Q1 2025 EZCORP Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to the Easy Corp, first quarter fiscal 2025 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.
Minder. This call may be recorded I now like to turn the conference over to Sean Mansouri.
The company's Investor relations adviser with elevate I R.
Please go ahead Sean.
Thank you and good morning, everyone. During our prepared remarks, we will refer to slides, which are available for viewing or download from our website at investors <unk> Easy Corp dotcom.
Before we begin I'd like to remind everyone that this conference call as well as the presentation slides contain.
Contains certain forward looking statements regarding the company's expected operating and financial performance for future periods.
These statements are based on the Companys 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 adjusted basis to remove the effect of foreign currency fluctuations and other discrete items.
Lockheed Given: Joining us on the call today are easy Corp's, Chief Executive Officer Lockheed given.
Tim judgments Chief Financial Officer.
Now I will turn the call over to Lucky.
Thanks, Sean and good morning, everyone.
We kicked off fiscal 2025 with another strong set of operating and financial results driven by sustained demand for fob cash pollution and affordable high quality secondhand goods.
Building on our momentum from last year, we generated another quarter of record revenue in PLO.
In Q1, we achieved total revenue of $329 7 million, marking a 10% year over year increase.
Lockheed Given: While PLO grew 16% to $292 9 million.
Our strong bottom line performance included a 12% increase in EBITDA of $53 million.
Lockheed Given: And diluted EPS up 17%.
Lockheed Given: 40%.
These results highlight our continued commitment to delivering enhanced value for our stakeholders through relentless operational execution.
Beginning on slide three we continued to be a global leader in Poland breaking at pre owned retail.
We operate 293 stores in the U S and Latin America, including toward in Argos stores added this quarter.
With the rising cost of living and limited access to credit options for many consumers the demand for our pawnbroking services continues to grow significantly.
At the same time more consumers are seeking affordable sustainable prion goods driven by a heightened focus on value conscious shopping.
Our commitment to innovation and exceptional service ensures we can effectively meet these evolving customer needs.
Moving on to slide four as I mentioned, we are going forward to now guide towards in Latin America This quarter.
Our earning assets grew 20% year over year, supporting our record PLO balance and leading to a 13% increase in PSC.
Our cash balance increased to $174 $5 million up 4 million from last quarter, driven primarily by cash from operating activities.
Lockheed Given: This was partially offset by higher earning asset capital expenditures tax payment for net share settlement of equity awards and share repurchases.
We maintain strong liquidity to support PLO growth.
All of our store expansion strategic acquisition near term debt maturities and ongoing share repurchases.
Slide five highlights the strong financial performance in the quarter showcasing the continued growth of our business the key metrics.
Q1 revenues and gross profit grew 10% year over year.
<unk> sales increased 8% and our EBITDA was up double digit for the third consecutive quarter.
Lockheed Given: As noted earlier, the strong consumer demand operational execution and exceptional customer service continues to fuel our growth.
Now turning to our key business strategy highlights for the quarter on slide six.
Im pleased to highlight the significant progress we have made in strengthening our core operations.
This achievement is a testament to the dedication and expertise of our team whose efforts have driven meaningful improvements across the business.
As a result, we have delivered strong loan growth fueled by larger average loan sizes.
Operational improvement and robust customer demand.
To enhance the customer experience by providing acceptable and flexible financing solutions for our customers. We have expanded a third party bond I'll highlight a program into all of our U S stores.
Additionally in July we launched the longer term <unk> option, which drove a 13% increase in <unk> during the quarter.
It's lightweight styles are recognized upon final, Thailand and customers now have more time to complete their payment.
This adjustment has shifted some sales into future quarters, reflecting the flexibility we've provided to better meet our customer financing.
Especially for the jewelry category.
To complement these efforts we've seen strong engagement with our easy plus rewards program, which continues to drive customer loyalty and enhance our overall performance.
In fact, our <unk> reward members accounted for 77% of all transactions for the quarter.
We also captured a 5% increase in traffic to our core pulling websites.
These metrics reflect deepening connections with our customer base and engagement across multiple platforms.
We are equally focused on investing in our team members who are the backbone of our success.
We enhanced field compensation plans to more effectively drive expected behavior.
Lockheed Given: Reward performance.
Increased retentions.
Lockheed Given: Additionally, we announced an assistant manager certification program for the U S stores to grow internal talent and strengthen operations support.
To celebrate excellence across the business, we held easier late celebration in each of our regions recognizing our top store managers that are consistent global message.
On growth mindset.
Leading expectations.
Turning to innovation and growth U S online payment collections increased more than 30% to $27 2 million for the quarter.
Similarly in Mexico digital adoption continued to rise with 15% of extensions and layaway now handled through online payments.
And bond for affordable luxury remained strong with Max pawns luxury e-commerce sales, increasing 50% largely fueled by ebay style.
Lockheed Given: As we continue to test buy online pickup in store. We also launched a new pilot program for view online buy in store.
Additionally, we are testing new SMS marketing campaigns in the U S.
Engagement with easy plus method.
Slide seven highlights our continued dedication to sustainability and community impact.
Lockheed Given: In Q1, we sold over $1 5 million pre owned items to extend their useful life and provided critical financial services to customers and the communities we serve.
We also advanced includes David through affinity groups and belonging initiatives enhance team operation and support our communities with charity donation and 461 out of the company tied volunteer time going toward nonprofit and community organizations.
With that I'll hand, the call over to Tim judgments at CFO, who will provide a deeper look at our financial results.
Yes.
Thanks, a lot.
Lockheed Given: Slide nine provides a detailed look at our consolidated financial results for the first fiscal quarter.
As Lachlan mentioned, we closed the quarter with record PLO of $282 9, million% to 16% increase year over year and up 15% on a same store basis PSC.
<unk> revenues rose, 13% year over year, primarily fueled by same store PLO growth.
Our inventory turnover rate was two seven times compared to three times with IHG M inventory, excluding out three luxury stores at one 2%.
Some of the lower inventory can be attributed to the expansion of our <unk> program in the U S as well as a greater composition of jewelry inventory in Latin America, which typically has a longer sales cycle.
While these factors contribute to the trend we are focused on improving inventory turns and are prioritizing efforts to optimize sales velocity and inventory management.
Merchandise sales increased by 8% to $192 9 million.
While merchandize gross profit grew by 4% from the prior year.
Posted another strong quarter of EBITDA margin expansion, which increased 35 basis points to 16, 1% as we continue to drive operating leverage in our business.
Moving to our U S pawn segment on Slide 10 U S revenue for the quarter was up 7% to a record $232 2 million.
Lockheed Given: Earning assets grew by 16% driven by increased in PLO and inventory.
Slide 11 includes a map of the U S States, which we operate highlighting out robot footprint of 542 stores across 19 states.
First quarter average U S loan size increased by 14% supported by 60 basis points rise in PLO jewelry competition, as well as growing gold and GM prices.
Slide 12 offers an in depth look at the U S financial performance, highlighting a 15% increase in PLO, both on total and same store basis.
This was driven by higher average loan size enhanced operational performance and sustained growing demand for <unk> services.
Lockheed Given: On the U S retail side much dots out increased by 3% and were up 1% on a same store basis, our merchandise gross margin decreased 61 basis points.
The decrease in sales margin reflects an increase in promotional activity and customer negotiation at the counter.
U S pawn EBITDA for the quarter was $55 $6 million up 11%, primarily due to higher PSC with EBITDA margin once again, expanding its 24% underscoring our focus on profitability.
Turning to our Latin American segment on Slide 13, total revenues increased 18% to $97 $5 million.
Which was a record high for the fiscal first quarter.
Earning assets increased 35% driven by a very strong PLO increase of 19% and inventory increase of 57% from the prior year, which was a historically low level.
As <unk> has grown significantly in recent quarters, we continue to focus on driving more styles at comparable pace.
We are implementing actions by systemically and operationally that we're successful in the U S that aimed to drive improvements going forward.
On Slide 14, you can see that we have expanded our presence in Latin America, and now have 741 stores opening one store in Mexico, and three stores in Guatemala during the quarter.
Hello, jewelry competition increased by 400 basis points, reflecting our continued focus on growing this category, particularly in Mexico.
As mentioned, our Latin American region saw significant PLO growth of 19% as highlighted on slide 15.
Primarily fueled by our team's strong operational performance and increased demand in the area.
PSC rose by 17% driven by same store PLO growth.
Lockheed Given: On the right outside merchandise sales grew by 19% and up 16% on a same store basis.
Merchandise gross profit increased by 11%, which was partially offset by a decrease in margin of 223 basis points.
EBITDA climbed to an impressive 20% to $14 $6 million with EBITDA margin, increasing by 14 basis points to 15%.
A quick word on our balance sheet and allocation priorities. We continue to have a robust liquidity position with $175 million of cash and $333 million of gross convertible notes on our balance sheet as at December 31, 2024.
We believe the most effective use of our cash to drive shareholder value is to use a balanced approach, which includes reinvestment in our business to drive organic growth acquisitions share buybacks and debt repayments.
We have $103 million of convertible notes that come due in May 2025, and we continue to explore several options to retire or refinance debt, including the use of existing cash traditional debt high yield debt or other equity linked instruments.
Looking ahead, we remain focused on driving organic growth across both revenue and earnings through a combination of higher PLO PSC and merchandise sales growth.
On a consolidated basis margin expected to remain at the low end of that target range of 35% to 38%, reflecting our commitment to optimizing inventory turnover and minimizing aged general merchandise.
As stated last quarter with inflation rates declining comparable to a year ago, we anticipate a moderation in some same store expense growth.
However in January we saw a minimum wage increase of six 5% to 12% enacted across Latin America.
Adjustments along with compression effects Fedex.
I ended wage increases beyond minimum wage on has resulted in salary increases to 63% of our team members in the region.
That said, we will continue investing in our team technology and store network to enhance operational efficiencies.
From a strategic standpoint, our M&A pipeline remains strong and we have consistently executed on our inorganic growth strategy.
Lockheed Given: We expect to continue expanding both within our existing markets and internationally.
Lockheed Given: These initiatives will be key drivers of our financial and operational performance in the years ahead.
Regarding our auto Janiero acquisition in our block the transaction remains pending as we continue.
Lockheed Given: Through the due diligence process.
Now I would like to turn it over so lucky for few closing remarks.
Thanks, Tim.
I want to thank our easy copay for delivering an outstanding quarter of operating and financial results for our shareholders.
Lockheed Given: We achieved another record quarter for total revenue in PLO, while continuing to drive operating leverage to expand the bottom line.
Wrong Foundation.
Rooted in core values that people pause and passion positions us for continued growth both organically and through strategic M&A.
And with that we will open the call to questions.
Later.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.
And our first question comes from Brian Mcnamara with Canaccord Genuity you May proceed.
Hey, good morning, guys. Thanks for taking the questions and congrats on the strong results a few for me.
So first off on the merchandise margin.
I think it dipped below 35% for the first time in a few years. Thanks since 2020.
Our <unk>.
Lockheed Given: Pre quarter work suggested loans would be stronger than retail sales and I think that appears to have played out is it just that is there anything else to read into there, particularly in Latam given that the two.
Hunter basis point drop year over year.
That's correct, it's definitely a very strong.
Loan growth quarter, we're definitely seeing the demand for cashing out stores from our consumers and.
We did have to negotiate a lot more in the stores.
And ill provide further discounts.
Because we do see this customer.
Less cash to spend.
Got it second question, we've gotten a lot recently is the company's exposure to undocumented immigrants in how potential deportations could impact your business is there any way to measure that I know that anything Paul needs to be kind of.
I'd and check my local police and things like that given our regulations to ensure its not stall and just any color there would be helpful.
Look I think good morning, Brian and thanks for the questions I think look we certainly had a similar question to we haven't seen any impact to this point certainly I think you've seen in this quarter's results.
As Tim mentioned, some incredibly strong lending results.
Lockheed Given: Across many regions and strong sales results. So look we haven't seen any impact yet.
Lockheed Given: We can't comment on policy of what we think is going to happen with the new with the new administration.
I think what we're focused on is what we can do.
What we can do to maximize the earnings in the business.
Look I think we're very very well set up to do that in the future.
The best way to to sort of to deal with it is is to concentrate on what we can do as I said in the store.
And to this point, we would say no impact as yet.
Great and then.
One for Tim how is the company planning for tax refund season, this year and how should investors think of Pls seasonality. I mean, obviously you have a really great PLO balance to finish off.
The calendar 'twenty four we Havent had obviously, we haven't had a normal tax season in a while so I'm curious if there's any puts or takes there that investors should be aware of.
Yes, if we look back in the last two.
Three years, even though that in Beijing normal compared to the prior years.
Lockheed Given: They may be the new normal.
Which as I showed.
Lockheed Given: Short of period of time.
Where people are receiving tax refunds.
And the.
The Delta is all gravy.
<unk> have not moved.
Those are what I've been rating.
From analysts is that is what people are assuming its going to happen.
Especially in the states we operate.
Got it.
And then you guys announced an acquisition I think in September it doesn't look like it has closed yet already narrow any anything to read into there.
No I think Tim said it said it in his remarks I think we are.
As an acquisition in Mexico.
Auto Poland business, which is a relatively new thing for easy call. We've got a very very small amount of auto loans and are booked out and in Mexico. So it's looking at the leading platform down there and we are just in diligence.
Making sure that we completely understand the business and then it's the right path forward.
The work and as soon as were finished we'll come back to the market and let you know.
Got it and final I appreciate all the correct and taking all the questions here finally.
Lockheed Given: I know you guys mentioned in your prepared remarks, the refinancing options for your converts in May.
A key topic for most investors we speak with are you leaning in a certain direction any color on maybe when you'll make a decision on this.
Look I think the color is.
Lockheed Given: The color Hasnt changed it it's very good news and that we certainly are under no pressure to do anything we have liquidity to pay it with cash in in May.
So we can take out time here in in really.
Weighing the pros and cons of each alternative unlike people have different views on those alternatives.
Lockheed Given: We are we are highly focused on it.
May God before May we go up they go optimized but.
I think given the amount of growth potential in our business, both organically and Inorganically, we will likely do another financing in the future.
To fuel that growth that as I said we.
We are under no pressure to do it.
In any hurry.
<unk> continue to improve for us.
With our operating performance improving so I think we.
Very very comfortable with where we are at in terms of potential financing. The board is as I've said very focused on it spending the time with our various advisors too.
Hopefully pick the right path forward.
Speaker Change: Got it I appreciate all the color guys. Thanks very much.
Thanks, Brian.
Thank you.
Our next question comes from John Hecht with Jefferies. You May proceed.
Good morning, guys. Thanks, very much for taking my questions.
First one on the recent wage increases in Mexico.
Speaker Change: Number one is yes.
There's been a series of these do you guys have any insight as to.
We are probably reaching the end of this.
Cycles of wage increases number one and number two is.
Other than the increasing of expenses down there from wage increases does the wage increases affect any other aspects of your business.
Lending side.
Hello, guys. Good morning, John and thank you for the question because well look I think yes, we are seeing in our various programs from the Mexican government on wage increases.
This one was a pretty significant one again.
Speaker Change: We don't know to be honest with you what the future holds on that front, but what I can tell you is that our Mexican and Latin American business.
Speaker Change: Gaining real momentum.
Okay.
Loan growth phenomenal sales growth. So I think the fastest being put into those pockets is clearly helping on the sales side, but in terms of the loan side, we are not seeing any slowdown.
Given the money Thats pain pain.
The minimum wage rises so look it has impacted our <unk> expenses obviously.
In answering your question, we don't know where its going to go but the very good news is that that segment is growing incredibly well in a balanced way with a great clients.
Speaker Change: I'm Super excited about the growth prospects down there.
Okay. That's great. Thanks, and then.
You guys have invested in.
Yes.
Infrastructure to develop new services like the online sales the customer rewards.
Rich.
They are pretty unique in the industry, maybe can you give us a sense for how you measure the impact of that.
Customer trends that Youre seeing as a result of those activities.
Yes look.
Good question and yes, we are investing across all of our digital assets.
Core infrastructure at point of sale system.
And look I think if you start.
Speaker Change: Hello.
Congrats.
I think you can say that whatever we are doing here.
He is in part due to the investment we're making in driving more customers.
Speaker Change: Throw out through our digital business, because we are trending very very well comparatively we look at when we look at acquisitions.
Compare to why we're growing but from loans and from styles is two <unk>.
Speaker Change: And we're obviously growing very strongly but I think we're winning market share.
In the neighborhoods in which we operate so I think we start with the high level numbers and we think that we compare quite favorably to the competition.
And in part that we believe that that's due to the digital digital investments, we're making when you go into our stores, which I know you do when you speak to a store manager and you talk about.
Easy plus program or.
No.
Our Google ratings or our social media presence and you cited was still manage a well we're thinking about wanting that back they immediately jumped jumped out at you and say no no don't do that.
We really we really.
We find it important an important way to engage our customers. So I think look from a from a customer centric point of view and from a from a high level numbers point of view I think we're confident in what we're doing now I think you look at all of the sectors and you know that.
To meet the customer and all sorts of places you just choose to make them in the store because.
They want to reach online or on the telephone and so I think we are just building.
Building various distribution platforms in order to give our customers the best.
Experience so look.
We've done a pretty disciplined why we haven't gone out and spent a huge amount of money on this stuff.
We keep it lane, we test we look at it at all on ROI basis.
Look I think I think when you when you run a customer and people centric business. These investments are important.
Okay and then my final question is.
<unk> been adding stores, you've been making acquisitions and maybe can you give us your sense for that.
Speaker Change: This fiscal year, where the store.
Whether it's acquisition or growth opportunities and where your focus there.
Okay. That's a good question I think look we're trying to run a balanced growth strategy around stores. So you've obviously got the de Novo program and then you've got your M&A program and I think with de Novo is you can be.
Little bit better planned.
I think we building being building roughly 40 stores per year.
Over the last couple of years and look I think that is.
That's a good way to think about at least the short term future, we'd like to be somewhere in that time the vicinity.
The only caveat to that is if you do a large.
But medium to large sized acquisition, maybe maybe you slow down that de Novo program, a little but look at de Novo as a very important part of our growth strategy. We've got a fantastic team in Latin America that are solely focused on that and are getting very good at it.
So I think thats, an important part of the growth story and then on M&A as you know it's not.
Takes a willing buyer and a willing seller to come up with a mutually acceptable price and that can that can take time and I think you've seen in our recent acquisitions over the years.
Our sort of pricing structure discipline.
A very real so look we think the pipeline is strong.
I don't think there has been much change in the last few years and pipeline I just think.
Going to do it in a disciplined way, we're going to do it where we think we're buying good people.
Sure.
Often in areas that we can.
Followed pretty easily into our field team, but I think it is.
Latin America, particularly is still very exciting in terms of the M&A M&A platform.
In the U S.
As you know there are still definitely targets out there I think the biggest is simple management group, which we obviously have a significant investment in.
So that's an exciting one for us that's now a 100 stores across Florida, the Caribbean and Central America.
That one is very interesting and then beyond.
Thank you.
Speaker Change: I think the world of corn, breaking either very large world of incredible scale.
And so I think long term, we will see is a super exciting global scale opportunity, but for now I think we're concentrated on now on our core markets and I think there's plenty to do there both organically and inorganically.
Great. Thanks, very much for that color.
Thanks, John.
Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Kyle Joseph with Stephens You May proceed.
Hey, good morning, Thanks for taking my questions.
Speaker Change: Just wanted to get a sense for.
Domestic growth I know you guys talked about inflation range, you would expect that that growth.
Come down a bit but you did we did see it accelerate.
In the December quarter, So just kind of give us any sense of what drove the acceleration in the quarter and and kind of how.
How quickly you expect that to normalize.
Good morning, Carl Let's look as you point out it was a it was a super strong results in the U S on the lending side.
I think as Tim said in his remarks, I think it was driven by both.
Really strong engagement by our people install.
<unk> and his team.
Speaker Change: A phenomenal in teaching out.
Our team members are pawnbrokers in store to engage every customer I think that engagement and that core expertise is really driving stronger loans and then you've got you've got higher average loan size as Tim mentioned and just.
Speaker Change: Do you think the consumer out there is still challenged at Ara and and so yes.
Yes inflation is coming down, but it's still.
It's still up their interest rates are high gas prices, you've got other forms of <unk>.
<unk> tightening so I think.
Our customer is showing that there is still a strong need for cash so our.
Our view is that with strong execution in the stores, we should continue to grow it dropped pretty strong growth here in loans.
Got it.
And then just.
High level talk about competitive trends between that call.
Speaker Change: Call. It the two segments that you asked in Latam and what are you seeing LTV trends in each segment.
I think competitive trends I don't think that changed quarter over quarter I think obviously there are the two major competitors.
Often first cash and then and then a very fragment and fragmented industry.
Speaker Change: Beyond that so I think I mean, the competitive trends I think have been pretty stable.
And then segment by saying what was it what was the second part of the question is segment by segment competitive trends.
Yeah, just where youre seeing ltvs.
Tim you want to comment on that.
Segment by segment.
Yes, sorry from a from an LTV perspective.
That is a constant movement based on where we are seeing.
The sales occur in our stores and across the market and so those we are.
Adjusting all the time, but from a consolidated perspective, they really remained very consistent year after year.
Got it that's it for me thanks for answering my questions.
Thanks Scott.
Lockheed Given: Thank you I would now like to turn the call back over to Lockheed given for any closing remarks.
Thank you operator, and thank you everyone for joining today, we very much appreciate your time and we are looking forward to talking to a lot of you over the next couple of days.
Lockheed Given: And just one last time, a very big Thank you to the <unk> team for another very very strong set of operating results.
We look forward to chatting a bit later on.
Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
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