarter and full year.
We are consistently delivering very strong operating and financial results for our shareholders driving growth through de Novo store buildout and disciplined acquisitions.
All while maintaining a strong liquid balance sheet and returning capital to our shareholders.
Every day, we continue to work tirelessly toward improving the experience of our employees and our customers in an environmentally responsible way and deliver enhanced value for our shareholders.
And with that we'll open the call for questions operator.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad. If you talk to ensure your question. Please press star followed by two.
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Our first question comes from Brian Nagel Oppenheimer, Brian Your line is I Couldnt. Please go ahead.
Hey, good morning.
Congratulations guys nice quarter nice year.
Thanks, Brian .
So the first question I have I guess, maybe a little bit longer term in nature, but.
Just from a from a strict.
<unk> standpoint, I mean, you've clearly taken significant strides here.
Position the business better we're seeing the results of that.
What still needs to happen where are the opportunities either from an investment standpoint, or just an ongoing kind of reposition restructure type opportunities.
I think look we look at it in two ways the organic stuff the organic improvement that we work on every single day and if you look at the three different regions I think there's opportunities in all three regions on a on a store level basis. So we can still attract more customers to retain more customers.
<unk> in all of our stores.
Thank you.
The organic side of it that we just need to continue to operate better and we see real opportunities there.
And then you've got the inorganic stuff, which is which is broken up by de Novo and acquisitions. So I think on the de Novo side.
There is just significant opportunity in Latam to build more stores.
And get.
Superior returns doing it.
Then as we said.
On the call I think there is significant pipeline fill for acquisition.
Look I think all in all as both organic and inorganic opportunities here.
But we we have challenges as all companies do around cost and inflation.
So we're doing our best to manage that.
The brand still plenty of opportunity out there for us.
Okay. That's helpful. And then my second question just.
So we talk a lot about that and it's obviously been trending quite well.
You highlight that is a real key measure the health of the business is there any how should we think about the growth from that.
As you grow with the business or is there some type of like penetration number we should look at that when it gets even healthier determined when that when that figure gets even healthier.
Look were at record levels.
At the moment as we settle Nicole. This is this is the best deal out of the company's ever had so we're in we're in uncharted territory, but.
Our objective is to continue to grow that we've come off clearly.
Outstanding year.
Where we've grown beyond all expectations.
The analysts.
And now as I set out our objective is to continue to improve that.
In Latin America, I think there is <unk>.
<unk> and Skype for real step change growth down there.
In the U S. That's a more mature market.
And as I said, we're seeing the highest level and on a store basis. So look.
It's tough to say, it's tough to give you an exact number but I would say that our objective is to continue to grow it.
Most significantly in Latin America, I would expect then that in the U S. Given it's a more mature market.
Thanks, a lot congratulations again.
Good on you Brian Thanks for the questions.
Thank you as another reminder, if you wish to submit your question. Please press star followed by one on your telephone keypad now.
Our next question comes from John Hecht of Jefferies. John Your line is open. Please go ahead.
Hey, guys good morning, and congratulations on a good quarter.
Just I guess, a little bit of a follow up.
On the last question.
Obviously, they've been strong and trending positively through awhile.
<unk> been trending a little better in Lat am.
And is that just a function of similar trends in the U S, meaning inflationary pressures in kind of the lapping of either social work well for stimulus.
Or is there other things going on in Latam that are driving that as well.
I think you're right.
I think there is.
Macro factors at play here, but I think we've also done great things internally down in Latin America to improve our business.
We've got really strong leadership in place down there.
And I think still a long way to go but I think I think your diagnosis is rod.
Okay and then there is we've seen some of the bigger retailers domestically announced that they've seen.
Customers changing their purchasing behavior.
You talked about bargain shopping driving some of your results.
Any comments there or are you seeing changes in either the borrower or the retailer behavior the customer's behavior at this point.
In different macro trends or certain things youre doing from an execution perspective.
And look we're seeing the same all of the same commentary from the big retailers.
They are really seeing it.
Shifting demand from from their customers our sales continue to be quite robust.
I think more people are coming to buy second hand, because it's tough out there and our margins are holding up really nicely. So.
We're seeing the big box retailers.
Every week announcing downgrades in difficult conditions.
We're just seeing.
Particularly done in Latin America, as well were seeing really robust sales and in maintaining our margins in that in that target range. So I think what's happening is.
People people are buying secondhand and looking for a bargain and Theyre also particularly young people.
Becoming really environmentally conscious and so buying second hand is not only.
Value for money.
I actually think it's cool because you are doing what's good for the environment.
So we're quite pleased with what we're seeing from a sales perspective.
Okay and then that's very helpful. And then last question.
Your store retail margins have been very strong.
Obviously migrating just kind of things normalize, but very strong.
The scrap margins are a little bit more volatile.
I'm sure there's some reasons behind that and I am wondering if you can you talk about what are the factors that move.
Scrap margins on a near term basis.
Okay.
John .
Scrap margins have moved up about a little bit definitely.
Dom and market has moved up and down on this on the scrapping side.
As you've seen over the years.
Trying to sell much more of that.
Jewelry in store.
And do much less scrapping.
And so that is that has shifted towards it.
Probably the lower grade stuff being scrapped and the high right now being sold in the stores and so those margins have come down over time.
And likely to remain quite quite low because of that change.
Yes.
Great. Thanks for the color guys.
Thanks, John .
Thank you as a final reminder, if you wish to submit your question. Please press star followed by one on your telephone keypad now.
We currently have no further questions and therefore this concludes today's call. Thank you for joining you may now disconnect your lines.
Yeah.
Yes.