Investor Update Business Transformation Delivering Results

Transcription

1 Investor Update Business Transformation Delivering Results September 13, 2016

2 Preliminary Statements Forward Looking Statements This document contains certain forward-looking statements. These statements are based on the company s current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates will, should or may occur in the future are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including operating risks, liquidity risks, legislative or regulatory developments, market factors and current or future litigation. For a discussion of these and other factors affecting the company s business and prospects, see the company s annual, quarterly and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. Other Information This information should be read in conjunction with, and not in lieu of, the company s annual, quarterly and other reports filed with the Securities and Exchange Commission. Those reports contain important information about the company s business and performance, including financial statements prepared in accordance with U.S. generally accepted accounting principles, as well as a description of the important risk factors that may materially and adversely affect our business, financial condition or results of operations. 2

3 Company Overview EZCORP is a leading provider of pawn loans in the United States and Mexico. At our pawn stores we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers. Mexico Pawn 15% EZCORP Revenue by Type* Other 1% U.S. Pawn 84% After the sale of Grupo Finmart, 99% of EZCORP revenue will be generated from our U.S. and Mexico pawn businesses. KEY STATISTICS Founded 1989 IPO Date 8/27/1991 Headquarters Austin, TX Market Capitalization (as of 9/2/16) $537m Institutional Holdings 88% 52 Week Price Range (as of 9/2/16) $2.44 to $10.62 Adjusted Total Revenue (LTM)** Adjusted EBITDA (LTM)** $728.9m $65.7m Employees ~5,600 Index inclusion: Russell 2000, S&P SmallCap 600, S&P 1000, NASDAQ Composite PAWN STORE LOCATIONS United States 522 Mexico 238 FINANCIAL SERVICES LOCATIONS* Cash Max in Canada 27 Unless otherwise noted, all financial information included in this presentation is as of June 30, 2016 and is presented on an adjusted basis, which includes presentation of amounts on a constant currency basis; excludes closed Mexico buy/sell business; and certain other discrete items. See the Appendix for a reconciliation to the comparable GAAP information. All comparisons unless stated are Q3FY16 relative to Q3FY15. See appendix for definition of terms. * Assumes completion of Grupo Finmart sale ** Continuing operations excluding closed Mexico buy/sell business 3

4 EZCORP Has Exited Most Non-Pawn Businesses And Driving Shareholder Value EZCORP September 2016* Simplifying, Focusing and Optimizing the Business EZCORP Share Price Performance September 2014 to September 2016 U.S. PAWN 84% MEXICO PAWN 15% CANADA CASH MAX 1% *After the sale of Grupo, 99% of EZCORP revenue will be generated from our U.S. and Mexico pawn businesses EZCORP September 2014 U.S. Pawn Mexico Pawn Canada Cash Max U.S. Financial Services Tuyo U.S. Online Lending U.K. Online Lending Cash Converters Canada Mexico Grupo Finmart 4

5 This Slide Intentionally Left Blank 5

6 Our Focus On Customer Lead the market in serving and satisfying short-term cash needs of consumers unable to access traditional credit products CUSTOMER FEEDBACK Q3FY16* EZCORP U.S. Customer Feedback Comprehensive Mystery Shop program measures up 6% Net Promoter Score to 46 points from 39 points Q3FY16* EZCORP Mexico Customer Feedback Comprehensive Mystery Shop program measures up 12% Net Promoter Score improved to 50 from 48 * Sequential scores in U.S. and Mexico. U.S. was previously measured in Q2FY16 and Mexico in Q1FY16. 6

7 U.S. Pawn Industry Remains Highly Fragmented and Attractive Continued opportunities for accretive acquisitions EZCORP Adding Value To Acquisitions Systems Processes Capital People Total U.S. Pawn Stores Estimated About 13,000 Pawn Stores EZCORP 4% Pawn Stores FirstCash 9% Pawn Stores Held By Independent Owner Operators 87%* EZCORP Serves a Large U.S. Market 20% of U.S. Households are underbanked (~25 million households)* 8% of U.S. Households are unbanked (~10 million households)* * 2013 FDIC National Survey of Unbanked and Underbanked Households; published October

8 U.S. Pawn Store Map EZCORP pawn platform supports geographic diversity of store mix Stable state regulation; rate setting authority is at state level EZCORP U.S. Store Mix TX 42% FL 19% Other 17% CO 7% IL 4% OK 4% AZ 4% NV 3% CA 12 AK 6 WA 33 OR 5 NV ID UT 10 7 AZ MT WY 3 CO NM ND SD NE 1 KS TX MN 7 OK IA 11 MO 25 AR 1 LA 24 WI 3 IL 22 MS 1 IN MI TN 13 AL 5 8 KY OH 120 GA 8 46 WV SC FL PA 27 NY 2 2 NC 41 VT 3 MD D 29 E VA N J NH ME MA CT RI 522 EZCORP U.S. Pawn store locations EZCORP Stores FirstCash Stores 8

9 EZCORP Mexico Pawn Store Map Coahuila (5) 2. Nuevo León (7) 3. Tamaulipas (6) 4. San Luis Potosí (1) 5. Veracruz (31) 6. Aguascalientes (4) 7. Jalisco (16) 8. Guanajuato (15) 9. Querétaro (6) 10. Hidalgo (6) 11. Michoacán (7) 12. Estado de México (42) 13. Ciudad de México (41) 14. Morelos (4) 15. Tlaxcala (3) 16. Puebla (11) 17. Guerrero (7) 18. Oaxaca (4) 19. Chiapas (7) 20. Tabasco (7) 21. Campeche (4) 22. Quintana Roo (4) Morelos EZCORP Mexico Pawn store locations 9

10 Strong Corporate Performance Driven By Continued Momentum In Pawn Operations EZCORP Continuing Operations Adjusted Results (Excludes Grupo Finmart)** High operating leverage and efficiently managing the business drove $9.8m increase in Net Revenue and $8.3m increase in Profit Before Tax et Re Net Revenue increase with strong same store metrics in Q3: PLO increased 11% PSC revenue increased 10% Merchandise sales gross profit increased 10% Continued expense management with corporate costs15% lower in Q3; tracking toward annual corporate expense of ~$50m by FY18*** EBITDA percentage increase in Q3 and YTD higher than net revenue growth, evidenced by strong operational leverage * Represents an increase or decrease in excess of 1500% or not meaningful ** Adjusted for restructuring and restatement charges, other discrete items and constant currency. Mexico Pawn excludes closed buy/sell businesses. See GAAP to non-gaap reconciliation. All amounts in millions. ***Corporate expense in this presentation refers to the Administrative line in SEC quarterly reports. 10

11 Pawn 101: Understanding Pawn Growth Drivers Key Growth Drivers ASSETS Pawn Loans Outstanding #4 Purchases + Forfeitures Inventory #2 Quality Store Manager #1 Pawn Service Charges Merchandise & Scrap Gross Profit #3 INCOME STATEMENT + = NET REVENUE - TOTAL EXPENSES = #5 Pawn Loans Outstanding (PLO) is the most influential driver to revenue and profitability. EZCORP had market leading Same Store PLO growth in Q3FY16 relative to publicly traded pawn companies driven by intense focus on market leadership in serving and satisfying customers needs for cash PROFIT BEFORE TAX Pawn Loans Outstanding are secured loans, typically small, and fully collateralized by tangible personal property. No personal recourse to customers or negative credit reporting. We earn Pawn Service Charge revenue on our pawn loans which varies primarily based upon statutory rates by state and loan valuations. Inventory for retail sales occur through pawn loan forfeitures and purchases of customers merchandise. If customer does not repay, renew or extend a loan, the collateral is forfeited to us and becomes inventory available for sale to drive sales gross profit. Same Store basis is the most effective measure of pawn growth. 11

12 Earning Assets Drive Strong Profitable Growth U.S. Pawn Q3FY16 ASSETS Pawn Loans Outstanding Total Up 13% to $144m SAME STORE UP 10% #1 Pawn Service Charges Total Up 10% to $54m PLO Monthly Yield 14% SAME STORE UP 8% INCOME STATEMENT Purchases + Forfeitures Quality Store Manager NET REVENUE Up 9% to $86m TOTAL EXPENSES Up 5% to $66m + = - = PROFIT BEFORE TAX Up 25% to $20m SAME STORE UP 16% Inventory Total Up 18% to $113m Merch & Scrap Gross Profit Total Up 8% to $31m Merch margin to 37% from 35% SAME STORE UP 6% Continued growth in U.S. pawn, Same Store PLO up 10% Redemption rate consistent at 85% PLO monthly yield unchanged at 14% Pawn loan forfeitures increased proportional to increase in PLO, resulted in growth in inventory during period of lower sales demand; resulted in: - Inventory annual turns to 2.2x from 2.4x - Inventory monthly yield of 9% compared to 10% last year Adjusted for restructuring charges and other discrete items. See GAAP to non-gaap reconciliation 12

13 Earning Assets Drive Strong Profitable Growth Mexico Pawn Q3FY16 ASSETS INCOME STATEMENT SAME STORE UP 21% Pawn Loans Outstanding Total Up 19% to $19m Purchases + Forfeitures Inventory Total Up 21% to $20m SAME STORE UP 19% Quality Store Manager Pawn Service Charges Total Up 20% to $9.5m PLO Monthly Yield 16% #1 NET REVENUE TOTAL EXPENSES + = - = Merch & Scrap Gross Profit Total Up 48% to $5.5m Merch margin to 33% from 27% SAME STORE UP 20% SAME STORE UP 45% Up 28% to $15m Up 1% to $11m PROFIT BEFORE TAX Up 237% to $4m Continued growth in Mexico Pawn, Same Store PLO up 19% Redemption rate increased to 77% from 76% PLO monthly yield unchanged at 16% Inventory monthly yield increased to 9% from 8% Inventory annual turns of 2.3x from 2.7x last year driven by clearing of aged merchandise in prior year Adjusted for restructuring charges, other discrete items, constant currency and excludes closed Mexico buy/sell business. See GAAP to non-gaap reconciliation. 13

14 Execution of 3-Year Strategic Plan: Building Platform For Profitable Growth Renewed Executive Leadership Team including CEO, CFO, President of Pawn 25 Pawn Stores acquired in FY15 Investment in District Managers (to 67 from 55) enabling more coaching & mentoring U.S. Financial Services business closed Procurement opportunities identified Mexico Buy/Sell business closed Closed 25 underperforming pawn stores in U.S. and Mexico in FY15 Financial restatement Store incentive plans revised 6 U.S. pawn stores acquired in Q2FY16 Pawn fundamentals continue to improve Definitive Agreement to sell Grupo Finmart Upgrading POS technology Received commitment for a $100 million secured credit facility to support business Tracking toward annual JULY 2016 Investing in customer data analytics corporate expense of ~$50m by FY18 Implementing workforce management system Process Reengineering Program 1 JULY 2015 Transformational customer focused 3-year strategic plan released 14

15 EZCORP Strengths Attractive Industry Dynamics Large and highly fragmented consumer market in U.S. and Mexico Solid demand for pawn services across economic cycles Fully collateralized performing loan portfolio No personal recourse to customers or negative credit reporting Stable pawn regulatory environment Rate setting authority in U.S. is at state level, no government rate setting in Mexico Track Record of Execution Consistently executing on 3-Year Strategic Plan, announced in July 2015: Closure of U.S. Financial Services business, ahead of time and budget Sale of Grupo Finmart business on track to be completed by September 30, 2016 Commitment for new $100m secured credit facility Disciplined Growth & Strong Performance High operating leverage and efficiently managing pawn businesses with strong growth in Net Revenue and Profit Before Tax in recent quarters Continued growth in Same Store PLO in Q3, up 10% in U.S. and up 19% in Mexico Continued expense management with corporate costs 15% lower in Q3; tracking toward annual corporate expense of ~$50m by FY18 Closing non-performing stores and disciplined acquisition program Improving Talent & Capability Largely new Executive team in place with incentives primarily tied to EBITDA Store incentive programs revised Increased investment in District Managers (to 67 from 55) enabling more coaching & mentoring Investing in additional training at all levels 15

16 Additional Information 16

17 Investor Resources ( Helpful links to presentations, transcripts, and financial results Three Year Strategic Program announced in July 2015

18 Definition of Terms PLO Yield = pawn service charges days in period average PLO X 365 Inventory Yield = merch. SGP + scrap SGP days in period average net inventory X 365 Return on Earning Assets = merch. SGP + scrap SGP + PSC days in period X 365 average net inventory + average PLO Inventory Turnover = total cost of sales days in period average net inventory X

19 Leverage on Operations with Net Revenue Up $6.6 million to $100 million, and Income From Continuing Operations Before Taxes Up $7.6 million to $3.8 million EZCORP GAAP Results Commitment to customer experience driving improved Net Revenue and higher Profit Before Tax with improved same store metrics in Q3: Pawn Loans Outstanding (PLO) up 9% Pawn Service Charges (PSC) up 8% Merchandise Sales Gross Profit up 8% et Re YTD total revenue driven by $11m improvement in PSC Revenue offset by lower Scrap Sales of $14m Negative FX impact of $14m on revenue and $8m on net revenue Efficiently managing the business, leveraging a 7% growth in Net Revenue to a 200% increase in Profit Before Tax YTD corporate expense increase primarily due to restatement costs of $4.2m * Represents an increase or decrease in excess of 1500% or not meaningful All amounts in millions 19

20 Serving and Satisfying Customers Desire for Access to Cash Is Fueling Performance U.S. Pawn Strategic Plan Announcement Encouraging results in early stages of our three-year strategic plan Continued focus on customer experience has led to double-digit Same Store PLO growth in Q3, driving a $4.8M or 10% increase in PSC, the largest component of net revenue Merchandise gross profit increase reflects ongoing improvements in loan valuation and pricing disciplines Continued improvement in aged inventory reduced to 9% EZCORP historically has higher first half net revenue, merchandise gross profit and profitability reflective of seasonal impact of tax refunds to customers, Christmas and Valentines Day Adjusted for discrete items All amounts in millions 20

21 Serving and Satisfying Customers Desire for Access to Cash Is Fueling Performance Mexico Pawn $ 1 Continued focus on customer experience has led to eight consecutive quarters of double-digit PLO growth Strong PLO growth resulted in 20% growth in PSC Continued strong merchandise gross profit up 48% and margin expansion up 600bps to 33% driven by discipline in pawn loan valuation, retail pricing cadences, and lower aged inventory levels Adjusted for discrete items, constant currency and excludes closed Mexico buy/sell business All amounts in millions 21

22 GAAP to Non-GAAP Reconciliations *See GAAP to non-gaap reconciliation. All comparisons unless stated are to Q3FY15. See appendix for definition of terms 22

23 GAAP to Non-GAAP Reconciliation Q3 Continuing Operations* (A) (B) (C) Footnote * - Includes immaterial presentation reclassifications and rounding Footnote (A) Amount includes $(0.1) million for Corporate expenses related to restatement Footnote (B) Amount includes $0.2 million Gain/ Loss on FX in Corporate Footnote (C) Amount includes $0.4 million Gain/ Loss on FX in Corporate *For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and ninemonths ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss. 23

24 GAAP to Non-GAAP Reconciliation YTD June Continuing Operations* (A) (B) (C) (D) Footnote * - Includes immaterial presentation reclassification and rounding Footnote (A) Amount includes $4.2 million related to restatement and $(0.1) million of discrete Corporate items Footnote (B) Amount includes $1.4 million of restructuring expenses ($1.0 million of U.S. Pawn, $0.2 million of Corporate, and $0.2 million of Other International) and ($0.2) million of discrete adjustments in Corporate Footnote (C) Amount includes $0.1 million of Corporate discrete items Footnote (D) Amount includes $0.8 million Corporate restructuring expense, $0.6 million of discrete items ($0.1 million of U.S. Pawn, $0.3 million of Mexico Pawn and $0.2 million of Corporate) *For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and ninemonths ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss. 24

25 GAAP to Non-GAAP Reconciliation Q3 U.S. Pawn* (A) Footnote * - Includes immaterial presentation reclassification and rounding Footnote (A) Amount includes $0.1 million of asset write-offs 25

26 GAAP to Non-GAAP Reconciliation YTD June U.S. Pawn* (A) (B) Footnote * - Includes immaterial presentation reclassification and rounding Footnote (A) Amount includes $1.0 million of restructuring expense Footnote (B) Amount includes $0.1 million of asset write-offs 26

27 GAAP to Non-GAAP Reconciliation Q3 Mexico Pawn* Footnote * - Includes $0.3 million presentation reclassification between other revenues/operating expenses and rounding *For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and nine-months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss. 27

28 GAAP to Non-GAAP Reconciliation YTD June Mexico Pawn* (A) Footnote * - Includes $0.3 million presentation reclassification between other revenues/operating expenses and rounding Footnote (A) Amount includes $0.3 million of discrete items *For condensed consolidated balance sheet items, the end of period rate as of June 30, 2016 of 18.6 to 1 was used, compared to the end of period rate as of June 30, 2015 of 15.7 to 1. For condensed consolidated statement of operations items, the average closing daily exchange rate for the appropriate period was used. The average exchange rates for the current three and nine-months ended June 30, 2016 were 18.1 to 1 and 17.6 to 1, respectively, as compared to the prior year three and nine-months ended June 30, 2015 rates of 15.3 to 1 and 14.7 to 1, respectively. Constant currency results, where presented, also exclude foreign currency gain or loss. 28

29 Trailing Twelve Month Reconciliations* * Includes immaterial presentation reclassifications and rounding 29

30 Investor Relations Contact Jeff Christensen, CPA Vice President, Investor Relations EZCORP, Inc. Phone: (512)