EZCORP Inc. Q2 2023 Earnings Call

I'd now like to turn the conference over to Jean Marie Young Investor relation with three part advisors. Please go ahead Jim.

Thank you and good morning, everyone.

During our prepared remarks, we will be referring to slides that are available for viewing or download from our website at investors that easy Corp dotcom.

Before we begin I'd like to remind everyone. This conference call as long as the presentation slides contain certain forward looking statements regarding the company's expected operating and financial performance for future periods.

Here are the key driver.

What about 17.

202 9 billion.

<unk> sales were up 12 eight.

I used to say all the time to Dubai.

The macroeconomic environment continues to support increased coal demand for our product.

Including providing environmentally conscious containment with a more sustainable way to shop.

Our team's relentless commitment to serving our customers with passion and respect and to access.

Operationally in all that we do continues to drive strong operating and financial results.

Beginning on slide three we are a.

Global leader in all broking and priorities and restocking of retail.

We operate 1100 $90 towards these.

In Latin America, and strategic investments in adjacent businesses.

<unk> geographic footprint worldwide.

The macroeconomic environment continues to be a challenge for our customer, but with inflationary pressures and economic uncertainty drove increased demand.

Consumers are seeking value for money and environmentally responsible alternative driving increased demand for second hand goods.

We strive to be the best most convenient experience for our customers through continuous innovation, while positively impacting the environment and the communities in which we serve.

Moving on to slide four.

We provide outstanding customer service.

Project positive so.

So that we can offer the best options for our customers.

Slide five shows how we progressed on our three year strategic goals.

We believe we have the most passionate productive tenured and committed team in the industry and we continue to find ways to motivate and retain them.

Our team drive that success.

And our intense focus on employee training and recognition as a result of install level vacancies at less than 3% across all geographies.

We continuously strive to improve both our team member and customer experience across all that we did it.

Customers continue to sign up for a points based loyalty program, which has grown to $2 9 million customers.

In Mexico, we are improving the retail showroom, so often offer an even better shopping experience.

Turning to our key financial themes in Q2.

On slide six.

CLO or the most significant driver of revenue and earnings was up 17% year over year, which was a record for the second quarter.

Total revenue for the quarter was $253 8 million.

Up 17%.

EBITDA was $33 million for the quarter up 4%.

We are focused on better execution in Latam to bring down inventory and get closer to the levels seen in the United States.

Cash on the balance sheet increased over the first quarter due to increased merchandise sales and the <unk>.

<unk> paid out a PLO during tax season.

On slide seven EBITDA margin was 13% for the last 12 months ending March 2023.

But then in the law.

Last 12 months ending March 2022, with the U S driving the growth.

Recently, EBITDA margin flattening due to inflationary pressures.

On slide eight we talked about strengthening our core by focusing on people and technology.

Ultimately drive earnings.

We are focused on recruitment retention inclusion and incentive innovation to ensure that our team is highly engaged.

Implementing processes to improve the bench strength of our field team and improving recruiting strategies that resulted in a vacancy rate of less than 3% as I mentioned earlier.

We believe that we are leading the industry in technology and process efficiency.

On slide nine innovation and growth is the third pillar of our three year strategy and we continue to execute our plan.

1 million quite giveaway promotion in the U S aimed at acquiring and engaging easy plus loyalty members. So.

7000 entry and $200.

Increased website visits to our core brands by 13% over the previous quarter.

We opened 11 and Argos stores in Latin America and.

In the Las Vegas area, we opened two de Novo at dose one Max pawn store in one easy point, though.

Slide 10 outlines our ESG highlights for the fiscal second quarter.

Our business by its very nature makes it the neighborhood with Aqua and a compelling component of the local circular economy.

We sold over $1 4 million pre owned items in the quarter, including toxic consumer electronic options, such as computers, and Tvs and phone as well as tools musical instruments household goods and jewelry.

The mold from landfills.

When you're down recycling anyways processing in the U S. We do not use batteries distribution facilities or heavy trucking.

Diversity and inclusion are a significant focus and we continue to have excellent engagement and a black impoundment affinity groups in the U S.

Women's empowerment affinity growth in both the U S and Latin America.

We celebrated employee appreciation day globally, and we have revamped the mission of our easy Cold Foundation.

Turning to our U S pawn operations on slide 12.

Store expenses increased by 4%, primarily due to light weighting on the tour activity higher store count and to a lesser extent expenses related to our loyalty program.

<unk> grew 14% for the second quarter or 12% on a same store basis, with a resulting P&C up 21%.

Our focus on growing PLO selling what we are in divesting acknowledging to gain efficiency and enhance customer service continues to drive our improved financial results.

We are consistently delivering strong operating and financial results for our stakeholders.

We achieved these milestones with a robust balance sheet and strong liquidity, providing the platform to capitalize upon the increasing demand for our core products.

The disposal of inventory as quickly as we can at an appropriate margin side, because I think the outlook remains the same at the low end of that range as we continue to make sure that the turns remain strong.

So I think youll see more of that from us.

And second hand goods, you can see that we're really up pretty strongly this quarter again.

Excellent.

I think people will have some comments here, but I think on the store base question.

Based on the current activity.

It's really strong progress against the period last year with them.

It was very very tough to get people into the stores in terms of staff members. So look question, Mike really good about the stocking leveled out so yes, it will be about inflationary impact on that store base.

Tim I don't know if you want to add anything on that or just moved to the longer term kind of operating margin question.

Yes.

Definitely we will see some inflationary pressures hitting next quarter.

On a sequential basis across the across the store network and G&A.

Yes.

The big.

Quench will rise in expenses is.

Slowly diminishing as the inflationary pressures are really almost all set in but there is still a little bit more movement to go.

And on a margin title margin perspective on our bottom line.

We definitely see that we've still got room to move on the on the revenue line R&D a little bit more.

Room on the expense line can move up and so as as that revenue goes up we think the margins.

We'll start improving next year.

At this stage at this year, it's probably relatively stable.

Perfect I appreciate all the color congrats on the nice quarter again.

Yes.

Okay.

Thank you thanks.

Thanks for the question. Thank you.

Thank you. The next question comes from Brian Mcnamara of Canaccord Genuity you May proceed.

Hey, good morning, guys. Congrats on the strong results and thanks for taking our questions.

So first off I'm curious if you guys are seeing any tangible benefit from the recent high profile regional bank failures and the tightening of lending standards, while your core customers likely.

Bank or Underbanked is this leading to some new customer acquisition of folks perhaps on the fringes.

Okay.

Perhaps.

It's a good thought.

Look you can see that our core demand is increasing you can see that.

Our loan balances significantly up and I think there's a whole variety of reasons, including the macro environment inflationary pressure interest right gas prices.

Definitely the tightening of credit from from competitive products like installment.

Installment lending payday title.

Their own audits.

The failures of first Republic.

Silicon Valley Bank by diagnostics.

Usually that is a coffee.

Really a different customer base.

It's not a lot out of the question that we would be seeing some incremental growth.

But I think it's probably those are the factors that are really driving and I'll go to slide truthfully.

All people and our strategies and our store in our rewards program and our customer service I think is probably the biggest drop verbal.

So secondly, PLO was down less than 2% sequentially compared to your typical kind of minus double digit given seasonality, which is incredible result in our opinion is that just the tax refund timing or is there underlying strength on top of that I guess for example, how would that look today from a seasonality standpoint.

Okay.

Yes, I think I think tax season is the largest issue at play you see a lot of other companies have announced the same the same thing.

I think that is the largest reason but yet.

All of our strategies, our operating strategies and our initiatives to better learn at the counter to retain customers I think is definitely taking hold.

Usually it's must be to paydown from tax season, So that was definitely a benefit for us this quarter.

And then finally are you seeing any improvement in the acquired stores in Mexico, where you cited some weakness in Q1 in terms of aged inventory and merchandise margins. Thank.

Thank you.

Yeah, we're definitely definitely thank you, Brian and thanks for the questions.

Definitely seeing progress in the Mexico acquisition.

We've got new leadership down there.

I think better retention of people and afterwards, firstly and Thats that is usually the leading indicator to improved financial results.

Concentrating sorry, much on bench strength on the promote ability of store managers or assistant managers.

And really retaining team members down there is starting to see some significant traction.

We're confident that that then is as it did in the U S last year that then.

<unk> foods into better selling of aged inventory better lending of the counter.

On most metrics, we're seeing improvement.

Acquisitions down there so we're pretty excited about it.

Yeah.

Okay.

Good luck guys.

Thanks, Thank you.

And with that we will conclude our time of Q&A.

I would now like to pass the conference back over to Rocky given for any closing remarks.

Thanks, operator, and thank you all for joining the call. It's obviously a very good quarter again.

And we look forward to talking to you all in the one on ones later on today and tomorrow.

Bye bye.

And with that we will conclude today's call. Thank you for participating you may now disconnect your line.

Now disconnect your line.