Ezcorp Inc 2026 Q3 Earnings Call

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.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. As noted in our presentation materials, and unless otherwise identified, results are presented on an adjusted basis to remove the effects of foreign currency fluctuations and other discrete items.

Joining us on the call today are EZCORP's Chief Executive Officer, Lockie Given, and Tim Jugman, Chief Financial Officer. Now I'll turn the call over to Lockie.

On slide six, we have provided the consolidated revenue and EBITDA bridges, which show the composition and quality of this quarter's growth. On revenues, SMG contributed $43.1 million in a second quarter of consolidation, and same-store core pawn revenues added $24.5 million. Scrap sales on a same-store basis added $15.9 million and other new stores contributed $13.9 million. Same-store core pawn revenues grew 9% and same-store core pawn gross profit grew 13%. As a reminder, core pawn excludes scrap entirely, giving the cleanest read on underlying business performance. The EBITDA bridge provides a clear view of earning drivers. Same-store EBITDA excluding scrap gross profit contributed $12.9 million of the year-over-year increase, the largest single driver of the bridge. SMG added $6.6 million and same-store scrap gross profit added $3.5 million. Core operations and new stores, not scrap, drove the majority of our earnings growth this quarter.

Scrap sales of $55.7 million increased $28.8 million year-over-year on higher gold prices. Sequentially, scrap sales and margin declined from the second quarter's unusually elevated levels as gold stabilized. Consistent with the outlook we provided on last quarter's call. Scrap gross margin was 26% compared to 38% in the second quarter and 20.9% in the prior year quarter. Scrap gross profit of $14.5 million remained well above the $7.9 million we generated a year ago. Scrap remains a valuable contributor to earnings and cash. As a reminder, we lend against longer-term gold values, not daily price movements, and use scrap to manage inventory, not speculate on gold. Consolidated net inventory ended at $312.5 million, up 39%, reflecting higher PLO purchases and layaways. Turnover was 2.3 times compared with 2.4 times a year ago, and aged general merchandise declined 132 basis points to 1.3% of total general merchandise inventory.

Inventory growth was driven by jewelry, which is scrapped if it doesn't sell within approximately 12 months. Moving to the U.S. Pawn segment on slide seven and eight. We ended the quarter with 560 stores across 19 states, including one store acquired during the period. Total revenues increased 14% to $251.2 million, with more than half of the improvement attributed to core pawn. Core pawn revenue grew 9% and core pawn gross profit grew 12%, supported by healthy pawn activity and further merchandise margin expansion. PLO grew 15% to $254.5 million, with same-store PLO up 13%, driven by increased average loan size and continued strong pawn demand. Average loan size rose 16% to $240 on a higher jewelry composition and gold prices. Jewelry represents 69% of U.S. PLO. PSC increased 13%, primarily driven by same-store PLO growth.

On the retail side, merchandise sales increased 6%, with same-store sales up 3% and merchandise margin expanded 130 basis points to 40%. Inventory quality remains excellent. Inventory grew 28% to $212.2 million on higher PLO purchases and layaways, while turnover came in at two times. Aged general merchandise declines of 1.9% of total general merchandise inventory or just $0.7 million. Segment EBITDA improved 23% to $64.5 million, and core pawn accounted for 83% of the gross profit growth. Store expenses rose 8% in total and 6% on a same-store basis, well below revenue growth, lifting EBITDA margin 200 basis points to 26%. This reflects the durable demand, disciplined lending and operating execution in our U.S. stores. Turning to Latin America on slide nine and 10, where the team delivered another excellent quarter. We ended the period with 881 stores across four countries.

During the quarter, we opened nine de novo stores, including five in Mexico, three in Guatemala, and one in Honduras, and consolidated one location. In April, we also completed the acquisition of 33 stores in Guatemala, extending our leadership in that market. As a reminder, our Latin American results are presented on a constant currency basis unless otherwise noted. Revenues reached a record $114.1 million, up 25%, with about half the improvement from merchandise sales. Core pawn revenues grew 22% and core pawn gross profit grew 31%. The growth here is broad-based and high quality. PLO increased 33% to $93.7 million, with same-store PLO up 28% on sustained pawn demand and improved operational performance. On a GAAP reported basis, average loan size rose 28% to $112, or 18% in constant currency. Jewelry now represents 49% of PLO. PSC rose 26%, supported by same-store PLO growth and new stores.