Q1 2024 EZCORP Inc Earnings Call

Okay.

Good morning, ladies and gentlemen, and welcome to the Easy Corp, first fiscal quarter of 2024 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

I asked the question you will need to press Star one one on your telephone you will then hear an automated message.

<unk> raised.

Your question. Please press star one again.

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 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 at investors got 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 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 and unless otherwise identified results are presented on an <unk>.

Adjusted basis to remove the effect of foreign currency fluctuations and other discrete items.

Joining us on the call, they're easy group's Chief Executive Officer, Lucky given that Jim Jack Bowles, Chief Financial Officer, now I'd like to turn the call over to Lockheed given Lockheed.

Thanks, Jane 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.

PLO continues to grow with.

Is the highest first quarter PLO.

Bottom line net income also grew very strongly to $28 million.

Up 30% on Q1 2023.

Beginning on slide three we are a global leader in Poland, Broking, and preordered and recycled reach out.

We operate 237 stores in the U S and Latin America, having added another six stores this quarter.

The macroeconomic environment continues to be a challenge for our customer base with inflationary pressure increasing the demand for Paul.

As consumers seek cash to satisfy the short term nature.

In addition, consumers seek value by purchasing pre owned merchandise and jewelry.

Which helped that represent the more environmentally responsible way to shop.

We strive to provide an industry leading experience to our customers through continuous innovation.

Moving to slide four.

We opened five de Novo stores in Latin America, and a quad one store in Texas during the quarter.

Record setting Q1, PLO balance of 238 4 million was up 14%.

Driving a 13% increase in Psa.

When comparing the first quarter with the fourth quarter.

Assets are typically impacted by strong holiday style 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 $298 million.

Primarily due to strong cash inflows from operating activities.

Really offset by increased <unk>.

Hello, and inventory strategic investments share repurchases and new store acquisitions.

We repurchased 3 million shares and invested $58 million and founders to fund SMG acquisitions in Central America.

Slide five shows our excellent excellent financial metrics for the quarter.

With total revenues up 11% merchandise sales up 7% gross profit up 11% and adjusted EBITDA are up 21%.

Strong consumer demand and excellent customer service continues to propel PLO and PSC.

14% and 13% respectively.

Turning to our key business strategies for Q1 on slide six.

We continue to strengthen our core <unk> 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.

80, plus reward members grew to $4 2 million globally with one 4 million people transacting in Q1.

Almost evenly split between the U S and Latin America.

Across all geographies transact with transacting customers increased 4%.

Okay members are at the core of our operating theme of people Paul and passion.

We are committed to investing in recruitment retention and incentive is 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 that training career development and recruitment processes.

Innovation and growth are critical to our future.

Online payments grew $8 6 million to $23 million in the U S.

We launched online App features to securely safe 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 pick up in store initiatives expanding to 23 additional stores in Houston.

Furthermore, we enhanced Max corn luxury e-commerce capabilities on ebay.

Slide seven.

During the quarter, we sold one 4 million <unk> and general merchandise and jewelry items and provided critical financial services to customers in the one hundreds of local communities in which we serve.

We are excited to share that Newsweek recognized <unk> as one of America's greatest workplaces for diversity.

This study highlights the large and mid sized companies recognized by their employees the dedication to supporting a diverse workforce.

Thank you Nicole we foster an environment that values diversity inclusion and development for all with initiatives promoting affinity groups in the U S and Latin America and hunting diversity awareness.

<unk> inclusive of compensation and more.

We launched an inaugural round of local giving which included U S district's 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 event at local food banks.

The background of the company is a passionate productive tenure and committed team members and we continue to find ways to enhance their experience.

We promote circular economy with a more affordable sustainable shopping experience for our customers.

Always working to improve their experience with innovations in our digital platforms proprietary caused system and loyalty program.

I'd now like to turn the call over to Tim Johnson, our CFO to provide more detail on our financial results Tim.

Thanks Lucky.

Slide nine details our consolidated financial results for the first quarter.

Hello ended the period at $238 4 million up 14% on a year over year basis, which is the highest first quarter in <unk> history.

<unk> revenue was up 13% over last year with growth driven by increased same store PLO growth and new stores.

Inventory turnover was strong at two nine times with HTM inventory up one 3%.

Merchandise sales were up 7% to $174 6 million.

It sounds gross profit was up 6% due to increased sales with flat margins as we move forward.

An increase in <unk>.

IHG inventory low.

It was another solid quarter with consolidated EBITDA of $46 4 million.

Up 21% driven by higher AAC offset by a 7% increase in expenses.

Turning to our U S pawn segment on slide 10.

Total revenues were up 12% to $217 4 million.

Which is the highest in our history.

Assets increased 12% driven by an increase of 14% in PLO and 8% in inventory.

Strong corn demand and excellent customer service continues to drive <unk>, which in turn drives inventory.

Our U S store count has grown to 530 stores with one store acquired in the quarter.

PLO jewelry competition is up 100 basis points due to continued operational focus on this category, which also helped drive the 6% increase in average line size.

Inventory general merchandise composition is up 200 basis points, driven by an increase in handbags shoes and tools.

PLO growth of 14% drive the PUC increase of 14% year over year.

On the retail side of the business I mentioned to US sales were up 6% with Nexstar sales gross profit up 4% with a 100 basis point drop in merchandise sales margin.

U S pawn EBITDA for the quarter was $50 $2 million up 19% from the prior year due to higher AUC, partially offset by 5% increase in expenses.

Okay.

Turning to our Latin American <expletive> segment on Slide 13, total revenues were up 9% to $75 $5 million, which was the highest first quarter in our history.

Earning assets increased 1% driven by an increase of 11% cappiello offset by the inventory.

Down 11%.

Our store count in Latin America has increased by 5% in the quarter to 707 stores in four countries.

PLO jewelry compensation is up 500 basis points with an operational focus on growing this category, especially in Mexico.

This jewelry compensation increase is also driven average line size up.

Great.

Hey, Hello Rose, 11% due to improved operational performance and continued strong corn demand.

<unk> was up 8% year over year, driven by both same store PLO growth and new stores.

On the retail side of the business merchandise sales gross profit was up 14% with merchandise sales up 8%. In addition to a 200 basis point improvement in sales margin.

EBITDA for the quarter was $11 3 million up 16% on the prior year due to higher AAC, partially offset by 10% increase in expenses.

The expense increase was primarily due to the increase in labor driven by minimum wage in head count higher store count and rate.

Looking forward on a consolidated basis, we should take PLO continued to grow on a seasonal basis with PSC following suit.

We continue to focus on strong inventory turnover and limiting aged general merchandise, while we remain committed to expense management, we expect to see expenses increase on a sequential basis, primarily due to ongoing inflationary pressures and filling vacancies in our stores.

Our focus on growing quality PLO, optimizing inventory management seamless integration and the highest customer service should continue to drive strong financial results in our business.

I will now turn it over to Lucky for a few closing remarks.

Thanks, Tim.

In closing I want to thank our <unk> team for delivering an outstanding quarter of operating and financial results for our stakeholders.

We made more total revenue and more merchandise styles than in any quarter in the company's history.

<unk> is at the highest level for any quarter first quarter ever.

Our balance sheet is hardly robust we continue.

To invest in our team and technology, while also buying back shares.

It's been an excellent start to 2024, and we look forward to driving enhanced value for all about shareholders. So the remainder of the year.

That we will open the call for questions operator.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for you.

Your name to be announced shall withdraw your question. Please press star one again.

One moment for our first question.

Okay.

Okay.

Yes.

Our first question comes from Ebrahim.

<unk> with Jefferies. Your line is open.

Good morning, guys can you guys hear me.

Gotcha.

Alright. Thank you. My question is I was wondering if you could talk about the progress mainly to costs associated with the workday transition I do have a follow up.

Sure.

Let's start with the strategic part.

We launched a bunch of module through the quarter, starting with human resources.

And look it's a company wide redefining platform. It just gives our people much more access to information.

Much better.

All sorts of resources on incentives <unk> rewards on all things to do with human results and so it really is a sort of a company redefining suddenly internally a company redefining platform.

With respect to cost him.

Europe they'll walk through that.

Sure.

Processes.

Kind of be over.

Two years of implementation, but we do have some.

Double costs, some in last year and some will be in this year.

We were running both systems, we have successfully launched the HR part of Workday and continue to work on implementing the finance part which will be.

<unk> to be launched this financial year.

There are.

Operator: Good morning, ladies and gentlemen. Welcome to the EC Corp first fiscal quarter 2024 earnings call. At this time, all participants are in a listen-only mode.

Some double costs coming through this year, there will be a slightly higher ongoing cost in FY 'twenty five.

Operator: Later, we will conduct the question and answer session. To ask a question, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Also be offsets.

Items on maintenance and things like that which will might have come down.

Operator: To withdraw your question, please press star 11 again. As a reminder, this call may be recorded. I'd now like to turn the conference over to Jean-Marie Young in best relations with the three-part advisors. Please go ahead, Jean.

We're still going through the process of calculating all those items and we all share that in future periods.

Alright. Thank you for that color my follow up is on efficiency improvement do you guys believe this will be maintained throughout the <unk>.

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.easycorp.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.

Fiscal year. Thank you.

Ed.

Turnover was increased.

So I just wanted some more color on that thank you.

And you don't take the whole.

Yes.

Definitely quarter one quarter.

Quarter, one and quarter two are definitely the most efficient quarters with the ability to sell through during the holiday season, and then Valentine's and tax season definitely.

Definitely provides.

Clear our sales strategies.

So we are attempting to keep those turn over numbers higher.

Then we did last year.

But not necessarily on a sequential basis.

Jean-Marie Young: And as noted in our presentation materials, and 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 EZ Corps' Chief Executive Officer, Lockie Gibbons, and Tim Juddman's Chief Financial Officer. Now I'd like to turn the call over to Lockie Gibbons. Okay?

Got it perfect. Thank you.

Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for any to be announced.

Our next question comes from Madison Kennon with Canaccord Genuity. Your line is open.

Lockie Gibbons: Thanks, Jane, and good morning, everyone. We will begin fiscal 2024 with an outstanding quarter. Total revenue of $293 million was the highest in the company's history. Our PLO continues to grow and was our highest first quarter PLO ever. On the bottom line, that income also grew very strongly to $28 million, up 30% on Q1 2023. Beginning on slide three, we are a global leader in pawnbroking and pre-owned and recycled retail. We operate 1,237 stores in the U.S. and Latin America, having added another six stores this quarter. The macroeconomic environment continues to be a challenge for our customers, with inflationary pressure increasing the demand for porn, and consumers seek cash to satisfy their short-term needs. In addition, consumers seek value by purchasing pre-owned 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 four.

Good morning, guys. This is Matthew on for Brian Walker.

Our questions.

First for our storage network.

Can you hear me.

Yes got you.

Okay. Okay.

So first <unk>, we found that merchandise sales in December and January it came in a bit below internal expectations that your actual results.

Much better thank you.

What's going on there and is that a function of high internal expectations. As you try to continue this record breaking performance.

Thanks.

Got it thanks Madison.

Yes, sorry, we do have high expectations internally about continuing to grow.

The business and so those expectations.

Thanks.

A little bit higher in our stores and our stores continue to hit.

With those targets and many of the stores and.

Really incentivizing them.

To hit those targets and share and share of the spoils sorry, it's been great to see.

Lockie Gibbons: We opened five De Novo stores in Latin America and acquired one store in Texas during the quarter. Our record-setting Q1 PLO balance of $238.4 million was up 14%, driving a 13% increase in PFC. When comparing the first quarter with the fourth quarter, earnings 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 the PLO balance. Our cash balance was up to $219 million, primarily due to strong cash inflows from operating activities, partially offset by increased PLO and inventory, strategic investments, share repurchase, and New Store Acquisition. We repurchased $3 million of shares and invested $15 million in founders to fund SMG acquisitions in Central America.

So that's definitely something that some of that win when you ask.

Somebody internally, they really thinking about.

The budget number or not what happened last year.

It's been a great way of encouraging our teams to continue to hit these are record numbers that we present.

To add to that medical I think it's been a really strong quarter, it's well it depends on what region, you're in what store manager you're asking.

But on the whole we had high expectations, we met those expectations really strong growth year on year.

And as we said in the robot.

Hi, Dave merchandize sales quarter.

We're really pleased with Abbott.

Selling gone in the first quarter across all regions.

Awesome and then if I could ask another one for the EZ pass rewards enrollment.

Lockie Gibbons: Slide five 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 continue 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 systems, and e-commerce capabilities to drive faster transaction times and deliver better customer service. EZ Plus 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%.

We really appreciate it.

So all disclosures on the royalty engagement, specifically the one formula for <unk>.

Members or one part of that transaction in the quarter.

Roche proportion improved versus last year.

Additional clarity on that.

Okay great.

The answer to that yes, the number of the.

The number of transacting customers.

<unk>.

Is the.

The number of trying to think of customers is improving from a.

Percentage.

Basis.

We will we will have to get back to you on that one.

No problem.

Just one more for me.

Can you tell us a little color on what categories are outperforming.

Are you seeing new faces in the stores.

From a category perspective.

You definitely which we've talked about a number of quarters is saying that luxury segment, though it's small.

Lockie Gibbons: Team members are at the core of our operating theme of people, porn, 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.

Continue to grow especially in the.

Handbag and.

<unk> section.

Being a good way of driving traffic into the stores.

Obviously from an overall perspective jewelry has been growing.

And in PLO com.

Composition.

The last 12 months across all our drug fees and as Shaun why.

Average.

Loan size has also increased.

Lockie Gibbons: 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 apps each year, securely saved payment card details with promotional giveaways, and 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, pick up in-store initiative expanding to 23 additional stores in Houston. Furthermore, we enhanced Max Pawn's luxury e-commerce capabilities on eBay. Slide seven.

Its Madison, it's been a really deliberate strategy on the jewelry side, particularly in Latin America, where we're taking the store teams, how big an opportunity that category, particularly in Mexico.

So we've seen really strong growth in that category.

Given that such a big category in the U S. We've got high expectations for Latin America going forward.

Great.

A couple more questions, but ill hop back in the queue.

Okay.

Thanks for those questions.

Thank you as a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Lockie Gibbons: 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 EZ Corp as one of America's greatest workplaces for diversity. This study highlights the top large and mid-sized companies recognized by their employees for dedication to supporting a diverse workforce. At EasyCorp, 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 insecurity, empowering young people, or engaging in poverty intervention. In addition, we hosted company-sponsored volunteer events at local food banks.

And we have a follow up from the line of Madison Cowen with Canaccord Genuity Madison Your line is open.

Thanks, guys.

So we.

We don't really think you have like a normal tax season for 2019.

How should we think about CLO balances there Steven.

And I think tax season. Thanks.

Got it.

Yes.

The taxation is going to be interesting this year.

Which is back to a normal tax season like we had in 2019.

Which we there's nothing to say that at once.

That's why I didn't say the definitely going to see the normal paydowns or CLO balances it really depends on how far those balances get pay down.

And then.

If they don't get pay down.

That much.

Tim Juddman: The backbone of the company is our passionate, productive, tenured, and committed team, and we continue to find ways to enhance their experience. We promote the circular economy with a more affordable, sustainable shopping experience for our customers, always working to improve their experience with innovations in our digital platforms, proprietary POS system, and loyalty program. I'd now like to turn the call over to Tim Judman, our CFO, to provide more details on our financial results. Kim.

The there is probably also going to be the ability to tell a little bit more as well.

So I think our business the ability to.

Help the customer both on the loan side.

And on getting discounted goods to buy allows us to.

Go through that a quarter or two quite well during tax season, but how that revenue is going to be made up it's really dependent on.

How much the customer is going to get back in.

Tim Juddman: Thanks a lot. Slide 9 details our consolidated financial results for the first quarter. PLO ended the period at $238.4 million, up 14% on a year-over-year basis, which is the highest first quarter in easy-coffee history. PC revenue was up 13% over the last, with growth driven by increased same-stool PLO growth and new stools. Inventory turnover was strong at 2.9 times, with AGM inventory at 1.3%. Merchandise sales were up 7% to $174.6 million.

Thanks for your time.

Awesome and then after a catch up year in 2023.

Can you give any additional color on store and G&A expenses for 2024.

Okay.

The store expenses.

Definitely.

Definitely under what we expected this quarter.

We do see those increasing on a sequential basis some of it in <unk>.

Tim Juddman: Merchandise sales gross profit was up 6% due to increased sales with flat margins as we focused on increasing turnover and keeping HGM inventory low. It was another solid quarter with consolidated EBITDA of $46.4 million, up 21%, driven by higher PSE offset by a 7% increase. Turning to our U.S. porn segment on slide 10.

Fleiss generate.

Some of it in Latin America, with the government mandated minimum wage increases and other benefit increases.

Causing some of the effects to keep guidance right.

Awesome and then last question for me.

How should we think about your investment in founders longer term outlooks.

Tim Juddman: Total revenues were up 12% to $217.4 million, which is the highest in our history. Earning assets increased 12%, driven by an increase of 14% in PLO and 8% in inventory. Strong pawn demand and excellent customer service continue to drive PLO, which in turn drives inventory growth. Our US store count has grown to 530 stores, with one store acquired in the quarter.

Question about share buybacks from investors.

Looked at it.

We've found as is.

High performing business, it's now the third largest pawnbroking China inland.

North American region. So it's very very quickly become quite a force, which is what we what we'd hope so.

Happy with that investment, it's producing even better return than.

And then we expected by a headboard stores this quarter and in Central America, which is exciting.

Seven stores.

The way, we think about it long term is that we are.

Tim Juddman: PLO jewelry composition is up 100 basis points due to continued operational focus on this category, which also drove the 60% increase in average loan size. Inventory General Merchandise Composition is up 200 basis points, driven by an increase in handbags, tools, and tools. PLO growth of 14% drove the PSE increase of 14% year over year. On the retail side of the business, merchandise sales were up 6%, with merchandise sales gross profit up 4%, with a 100 basis point drop in merchandise sales in March. U.S. poor and EBITDA for the quarter was $50.2 million, up 19% from the prior year due to higher PSE partially offset by a 5% increase.

Very happy with the structure.

We've already obviously already spoken to investors about its potential.

Potential acquisition going forward and it could be a source of really high growth for our shareholders. So we're really happy with the team with their performance as I said, they're delivering better returns than.

What we'd expected when we invested.

And I think ultimately could could prove to be a great acquisition for us potentially but for now we are there to support them in their growth plans.

Lots of very exciting investment for us.

Sure.

On the share buybacks, obviously, we're trying to balance.

Our own growth with share buybacks.

We've listened to shareholders, obviously and we assess this every quarter, but we continue to buy back stock we've done that very consistently.

Tim Juddman: Turning to our Latin American porn segment on slide 13, total revenues were up 9% to $75.5 million, which was the highest first quarter in our history. Earning assets increased 1%, driven by an increase of 11% for PLO, offset by inventory, down 11%. Our store count in Latin America increased by five in the quarter to 707 stores in four countries. PLO Jewelry Composition is up 500 basis points with an operational focus on growing this category, especially in Mexico. This jewelry composition increase has also driven the average loan size up by 8%.

Across every quarter.

We see it as another good return on investment.

We believe that our stock is very very cheap and so we are balancing buying that back with really significant growth opportunities that we think we have.

Just even in the regions in which we operate so we're trying to strike a balance between growth and scaling up our cash flows in our store base.

With what we see as a good return on investment in buying back stock.

Hopefully, we've been very consistent with that message and consistent of course across quarters, but well.

The great news.

We've had a phenomenal start to the year and outstanding quarter.

And we are trying to balance those growth opportunities with share buybacks.

Tim Juddman: PLO rose 11% due to improved operational performance and continued strong pawn demand. PSE was up 8% year-over-year driven by both same-store sales growth and new stores. On the retail side of the business, merchandise sales gross profit was up 14%, with merchandise sales up 8% in addition to a 200 basis point improvement in sales margins.

Great. Thanks, so much guys and congrats on Macquarie.

Thanks, Matt.

That concludes the question and answer session. At this time I would like to turn the call back to Lucky given for closing remarks.

Thank you operator, thank you everyone for joining today.

And thank you to ethane.

They have produced an outstanding quarter of financial and operating results for all of our shareholders and what we're really looking forward to the rest of this year to continue to continue on this path.

Lockie Gibbons: Even dark for the quarter was $11.3 million, up 16% on the prior year due to higher PSE partially offset by a 10% increase in expansion. The expense increase was primarily due to the increase in labor driven by the minimum wage and headcount, high store count, and Looking forward, on a consolidated basis, we should see PLO continue to grow on a seasonal basis with PSE following suit. We continue to focus on strong inventory turnover and limit A's general merchants. While we remain committed to expense management, we expect to see expenses increase on a sequential basis, primarily due to ongoing inflationary pressures and filling vacancies in our stores. Our focus on growing quality PLOs, optimizing inventory management, seamless integration, and enhanced customer service should continue to drive strong financial results in our business.

Thanks, everyone for joining today and we'll speak to you through the course of the day.

Thanks.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Okay.

[music].

Okay.

Okay.

[music].

Thank you.

Lockie Gibbons: I will now turn it over to Lockheed for a few closing remarks. Thanks, Tim. In closing, I want to thank our EasyCorp team for delivering an outstanding quarter of operating and financial results for our stakeholders. We made more total revenue and more merchandise sales than in any quarter in the company's history. PLO is at the highest level for any first quarter ever, and our balance sheet is highly robust.

Operator: We continue to invest in our team and technology while also buying back shares. It's been an excellent start to 2024, and we look forward to driving enhanced value for all of our shareholders for the remainder of the year. And with that, we will open the call for questions, Operator. Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: One moment for our first question. Our first question comes from Ibrahim Kargbo, with Jefferies. Your line is open. Good morning, guys. Can you guys hear me?

Lockie Gibbons: Yep, gotcha, Abraham. Hey, thank you. My question is, I was wondering if you could talk about the progress and maybe the cost associated with the workday transition. I do have a follow-up. So let's start with the strategic part.

Lockie Gibbons: You know, we launched a bunch of modules this quarter starting with human resources. And look, it's a company-wide, redefining platform, you know, it just gives our people much more access to information, it gives much better, you know, all sorts of resources on incentivization, on rewards, and all things to do with human resources. So it really is a sort of a company redefining platform, certainly internally.

Tim Juddman: With respect to cost, Tim, do you want to walk through that? Sure, so this process is going to be over two years of implementation, so we do have some double costs, some from last year and some will be in this year, where we're running both systems. We've successfully launched the HR part of Workday and continue to work on implementing the finance part, which will be..., slated to be launched this financial year.

Tim Juddman: There are some double costs going through this year. There'll be a slightly higher ongoing cost in FY25, but there'll also be an offset, items on maintenance, and things like that which will make it come down. We're still going through the process of calculating all those items, and we'll be able to share that in future periods. All right. Thank you for the color.

Lockie Gibbons: My follow-up is on efficiency improvement. Do you guys believe this will be maintained throughout the fiscal year? Thank you. I see that turnover was increased. So I just wanted some more color on that.

Tim Juddman: Thank you. If you want to take... Yep, definitely quarter one and quarter two are definitely the most efficient quarters with the ability to sell through during the holiday season, and then Valentine's and tax season definitely provide a clearer sales strategy. So we are attempting to keep those turnover numbers higher than we did last year but not necessarily on a sequential basis. Got it. Perfect. Thank you. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: Our next question comes from Madison Kellenan with Kinnacore Genuity. Your line is open. Good morning, guys. This is Madison Callanan. I'm on behalf of Brian McNamara.

Operator: Thanks for taking our questions. First, for our store check, we're sorry, can you hear me? Yep, gotcha. Yes, all good.

Lockie Gibbons: Okay, okay. So for our store check work, we found that merchandise sales in December and January came in a bit below internal expectations, but your actual results look much better. If you talk about what's going on there, and is that a function of high internal expectations as you try to continue this record-breaking performance, or is it something else?

Lockie Gibbons: Thanks. Thanks, Madison. Yes, so we do have high expectations internally about continuing to grow the business, and so those expectations are set a little bit higher in our stores. And our stores continue to hit hit those targets in many of the stores and are really incentivizing them to hit those targets and share the spoils. So it's been great to see. So that's definitely some of that when you ask somebody internally, they're really thinking about... their budget number and not what happened last year.

Lockie Gibbons: It's been a great way of encouraging our teams to continue to hit the record numbers that we present. To add to that Madison, I think it's been a really strong quarter; it depends on what region you're in, what store manager you're asking, but on the whole, we had high expectations, we met those expectations, really strong growth year on year, and, as we said in the remarks, it's our highest ever merchandise sales quarter, so we're really pleased with how the selling went in the first quarter across all regions. It was awesome. And then, if I could ask another one, for the EV Plus rewards enrollment, we really appreciate the additional disclosures on the rewards engagement, specifically the 1.4 million out of 4.2 million members, or one-third that transacted in the quarter. Did that proportion improve versus last year? Or any additional color you can give us on that would be great. Do you know the answer to that?

Tim Juddman: Yeah, the number of transacting customers, the number of TransLink customers, is improving from a percentage basis. We will have to get back to you on that. No problem. And just one more for me. Can you give us a little color on what categories are outperforming? Are you seeing new faces in the stores?

Lockie Gibbons: From a category perspective, you definitely, which we've talked about a number of quarters, are seeing that luxury segments, though they're small, continue to grow, especially in the handbags and shoes section. It's been a good way of driving traffic into the stores. Obviously, from an overall perspective, jewelry has been growing in PLO composition over the last 12 months across all our drug fees and has shown why our average loan size has also increased. It's Madison, it's been a really deliberate strategy on the jewelry side, particularly in Latin America, where we're teaching the store teams how big an opportunity that category is, particularly in Mexico, so we've seen really strong growth in that category and given it's such Great. I have a couple more questions, but I'll hop back into queue.

Lockie Gibbons: Thanks for listening. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: To withdraw your question, please press star 11 again. And we have a follow-up from the line of Madison Callanan with Cantercourt Genuity. Madison, your line is open.

Tim Juddman: Thanks, guys. So we don't really think you've had a normal tax season since 2019. How should we think about PLO balances this season, both entering and exiting tax season? Thanks. The tax season is going to be interesting this year if it switches back to a normal tax season like we've had in 2019, which we there's nothing to say that it won't but we'll wait and see the definitely going to see the normal paydowns of PLO balances it really depends on how far those balances get paid down and then if they don't get paid down that much There's probably also going to be the ability to tell a little bit more as well.

Tim Juddman: So I think our business, the ability to help the customer both on the loan side and on getting discounted goods to buy, allows us to... go through that our second quarter quite well during tax season, but how that revenue is going to be made up is really dependent on how much the customer is going to get back in text return. And then after the catch-up year in 2023, can you give any additional color on store and GINA expenses for 2024? The store expenses, definitely. We were definitely under what we expected this quarter. We do see those increasing on a sequential basis, some of it inflationary, some of it in Latin America with government mandated minimum wage increases and other benefit increases causing some of the effects to keep going on.

Tim Juddman: And then last question for me, how should we think about your investment in Founders longer term? We're just getting questions about share buybacks from investors. Thanks. Look, The Founders is a, you know, high-performance business. It's now the third largest pawnbroking chain in the North American region.

Lockie Gibbons: So it's very, very quickly become quite a force, which is what we'd hoped it would be. So, you know, we're very happy with that investment. It's producing even better returns than we expected. They have bought stores this quarter in Central America, which is exciting. So they're now at 97 stores.

Lockie Gibbons: The way we think about it long-term is that we are very happy with the structure that we've obviously already spoken to investors about, but it's a potential acquisition going forward and could be a source of really high growth for our shareholders. So we're really happy with the team and with their performance. As I said, they're delivering better returns than what we'd expected when we invested, and I think, ultimately, it could prove to be a great acquisition for us, potentially. But for now, we are there to support them in their growth plans, and it's a very exciting investment for us. On the share buyback side, obviously, we're trying to balance our own growth with share buybacks. We listen to shareholders, obviously, and we assess this every quarter, but we continue to buy back stock.

Lockie Gibbons: We've done that very consistently across every quarter, and we see it as another good return on investment. We believe that our stock is very, very cheap, and so we are balancing buying that back with the really significant growth opportunities that we think we have, just even in the regions in which we operate. We're trying to strike a balance between growth and scaling up our cash flows and our store base with what we see is a good return on investment in buying back stock.

Lockie Gibbons: Hopefully, we've been very consistent with that message and consistent across quarters, but the great news is we've had a phenomenal start to the year, an outstanding quarter, and we are trying to balance those growth opportunities with share buybacks. Thanks so much, guys, and congrats on the quarter. Thanks, guys. That concludes the question and answer session. At this time, I would like to turn the call back to Lockheed Gibbon for closing remarks.

Lockie Gibbons: Thank you, Operator. Thank you, everyone, for joining us today, and thank you to our team. I think they have produced an outstanding quarter of financial and operating results for all of our shareholders, and we're really looking forward to the rest of this year continuing on this path. So thanks, everyone, for joining us today, and we'll speak to you through the course of the day. Thanks. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thanks for watching!