Q2 2024 EZCORP Inc Earnings Call
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Operator: Good morning, ladies and gentlemen. Welcome to EZCORP's second fiscal quarter 2024 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 may be recorded. I'd now like to turn the conference over to Jean Marie Young, Investor Relations, and her three part advisors. Please go ahead, Jean.
Good morning, ladies and gentlemen, welcome to the U C Corp, second fiscal quarter 'twenty 'twenty four 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.
Speaker Change: As a reminder, this call may be recorded I would now like to turn the conference over to Jean Marie Young Investor Relations with three part advisors. Please go ahead Jim.
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.ezcorp.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. Additionally, 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.
Speaker Change: 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.
Jean Marie Young: Investors got easy Corp dotcom.
Jean Marie Young: 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.
Jean Marie Young: 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.
Jean Marie Young: And as noted in our presentation materials and unless.
Jean Marie Young: Otherwise I can't decide.
Jean Marie Young: I'll start presented on an adjusted basis.
Jean Marie Young: The effect of foreign currency fluctuations and other discrete items.
Jean Marie Young: Joining us on the call today are EZCORP's Chief Executive Officer, Lachy Given, and Tim Jugmans, Chief Financial Officer. Now I'd like to turn the call over to Lachy. Okay?
Lockheed: Joining us on the call today are easy courts, Chief Executive Officer, Lucky, Kevin and Kim Draglines, Chief Financial Officer, now I'd like to turn the call over to Lockheed get Lucky.
Lachlan P. Given: Thanks, Jane, and good morning, everyone. In the second quarter of fiscal 2024, EZCORP produced another very strong set of operating and financial results for our shareholders. Total revenue of $280 million was up 8%, and PLO of $232 million was up 13%, both the highest for the second quarter in the company's history. From a bottom line perspective, Adjusted Net Income was up 21%.
Lachlan P. Given: Thanks, James and good morning, everyone.
Lachlan P. Given: The second quarter of fiscal 2020 cool easy caucus produced another very strong set of operating and financial results for our shareholders.
Lachlan P. Given: Total revenue of $290 million was up 8%.
Lachlan P. Given: $232 million was up 13%.
Lachlan P. Given: Most of the Hearts of the second quarter in the company's history.
Lachlan P. Given: From a bottom line perspective, adjusted net income was up 21%.
Lachlan P. Given: Beginning on slide three, we are a global leader in pawnbroking and pre-owned and recycled retail. We operate 1,246 stores in the U.S. and Latin America, having added another nine stores this quarter. The macroeconomic environment remains challenging for our customers. With rising living costs, economic uncertainty, and less availability of consumer credit, customers are increasingly using pawnbroking services to satisfy their short-term cash needs. In addition, these customers are seeking better value for money retail options and so are purchasing pre-owned merchandise, which also has the additional benefit of being more environmentally friendly.
Lachlan P. Given: Okay.
Lachlan P. Given: Beginning on slide three we are a global leader in Poland, Broking and pre oriented recycled great job.
Lachlan P. Given: We operate 246 stores in the U S and Latin America, having added another nine stores this quarter.
Lachlan P. Given: The macroeconomic environment remains challenging for our customer base.
Lachlan P. Given: Rising living costs, economic uncertainty and less availability of consumer credit.
Lachlan P. Given: Ms are increasingly using Poland broking services to satisfy the short term cash needs.
Lachlan P. Given: In addition, these customers who are seeking better value for money retail options and so purchasing pre owned merchandise.
Lachlan P. Given: It also has the additional benefit of being more environmentally friendly.
Lachlan P. Given: We strive to provide an industry-leading experience for our customers through continuous innovation and excellent customer service. Moving on to slide four, we opened nine DeNovo stores in Latin America and consolidated five stores during the quarter. In the U.S., we acquired six stores and consolidated one. A record-setting Q2 P.O. The low balance of $232 million was up 13%. However, when comparing the second quarter with the first quarter, earning assets typically decrease. She's paid out of balances during tax refund season in the U.S.
Lachlan P. Given: We strive to provide an industry leading experience for our customers through continuous innovation and excellent customer service.
Lachlan P. Given: Okay.
Lachlan P. Given: Moving on to slide four we opened nine de Novo stores in Latin America.
Lachlan P. Given: Consolidated five stores during the quarter.
Lachlan P. Given: In the U S. We acquired six doors in consolidated one.
Lachlan P. Given: Our record setting Q2, PLO balance of $232 million.
Lachlan P. Given: Was up 13%.
Lachlan P. Given: When comparing the second quarter with the first quarter.
Lachlan P. Given: Typically decrease.
Lachlan P. Given: You did pay down of balances during tax refund season in the U S.
Lachlan P. Given: This year we saw a mild pay-down similar to last year. A cash balance of $229 million provides us with substantial liquidity to fund additional organic earning asset growth, to capitalise upon inorganic opportunities as they arise, to research shares, and to fund near-term debt maturities if required. Slide 5 shows the continuous, consistent improvement in our financial metrics. Total revenues are 8%, merchandise sales up 6%, gross profit up 10%, and Adjusted EBITDA up 7%.
Lachlan P. Given: This year, we saw a mild pay down similar to last year.
Lachlan P. Given: Our cash balance of $229 million.
Lachlan P. Given: AIDS us with substantial liquidity to fund additional organic earning asset growth.
Lachlan P. Given: To capitalize upon inorganic opportunities as they arise.
Lachlan P. Given: Repurchase shares and to fund near term debt maturities if required.
Lachlan P. Given: Slide five shows the continuous consistent improvement in our financial metrics with total revenues up 8%.
Lachlan P. Given: Merchandise sales up 6%.
Lachlan P. Given: Profit up 10% and adjusted EBITDA were up 7%.
Lachlan P. Given: Strong consumer demand and excellent customer service continues to propel PLO and PSC, both up 13%. Turning to our key business strategy highlights for Q2, on slide 6. We continue to strengthen our core pawn operations, investing in PECORN technology. In Latin America, we improved PLO growth by focusing on the fundamentals in our stores and by reinforcing business model best practices. We continue to modernize our point-of-sale backend and launched Workday Scheduling to enhance both productivity and efficiency, as well as team member work-life balance. EZ Plus Rewards members grew to 4.6 million globally, with 1.3 million transacting in Q2, almost evenly split between the U.S. and Latin America. Across all geographies, unique customs increased by 2%.
Lachlan P. Given: Strong consumer demand and excellent customer service continues to propel PLO and PSC both up 13%.
Lachlan P. Given: Turning to our key business strategy highlights for Q2 on slide six.
Lachlan P. Given: We continued to strengthen our core pawn operations investing in people and technology.
Lachlan P. Given: Latin America, we improved PLO growth by focusing on the fundamentals get outdoors and by reinforcing business model best practices.
Lachlan P. Given: We continue to modernize our point of sale backend and launched workday scheduling to enhance both productivity and efficiency as well as team member work life balance.
Lachlan P. Given: Easy plus rewards members grew to $4 6 million globally with $1 3 million transacting in Q2, almost evenly split between the U S and Latin America.
Lachlan P. Given: Across all geography unique customers increased 2%.
Lachlan P. Given: 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 members remain highly engaged. We hosted our second annual career week focused on growth opportunities for all team members across the organization and launched a variety of workday talent. On the innovation and growth side, online payments grew $9.1 million to $21.8 million in the U.S., and we expanded online payments to all stores in Mexico.
Lachlan P. Given: Team members are at the core of our operating theme of people, Paul and passion, we are committed to investing in recruitment retention and incentive inflation to ensure that our team members remain highly engaged.
Lachlan P. Given: We hosted our second annual Korea week focused on growth opportunities for all team members across the organization and launched a variety of workday talent tools.
Lachlan P. Given: On the innovation and growth.
Lachlan P. Given: Align payments grew $9 $1 billion to $21 $8 million in the U S and we.
Lachlan P. Given: Expanded online payments to all stores in Mexico.
Lachlan P. Given: The Buy Online, Pick Up in Store pilot initiative has expanded to 100 stores in the U.S., and we are seeing early success in e-commerce activities in our luxury porn business in Las Vegas, where this channel is helping drive sales for the category. Slide seven provides some of our sustainability highlights during the quarter. We sold 1.3 million pre-owned general merchandise and jewelry items and provided critical financial services to customers in need in the hundreds of local communities in which we serve.
Lachlan P. Given: The buy online pickup in store pilot initiative has expanded to 100 stores in the U S.
Lachlan P. Given: And we are seeing early success in e-commerce activities now luxury colon business in Las Vegas, where this channel is helping drive sales of the category.
Lachlan P. Given: Slide seven provides some about sustainability highlights during the quarter.
Lachlan P. Given: We sold $1 3 billion pre owned general merchandising jewelry items and provided critical financial services to customers in need in the hundreds of local communities in which we serve.
Lachlan P. Given: At EZCORP, we foster an environment that values diversity, inclusion, and development for all, and we are driving many important initiatives across the organization, enhancing diversity awareness, encouraging inclusive conversations, and more. We launched an EZPride Affinity Group and grew all existing US and LATAM Affinity Groups, EZ Inclusive Conversations, and Internal Conversations. The backbone of the company is our passionate, productive, tenured, and committed team members, and we continue to find new ways to enhance their experience.
Lachlan P. Given: And he'd be coke, we foster an environment that values diversity inclusion and development for all and we are driving many important initiatives across the organization enhancing diversity awareness encouraging inclusive conversations and more.
Lachlan P. Given: We launched an easy pride affinity group.
Lachlan P. Given: Peru, all existing U S and Latam affinity groups easy inclusive compensations and internal conflicts conversations.
Lachlan P. Given: The backbone of the company is that passionate productive tenure and committed team members and we continue to find new ways to enhance their experience.
Lachlan P. Given: Community engagement is also critical to the culture we are building at EZCORP. We are working with 9 US charities whose work closely aligns with our stated goals of supporting financial literacy, eradicating food insecurity, empowering young people to achieve success, and Poverty Intervention. I would now like to turn the call over to Tim Jugmans, our CFO, to provide more details on our financial results.
Lachlan P. Given: Community engagement is also critical to the culture, we are building an easy call.
Timothy K. Jugmans: We are working with non U S charity. He's worked closely aligns with our stated goals of supporting financial literacy erratic.
Timothy K. Jugmans: Eradicating food and security.
Timothy K. Jugmans: Barring young people to achieve success in poverty intervention.
Timothy K. Jugmans: Slide 9 details our consolidated financial results for the second quarter. PLO ended the period at $232 million, up 13% on a year-over-year basis, which is the highest second quarter in EZCORP history. PC revenue was also up 13% over last year, with growth driven by both increased same-store PLO growth and new stores. Infantry turnover was strong at 2.9 times, with age-general motor disease at 2.3%.
Timothy K. Jugmans: I would now like to turn the call over to Tim judgments.
CFO: CFO to provide more details on our financial results Tim.
Speaker Change: Thanks, a lot.
Timothy K. Jugmans: Slide nine details now.
Timothy K. Jugmans: <unk> financial results for the second quarter.
Timothy K. Jugmans: PLO ended the period at $232 million up 13% on a year over year basis, which is the highest second quarter in <unk> history.
Timothy K. Jugmans: <unk> revenue was also up 13% over last year with growth driven by both increased same store PLO growth and new stores.
Timothy K. Jugmans: Inventory turnover was strong at two nine times with ice general merchandise.
Timothy K. Jugmans: Two 3%.
Timothy K. Jugmans: Merchandise sales were up 6% to $161.1 million. Gross profit was up 4% due to increased sales and flat margins as we focus on increased turnover and keeping age general merchandise inventory low. It was another solid quarter with consolidated EBITDA of $36.2 million, up 7%, driven by higher PSE offset by a 10% increase in expense. Turning to our U.S. porn segment on slide 10.
Timothy K. Jugmans: Merchandise sales were up 6% to $161 $1 million.
Timothy K. Jugmans: Merchandise sales gross profit was up 4% Q2 increased sales and flat margins as we focus on increased turnover and keeping aged general merchandise inventory low.
Timothy K. Jugmans: It was another solid quarter with consolidated EBITDA of $36 $2 million up 7%.
Timothy K. Jugmans: Driven by higher PSC offset by a 10% increase in expenses.
Timothy K. Jugmans: Turning to our U S pawn segment on slide 10.
Timothy K. Jugmans: Total revenues were up 10% to $207.6 million, which was the highest second quarter in our history. Earning assets increased 10%, driven by a PLO increase of 11% and 9% in investment. Strong pawn demand and excellent customer service continue to drive PLO, which in turn drives industry growth. Slide 11 provides a map showing the U.S. states in which we operate.
Timothy K. Jugmans: Total revenues were up 10% to $207 6 million, which was the highest second quarter in our history.
Timothy K. Jugmans: Earning assets increased 10% driven by a PLO increase of 11% and non sandy inventory.
Timothy K. Jugmans: Strong demand and excellent customer service continues to drive PLO, which in turn drives <unk> correct.
Timothy K. Jugmans: Slide 11 provides a map showing the U S in which we operate.
Timothy K. Jugmans: Our US store count has grown to 535 stores, with six stores acquired and one store consolidated in the quarter. PLO jewelry composition is up 100 basis points due to continued operational focus on this category, which also drove the 9% increase in average loan size. Inventory General Merchandise Composition is up 300 basis points, driven by an increase in handbags, shoes, and tools. Slide 12 provides a snapshot of the U.S. segment financial performance; PLO growth of 11% drove the PSE increase of 14% year-over-year.
Timothy K. Jugmans: Our U S store count is growing to 535 stores with fixed stores acquired in one store consolidator in the quarter.
Timothy K. Jugmans: Hello, jewelry competition is up 100 basis points due to continued operational focus on this category, which also drove the 9% increase in average line size.
Timothy K. Jugmans: Inventory general merchandize composition is uptrend or basis points, driven by an increase in handbags shoes and tools.
Timothy K. Jugmans: Okay.
Timothy K. Jugmans: Slide 12 provides a snapshot of the U S segment financials.
Timothy K. Jugmans: PLO growth of 11% and drive the PSA increase of 14% year over year.
Timothy K. Jugmans: On the retail side of the business, Merchandise Sales were up 6%, and Merchandise Growth Profit was up 2% with a 100 basis point decrease in Merchandise Sales margin. U.S. porn EBITDA for the quarter was $43.2 million, up 7% due to higher PFC, partially offset by a 12% increase in expenses.
Timothy K. Jugmans: On the retail side of the business merchandise sales were up 6% with much Joss sounds great profit up 2% with 100 basis point decrease in merchandise sales margin.
Timothy K. Jugmans: U S pawn EBITDA for the quarter was $43 $2 million up 7% due to higher PFC, partially offset by a 12% increase in expenses.
Timothy K. Jugmans: Okay.
Timothy K. Jugmans: Turning to our Latin American segment on slide 13, total revenues were up 4% to $72.6 million, which was the highest second quarter in our history. Earning assets increased 11%, driven by a PLO increase of 19% and an inventory increase of 2%. Our store count in Latin America increased four in the quarter to 711 stores in four countries. PLO Jewellery Composition is up 600 basis points with an operational focus on growing this category, especially in Mexico.
Timothy K. Jugmans: Turning to our Latin American segment on Slide 13, total revenues were up 4% to $72 6 million, which was the highest second quarter in our history.
Timothy K. Jugmans: Earning assets increased 11% driven by a lot of increase of 19% and the inventory increase up 2%.
Timothy K. Jugmans: Yeah.
Timothy K. Jugmans: Our store count in Latin America increased four in the quarter to 711 stores in four countries.
Timothy K. Jugmans: Payload jewelry competition is up 600 basis points with operational focus on growing this category, especially in Mexico.
Timothy K. Jugmans: This jewelry composition increase has also driven average loan size up 9% on a constant currency basis. Additionally, our PLO balance increased significantly in the LATAM region by 19%. This was driven primarily by improved operational performance by our team as well as continued strong pull and demand in lead markets. PSE was up 10 cents, driven by both same store PLO growth and new stores. On the retail side of the business, Merchandise Sales Gross Profit was up 8%, with merchandise sales up 6%, in addition to a 100 basis point improvement in sales margin.
Timothy K. Jugmans: This jewelry competition increase that's also drove an average loan size up 9% on a constant currency basis.
Timothy K. Jugmans: Our payroll our balanced increased significantly in the Latam region by 19%. This was driven primarily by improved operational performance by our team as well as continued strong demand in these markets.
Timothy K. Jugmans: PSC was up 10% driven by both same store PLO growth and new stores.
Timothy K. Jugmans: On the retail side of the business merchandise sales gross profit was up 8% with merchandise sales up 6%. In addition to a 100 basis point improvement in sales margin.
Timothy K. Jugmans: EBITDA grew very strongly for the quarter to $9.4 million, up 23% on the prior year. This was due to high FEC partially offset by a 7% increase in expenses, with same store expenses increasing 2%. Looking forward, on a consolidation basis, we should see PLO continue to grow on a seasonal basis with BSC following suit. We continue to focus on strong inventory turnover and limited-age 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, filling vacancies in our stores, and year-over-year store count growth.
Timothy K. Jugmans: EBITDA grew very strongly for the quarter to $9 $4 million up 23% on the prior year.
Timothy K. Jugmans: This was due to higher <unk>, partially offset by a 7% increase in expenses.
Timothy K. Jugmans: Same store expenses, increasing 2%.
Timothy K. Jugmans: Looking forward on a consolidation basis, we should say PLO continued to grow on a seasonal basis with PSC following suit.
Timothy K. Jugmans: We continue to focus on strong inventory, China and limited H general merchandise all of it.
Timothy K. Jugmans: We remain committed to expense management, we expect to see expenses increase on a sequential basis, primarily due to ongoing inflationary pressures filling vacancies out stores and year over year store count growth.
Timothy K. Jugmans: Our focus on growing quality PLOs, optimizing inventory management, improving systems and processes, and delivering excellent customer service should continue to drive strong financial results in our business. I'll now turn it over to Lachie for a few closing remarks.
Timothy K. Jugmans: Our focus on growing quality, PLO, optimizing inventory management, improving systems and processes and delivering excellent customer service should continue to drive strong financial results in our business.
Lachie: I'll now turn it over to Lucky for a few closing remarks.
Timothy K. Jugmans: Thanks.
Lachlan P. Given: In closing, I want to thank our EZCORP team for delivering another outstanding quarter of operating and financial results for our stakeholders, with record Q2 total revenues and PLO. We are very pleased with the strong growth this quarter in our LATAM sector. We can see real momentum building in that business with stronger execution of our enhanced operating model by our teams, producing improving results across almost all financial and operating metrics. It has been an excellent first half of 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. (inaudible)
Lachie: In closing I want to thank our easy called team for delivering another outstanding quarter of operating and financial results for our stakeholders with record Q2 total revenues in PLO.
Lachlan P. Given: We are very pleased with the strong growth this quarter in our Latam segment.
Lachlan P. Given: We can see real momentum building in that business with stronger execution of our enhanced operating model buyout team producing improving results across almost all financial and operating metrics. It.
Lachlan P. Given: It has been an excellent first half of 2024, and we look forward to driving enhanced value for all of our shareholders for the remainder of the year.
Lachlan P. Given: And with that we will open the call for questions.
Speaker Change: Got it.
Operator: As a reminder, to ask a question, you will need to press star one one on your telephone to remove yourself from the queue. You may press star one one again. Please stand by while we compile the Q&A; our first question comes from the line of John Hecht, of Questions, please.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.
John Hecht: Our first question.
Operator: Comes from the line of John Hecht of Jefferies. Your question. Please John.
John Hecht: Good morning. Thanks, guys, for taking my questions. You've added a few stores each quarter in LATAM and in the U.S. And it sounds like there's been small acquisitions and then some organic buildout, too. Yeah, I'm wondering if you could give us some characteristics of the pipeline. Are there any, you know, consolidation opportunities that are worth noting? What geographies would those be in, and then where are you focused on organic expansion?
John Hecht: Yes. Good morning, Thanks, guys for taking my questions.
John Hecht: You've added a few stores each quarter in Nevada, and in the U S and it sounds like Theres been small acquisitions, and then some organic build out too.
John Hecht: I'm wondering kind of if you could give us some characteristics of the pipeline is are.
John Hecht: Are there any.
John Hecht: Consolidation opportunities that are worth, noting what geographies with those be and then where are you focused on organic expansion.
Lachlan P. Given: Thanks, John. Good morning.
Speaker Change: Thanks, John and good morning.
Lachlan P. Given: Look, I think you can see that we've been pretty consistent in adding stores, as you say. I think the pipeline, it's always been pretty strong, particularly in Latin America. I think there's, you know, lots to do in those countries. In the U.S., we added stores this quarter. I don't think there are many more big acquisitions to do in the U.S. It's much more of a small consistent acquisition pipeline whereas in Latin America, you know, you've still got some pretty big chains out there that we can potentially do, but I think what we're showing is that we're disciplined about it. Well, you know, while there's still pretty big things to do out there, I think we're being disciplined on price, where in the U.S., it's much more of a steady as she goes.
Lachlan P. Given: Look I think you can tell you that we've been pretty consistently adding store side I think the pipeline is there.
Lachlan P. Given: It's always been pretty strong and particularly in Latin America I.
Lachlan P. Given: I think there is lots to do in the country.
Lachlan P. Given: In the U S. We added stores this quarter.
Lachlan P. Given: But I think there are many more big acquisitions to do in the U S. It's much more of a.
Lachlan P. Given: Small consistent acquisitions pipeline, whereas in Latin America.
Lachlan P. Given: Still some pretty big changes out there.
Lachlan P. Given: We can potentially told me, but I think what we're showing is that we're disciplined about it.
Lachlan P. Given: Well listen still pretty pretty big things to do out there I hope, we're being disciplined on price.
Lachlan P. Given: Whereas in the U S. It's much more of a steady as she goes.
Lachlan P. Given: Small but consistent.
John Hecht: Okay. The second question is, the US gross margin on retail has been very, very consistent. There's been an increase in Latium over the past couple quarters. Is that tied to mix or just different buying patterns? I'm just curious about the margin trends there.
Lachlan P. Given: Okay.
John Hecht: Second question is the U S margin gross margin in retail has been very very consistent theres been an increase in lat am I'm.
John Hecht: Over the past couple of quarters is that tied to mix or just different buying patterns.
John Hecht: And I'm, just curious about the margin trends there.
Lachlan P. Given: Thanks, John. Yes, some of it is to do with mix. We also have had much better pricing in Latin America for the last 6 to 12 months, and that's coming through in the pricing. We also are executing the business model a lot better, especially in Mexico, and that's driving some of that. So a combination of all those is really a great result.
Speaker Change: Thanks, John Yes, some of it is.
Lachlan P. Given: With.
Lachlan P. Given: Mix.
Lachlan P. Given: We also have.
Lachlan P. Given: At much better pricing in that.
Lachlan P. Given: America for the last.
Lachlan P. Given: Six months to 12 months and that's coming through in the pricing. We also are executing the business model a lot.
Lachlan P. Given: Better, especially.
Lachlan P. Given: Especially in Mexico.
Lachlan P. Given: And is driving some of that so a combination of all those.
Lachlan P. Given: It really.
Speaker Change: Great result from let's say.
John Hecht: Okay, and last question, I'm just kind of worried when you work with customer trends, you know, is there a way to think about new customers versus recurring customers and any kind of changing behavior in that front? I don't think there's any changing behavior, I think.
Lachlan P. Given: Okay.
Speaker Change: Last question I'm, just kind of worried.
John Hecht: Interested in customer trends is there a way to think about new customers versus recurring customers in any kind of changing behavior in that front.
Lachlan P. Given: I don't think there's any changing behavior. I think, you know, we're pleased with...
John Hecht: I don't think theres any changing behavior I think it.
Lachlan P. Given: We're pleased with.
Lachlan P. Given: The organic growth in customer demand, I think it's coming from both sides. We're seeing growth in loan customers, we're seeing growth in... in people buying second-hand goods. So I think it's pretty consistent across all of our regions, just core customer growth in the two things that we're doing, in the two businesses that we run, but we're seeing some nice growth as well in luxury goods, so luxury handbags, watches, jewelry; we're seeing nice growth there. So I think it's a pretty consistent picture of customer growth, both in the US and in Latin America.
Lachlan P. Given: The organic growth in customer demand I think it's coming from both sides I think growth in line customer <unk> growth.
Lachlan P. Given: And people buying secondhand goods, so I think it's been.
Lachlan P. Given: Pretty consistent across all of our regions just core customer growth and the two things that we're doing.
Lachlan P. Given: In the two businesses that we run.
Lachlan P. Given: Thanks, NAS growth as well and in luxury goods.
Lachlan P. Given: Luxury handbags watches jewelry, we're seeing nice growth there so I think it's.
Lachlan P. Given: So a pretty consistent picture on customer growth both in the U S and adding Latin America.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question.
Brian Christopher McNamara: comes from the line of Brian McNamara of Kennecott. Your line is open, Brian.
Lachlan P. Given: Comes from the line of Brian Mcnamara of Canaccord. Your line is open Brian.
Brian Christopher McNamara: Good morning, guys. Congratulations on the strong results. Thanks for taking the questions. So, you know, we observe, obviously, PLO is really strong again, despite more normal tax refunds coming through, driving loan paydowns. Is that just timing, or are you still running record PLO in May, or have you seen that typical seasonal paydown of loans?
Brian Christopher McNamara: Hey, good morning, guys. Congrats on the strong results thanks for taking the questions.
Brian Christopher McNamara: So we observe obviously PLO was really strong again, despite more normal tax refunds coming clearly driving the loan pay downs or is that just timing.
Brian Christopher McNamara: Or are you still running record PLO and or have you seen that typical seasonal pay down of loans.
Brian Christopher McNamara: So typically, that finishes at the end of March. And so you start seeing the build-up in loan balances from March. So the paydowns definitely do stop. Last year, we did see a very quick turnaround on those. [inaudible] Excellent customer service and the rewards program. We do think we're gaining market share.
Brian Christopher McNamara: Sorry.
Brian Christopher McNamara: Typically that that finishes at the end of.
Brian Christopher McNamara: At the end of March and so you start seeing the bills in loan balances from March.
Brian Christopher McNamara: Hi, I'm definitely do stock.
Brian Christopher McNamara: Last year, we did see a very quick turnaround.
Brian Christopher McNamara: And those.
Brian Christopher McNamara: And those numbers.
Brian Christopher McNamara: This year I think it's probably a little bit more normal where it slowly slowly builds.
Brian Christopher McNamara: Through this quarter.
Brian Christopher McNamara: But.
Brian Christopher McNamara: With the.
Brian Christopher McNamara: Excellent customer service and the rewards program, we do we do think we get gaining market share.
Brian Christopher McNamara: Okay, great. And then I'm assuming the buy online, pick up in store test. I think you guys started that in San Antonio, correct me if I'm wrong. I'm assuming that's going well as you're expanding it to 100 stores in Texas and Florida. I guess, what did you see out of that test or pilot or whatever that kind of gave you confidence to roll this out to more stores? And would you expect to roll this out to kind of all your US stores or all your stores in total at some point?
Speaker Change: Okay, Great and then.
Brian Christopher McNamara: I'm, assuming the buy online pickup in store test I think you guys started that in San Antonio Correct me, if I'm wrong, I'm, assuming that's going well as you're expanding it to 100 stores in Texas and Florida.
Brian Christopher McNamara: I guess, what did you see out of that cast their pilot or whatever that kind of gave you confidence to roll. This out to more stores on would you expect to roll this out to kind of all your U S stores are all your stores in total at some point.
Lachlan P. Given: Look, I think it's still early, Brian. I think we're in 100 stores now across three markets. It's, it's, we're at a point where we've got the pilot test in a place where we want it. You know, we've got photography going well now. We've got teams trained. So I think it's now that the pilots are actually happening.
Speaker Change: Look I think it's still early.
Lachlan P. Given: Ryan I think we're in 100 stores now across three markets.
Lachlan P. Given: We're at a point, where we've we've got a pilot test.
Lachlan P. Given: The place, where we want it we've got photography going going well now we've got teams trying so I think it's <unk>.
Lachlan P. Given: Now is the way the policy actually happening so I think.
Lachlan P. Given: So I think by the end of this quarter, we'll know if, you know, we've got a successful test. You know, I would like to think we can roll it out into more stores. Customers early on are seeming to like it, we're having some early success, but I think this is the quarter where we'll really know, so... We've said in the materials also that e-commerce is going pretty well in the MaxPawn business.
Lachlan P. Given: By the end of this quarter, we'll know if <unk> got a successful test.
Lachlan P. Given: I would like to think we can roll it out into most of those customers early on our saving to lock it we're having some early success.
Lachlan P. Given: I think this is the quarter, where we will really not sorry.
Lachlan P. Given: We said in our materials all star that e-commerce is going pretty well in the Mexico business.
Lachlan P. Given: You know, while that's still relatively small, we're seeing some strong early results there. So, look, I think this quarter is the quarter where we'll see if... This is the real business that we're going to roll out, but we're pretty confident that early on it looks good, but I think this time next quarter we'll have a much better idea of how it's going.
Lachlan P. Given: That's still relatively small with some strong early results of this are.
Lachlan P. Given: I think this quarter the quarter, where we will say.
Lachlan P. Given: This is this is a rail business that were going to rollout.
Lachlan P. Given: We're pretty confident.
Lachlan P. Given: Early on it looks good but I think we've told them next quarter will have a much better idea of how 'bout guy.
Lachlan P. Given: Got it. I appreciate all the incremental detail on the rewards program. I think that's really helpful for investors. Are you surprised at how successful you guys have been at kind of digitizing a very historically physical business? You've got to go to the store, you've got to negotiate and things like that. And how is that kind of overall digitization? Obviously, acknowledging it's a very, it will continue to be a very physical business kind of to date, given the initiatives you've rolled out.
Speaker Change: Got it I appreciate all the incremental detail on the rewards program I think thats really helpful for investors.
Lachlan P. Given: Are you surprised at how successful you guys have been kind of digitizing, a very historically physical but unless you had a comment on the story guys negotiate and things like that.
Lachlan P. Given: How is that kind of overall digitization, obviously acknowledging it's a very it's.
Lachlan P. Given: Continuing to get very critical business kind of to date, given the initiatives rollout.
Lachlan P. Given: Cost to be truthful.
Lachlan P. Given: I have to be truthfully honest, yes. I am quite surprised at how well it's gone. You know, we've got nearly 5 million rewards customers, so it's... Truthfully, I think it's gone a lot better than we would have thought. So it's a very large program, I think it's very successful, I think the engagement looks really strong, but as we've said to you and our shareholders a bunch of times, it's now time to really work out how we best use this customer base in terms of engaging them, giving them the best benefit that we can drive.
Lachlan P. Given: I'm quite surprised at how well, let's call it nearly 5 million rewards customers.
Lachlan P. Given: I think truthfully I think it has got a lot better than we would've thought so.
Lachlan P. Given: So it's a very large program I think its very successful I think the engagement looks really strong.
Lachlan P. Given: As we've said to you.
Lachlan P. Given: And our shareholders a bunch of times, it's now time to.
Lachlan P. Given: So really work at how we best use this customer base in terms of engaging name, giving them. The best benefit that we can that we can draw.
Lachlan P. Given: Look, I think digitisation, to answer your question, has gone a lot better than we would have believed. I think we're leading the industry, but now it's time to really work out how to best engage that customer base and drive real growth for them and for us.
Lachlan P. Given: Look I think the Digitization to answer your question has got a lot better than we would've beliefs relating to the industry.
Lachlan P. Given: But now it's time to.
Lachlan P. Given: To really work out how to best engage that customer base and drive drive real growth for them and for us.
Brian Christopher McNamara: Got it, and then perhaps one for Tim. Costs are a bit higher than we expected. What's driving that, and how should we think about costs in Q3 and the back half of the year?
Speaker Change: Got it and then perhaps one for Tim.
Tim: Costs are a bit higher than we expected, what's driving that and how should we think about costs in Q3, and the back half of the year.
Timothy K. Jugmans: Yes, we continue to invest in our teams, driving some of the costs. Obviously, in Latin America, there are also the costs that the government is instituting with increased minimum wages. A little bit on rent renewals as well, causing some of that cost to come through. Where we see the successful Advertising Rewards Program is also being successful.
Tim: Yes, we continue to invest in now.
Timothy K. Jugmans: Our teams.
Timothy K. Jugmans: Driving some of the costs, obviously in Latin America Theres also.
Timothy K. Jugmans: The costs that the government is instituting with increased minimum wages.
Timothy K. Jugmans: A little bit on ranked renewals as well.
Timothy K. Jugmans: Causing some of that cost to come through.
Timothy K. Jugmans: Where we see the successful.
Timothy K. Jugmans: Advertising rewards program.
Timothy K. Jugmans: <unk> is also.
Brian Christopher McNamara: So the cost is also increasing. So there's a couple of those things driving those costs. We do expect the costs to sequentially rise through the quarter, through Q3 and Q4. You know, these inflationary effects are still in play, as we've seen. The US government is still keeping rates steady with inflation still out there.
Timothy K. Jugmans: Being successful so the cost is also increasing.
Brian Christopher McNamara: So theres a couple of those things driving those costs, we do expect the costs.
Brian Christopher McNamara: Sequentially rise.
Brian Christopher McNamara: Through the quarter.
Brian Christopher McNamara: Through Q3 and Q4.
Brian Christopher McNamara: Obviously inflationary effects.
Brian Christopher McNamara: Really imply as we've seen.
Brian Christopher McNamara: The U S government still keeping rights steady with inflation still out there.
Brian Christopher McNamara: Got it. And then finally, thanks for taking all the questions, which are probably our most important questions relating to capital allocation, what drove the decision to pay the principal amount of your 2024 convertible notes in cash, and would you expect to do the same for the 2025s? And what other options would you consider absent, kind of repeating that? Would you consider straight debt or something like that?
Speaker Change: Got it and then finally, thanks for taking all the questions are probably our most important question relating to capital allocation what drove the decision to pay the principal amount of your 2024 convertible notes in cash and.
Brian Christopher McNamara: What do you expect to do the same for the 2025 and what other options would you consider absence kind of repeating that.
Brian Christopher McNamara: Consider straight debt or something like that.
Brian Christopher McNamara: Yes.
Lachlan P. Given: No, thank you, mate. I mean, look, I think we've been really consistent in the way we think about capital. You know, as a board, as a team, we're always looking at all alternatives. We look at equity, debt, equity link, in the capital stack. So, look, I think it's a really consistent message.
Speaker Change: Thank you, Matt I mean look I think we've.
Lachlan P. Given: Been really consistent in the way, we think about capital.
Speaker Change: Thank you.
Lachlan P. Given: As a board as a team we're always looking at all alternatives, we look at equity debt equity linked.
Lachlan P. Given: Capital stacks.
Lachlan P. Given: Look I think it's a really consistent message we are conservative in the way, we think about the balance sheet, we like to be very liquid because we are growing quickly we've got lots of.
Lachlan P. Given: We are conservative in the way we think about the balance sheet. We like to be very liquid because we're growing quickly. We've got lots of potential acquisitions that we can do at the right price; we're buying back shares, so look, we're trying to balance all of those competing or, you know, initiatives. And, you know, and we've been very clear with our investors and our shareholders that all alternatives are always on the table, but look, I think our financing strategy has been an excellent one.
Lachlan P. Given: Potential acquisitions that we can do at the right price, we're buying back shares.
Lachlan P. Given: Look we're trying to trying to balance.
Lachlan P. Given: All of those competing or.
Lachlan P. Given: <unk>.
Lachlan P. Given: And we've been very clear with our investors and our shareholders.
Lachlan P. Given: All alternatives are always on the table, but.
Lachlan P. Given: I think I think our financing strategy has been an excellent one.
Lachlan P. Given: You know, I think we are very liquid, we're very conservative, and we've got plenty of capital to go after what we think is a truly global, big opportunity, and all alternatives are on the table, and I think this quarter has been a really strong one. I think you're continuing to see strong growth in the U.S., but... I think really pleasingly we're seeing fantastic results in Latin America and I think that's been a real highlight for this quarter where we're seeing great loan growth, sales growth, and the team who are driving, particularly Mexico and Guatemala, obviously, are experiencing some really sustained and strong growth.
Lachlan P. Given: I think we are very liquid we're very conservative.
Lachlan P. Given: And we've been we've got plenty of capital to go after what we think of the.
Lachlan P. Given: Truly global opportunity.
Lachlan P. Given: And all alternatives are on the table.
Lachlan P. Given: This quarter has been a really strong one I think you're continuing to see strong growth in the U S. But.
Lachlan P. Given: Really pleasingly, we're seeing fantastic results in Latin America, and I think that's been a real highlight for this quarter, where we're seeing great loan growth sales growth and the team who are driving particularly Mexico, and Guatemala, albeit layout.
Lachlan P. Given: Some really sustain now strong growth.
Lachlan P. Given: So I think it's been a really great quarter for both businesses, the U.S. and Latin America, and I think on your question about the balance sheet, the strategy is showing that we've got the right amount of capital to grow the business both organically and inorganically. So we're really happy with the quarter. One of the big highlights is Latin America, so, you know, we're really pleased with what the team's been able to achieve down there, and we're looking at driving even stronger growth in the coming quarter.
Lachlan P. Given: I think it's been a really great quarter for both businesses. The USA in Latin America, and I think on your question on the balance sheet. This strategy is showing that.
Lachlan P. Given: We've got the right amount of capital to grow the business, both organically and Inorganically. So we're really happy with the quarter.
Lachlan P. Given: One of the big haul lot to Latin America, we're really pleased with what the team's been able to shave down there and what we're looking at driving even stronger growth in the coming quarters.
Brian Christopher McNamara: Thanks very much, guys. Best of luck.
Speaker Change: Got it thanks, very much guys best of luck.
Speaker Change: Thanks, Brian.
Lachlan P. Given: Thank you. I would now like to turn the conference back to Lachlan Given for his closing remarks, sir.
Lockheed Kevin: Thank you I would now like to turn the conference back to Lockheed Kevin for closing remarks, Sir.
Lachlan P. Given: Thank you, everyone, for joining our team at EZCORP. Thank you very much for delivering a really strong quarter, particularly down in Latin America, and thank you all for joining the call. We look forward to our one-on-ones for the rest of the day, so thanks, guys.
Lachlan P. Given: Well, thank you everyone for joining.
Lachlan P. Given: <unk>. Thank you very much for deliver delivering a really strong quarter, particularly down in Latin America and thank you all for joining the call and we look forward to.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: In our models for the rest of the diet.
Speaker Change: Thanks Scott.
Operator: This concludes today's conference call. Thank you for participating you may now disconnect.
Operator: Okay.
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Operator: Okay.
Operator: Okay.
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