EZCORP INC 10-K

ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements ITEM 8 Page Report of Independent Registered Public Accounting Firm 40 Consolidated Financial Statements: Consolidated Balance Sheets as of September 30, 2020 and 2019 41 Consolidated Statements of Operations for each of the three years ended September 30, 2020, 2019 and 2018 42 Consolidated Statements of Comprehensive (Loss) Income for each of the three years ended September 30, 2020, 2019 and 2018 43 Consolidated Statements of Stockholders’ Equity for each of the three years ended September 30, 2020, 2019 and 2018 44 Consolidated Statements of Cash Flows for each of the three years ended September 30, 2020, 2019 and 2018 45 Notes to Consolidated Financial Statements 46 Note 1: Organization and Summary of Significant Accounting Policies 46 Note 2: Other C harge s 52 Note 3 : Acquisitions 53 Note 4 : (Loss) Earnings Per Share 55 Note 5 : Strategic Investments 55 Note 6 : Fair Valu e Measurements 56 Note 7 : Property and Equipment 56 Note 8 : Goodwill and Intangib le Assets 56 Note 9 : Debt 58 Note 10 : Common Stock and Stock Compensation 62 Note 1 1 : Income Taxes 63 Note 1 2 : Leases 66 Note 1 3 : Contingencies 68 Note 1 4 : Segment Information 68 Note 1 5 : Supplemental Consolidated Financial Information 72 Note 1 6 : Quarterly Information (Unaudited) 74 39 Table of Contents Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors EZCORP, Inc. Rollingwood, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of EZCORP, Inc. (the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated December 14, 2020 expressed an unqualified opinion thereon. Adoption of New Accounting Standard As is discussed in Notes 1 and 12 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended September 30, 2020, due to adoption of ASC Topic 842, Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, LLP We have served as the Company’s auditor since 2015. Dallas, Texas December 14, 2020 40 Table of Contents EZCORP, Inc. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) September 30, 2020 2019 Assets: Current assets: Cash and cash equivalents $ 304,542 $ 157,567 Restricted cash 8,011 4,875 Pawn loans 131,323 199,058 Pawn service charges receivable, net 20,580 31,802 Inventory, net 95,891 179,355 Notes receivable, net — 7,182 Prepaid expenses and other current assets 32,903 25,921 Total current assets 593,250 605,760 Investments in unconsolidated affiliates 32,458 34,516 Property and equipment, net 56,986 67,357 Lease right-of-use asset 183,809 — Goodwill 257,582 300,527 Intangible assets, net 58,638 68,044 Notes receivable, net 1,148 1,117 Deferred tax asset, net 8,931 1,998 Other assets 4,221 4,383 Total assets $ 1,197,023 $ 1,083,702 Liabilities and equity: Current liabilities: Current maturities of long-term debt, net $ 213 $ 214 Accounts payable, accrued expenses and other current liabilities 71,504 77,957 Customer layaway deposits 11,008 12,915 Lease liability 49,742 — Total current liabilities 132,467 91,086 Long-term debt, net 251,016 238,380 Deferred tax liability, net 524 1,985 Lease liability 153,040 — Other long-term liabilities 10,849 7,302 Total liabilities 547,896 338,753 Commitments and contingencies (Note 13) Stockholders’ equity: Class A Non-Voting Common Stock, par value $ 0.01 per share; shares authorized: 100 million; 52,332,848 issued and outstanding as of September 30, 2020; and issued and outstanding of 52,565,064 as of September 30, 2019 521 526 Class B Voting Common Stock, convertible, par value $ 0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171 as of September 30, 2020 and 2019 30 30 Additional paid-in capital 398,475 407,628 Retained earnings 318,169 389,163 Accumulated other comprehensive loss ( 68,068 ) ( 52,398 ) Total equity 649,127 744,949 Total liabilities and equity $ 1,197,023 $ 1,083,702 See accompanying notes to consolidated financial statements. 41 EZCORP, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal Year Ended September 30, 2020 2019 2018 (in thousands, except per share amounts) Revenues: Merchandise sales $ 498,213 $ 453,375 $ 438,372 Jewelry scrapping sales 47,953 60,445 60,752 Pawn service charges 272,638 327,366 304,577 Other revenues 4,007 6,043 8,455 Total revenues 822,811 847,229 812,156 Merchandise cost of goods sold 334,481 297,508 276,618 Jewelry scrapping cost of goods sold 38,041 52,935 52,290 Other cost of revenues 1,054 2,338 1,697 Net revenues 449,235 494,448 481,551 Operating expenses: Operations 341,040 358,253 334,841 Administrative 49,897 55,990 53,639 Impairment of goodwill, intangible and other assets 54,666 — — Depreciation and amortization 30,827 28,797 25,484 Loss on sale or disposal of assets and other 801 4,399 463 Other charges 20,388 — — Total operating expenses 497,619 447,439 414,427 Operating (loss) income ( 48,384 ) 47,009 67,124 Interest expense 22,472 32,637 27,834 Interest income ( 3,173 ) ( 11,086 ) ( 17,041 ) Equity in net loss (income) of unconsolidated affiliates 2,429 135 ( 5,529 ) Impairment of investment in unconsolidated affiliates — 19,725 11,712 Other (income) expense ( 17 ) 1,424 ( 5,391 ) Income from continuing operations before income taxes ( 70,095 ) 4,174 55,539 Income tax (benefit) expense ( 1,632 ) 2,406 18,389 (Loss) income from continuing operations, net of tax ( 68,463 ) 1,768 37,150 Loss from discontinued operations, net of tax — ( 457 ) ( 856 ) Net (loss) income ( 68,463 ) 1,311 36,294 Net loss attributable to noncontrolling interest — ( 1,230 ) ( 988 ) Net (loss) income attributable to EZCORP, Inc. $ ( 68,463 ) $ 2,541 $ 37,282 Basic (loss) earnings per share attributable to EZCORP, Inc. — continuing operations $ ( 1.24 ) $ 0.05 $ 0.70 Diluted (loss) earnings per share attributable to EZCORP, Inc. — continuing operations $ ( 1.24 ) $ 0.05 $ 0.66 Weighted-average basic shares outstanding 55,313 55,341 54,456 Weighted-average diluted shares outstanding 55,313 55,984 57,896 See accompanying notes to consolidated financial statements. 42 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Net (loss) income $ ( 68,463 ) $ 1,311 $ 36,294 Other comprehensive loss: Foreign currency translation loss, net of income tax expense (benefit) for our investment in unconsolidated affiliate of $ 354 , $( 708 ) and $( 353 ) for the years ended September 30, 2020, 2019 and 2018, respectively ( 15,678 ) ( 10,042 ) ( 2,638 ) Comprehensive (loss) income ( 84,141 ) ( 8,731 ) 33,656 Comprehensive loss attributable to noncontrolling interest — ( 1,230 ) ( 882 ) Comprehensive (loss) income attributable to EZCORP, Inc. $ ( 84,141 ) $ ( 7,501 ) $ 34,538 See accompanying notes to consolidated financial statements. 43 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Noncontrolling Interest Total Equity Shares Par Value Retained Earnings (in thousands) Balances as of October 1, 2017 54,398 $ 544 $ 348,532 $ 347,885 $ ( 38,157 ) $ ( 2,449 ) $ 656,355 Stock compensation — — 10,711 — — — 10,711 Release of restricted stock 187 2 — — — — 2 Taxes paid related to net share settlement of equity awards — — ( 311 ) — — — ( 311 ) Reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act — — — 1,455 ( 1,455 ) — — Foreign currency translation (loss) gain — — — — ( 2,744 ) 106 ( 2,638 ) Equity classified conversion feature of 2024 Convertible Notes, net of tax — — 38,995 — — — 38,995 Net income (loss) — — — 37,282 — ( 988 ) 36,294 Balances as of September 30, 2018 54,585 $ 546 $ 397,927 $ 386,622 $ ( 42,356 ) $ ( 3,331 ) $ 739,408 Stock compensation — — 9,794 — — — 9,794 Release of restricted stock 950 10 — — — — 10 Taxes paid related to net share settlement of equity awards — — ( 3,288 ) — — — ( 3,288 ) Transfer of subsidiary shares to noncontrolling interest — — 3,195 — — ( 3,195 ) — Foreign currency translation loss — — — — ( 10,042 ) — ( 10,042 ) Deconsolidation of subsidiary — — — — — 7,756 7,756 Net income (loss) — — — 2,541 — ( 1,230 ) 1,311 Balances as of September 30, 2019 55,535 $ 556 $ 407,628 $ 389,163 $ ( 52,398 ) $ — $ 744,949 Stock compensation — — ( 5,094 ) — — — ( 5,094 ) Release of restricted stock 711 6 — — — — 6 Taxes paid related to net share settlement of equity awards — — ( 1,435 ) — — — ( 1,435 ) Foreign currency translation loss — — — ( 8 ) ( 15,670 ) — ( 15,678 ) Purchase and retirement of treasury stock ( 943 ) ( 11 ) ( 2,624 ) ( 2,523 ) — — ( 5,158 ) Net loss — — — ( 68,463 ) — — ( 68,463 ) Balances as of September 30, 2020 55,303 $ 551 $ 398,475 $ 318,169 $ ( 68,068 ) $ — $ 649,127 See accompanying notes to consolidated financial statements. 44 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Operating activities: Net (loss) income $ ( 68,463 ) $ 1,311 $ 36,294 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 30,827 28,797 25,484 Amortization of debt discount and deferred financing costs 13,200 19,759 17,595 Amortization of lease right-of-use asset 45,649 — — Accretion of notes receivable discount and deferred compensation fee ( 821 ) ( 4,524 ) ( 9,150 ) Deferred income taxes ( 8,393 ) 1,616 7,916 Impairment of goodwill, intangibles and other assets 54,666 — — Other adjustments 1,652 5,776 2,607 Reserve on jewelry scrap receivable — 3,646 — Stock compensation expense ( 5,094 ) 9,751 10,784 Equity in net loss (gain) from investment in unconsolidated affiliates 2,429 135 ( 5,529 ) Impairment of investment in unconsolidated affiliates — 19,725 11,712 Changes in operating assets and liabilities, net of business acquisitions: Pawn service charges receivable 11,021 ( 732 ) ( 1,788 ) Inventory 17,043 ( 493 ) ( 1,074 ) Prepaid expenses, other current assets and other assets ( 875 ) 5,732 477 Accounts payable, accrued expenses and other liabilities ( 37,401 ) 22,246 ( 3,271 ) Customer layaway deposits ( 1,647 ) 1,176 709 Income taxes, net of excess tax benefit from stock compensation ( 4,715 ) ( 10,404 ) ( 3,785 ) Net cash provided by operating activities 49,078 103,517 88,981 Investing activities: Loans made ( 568,368 ) ( 737,585 ) ( 707,220 ) Loans repaid 394,469 434,142 421,331 Recovery of pawn loan principal through sale of forfeited collateral 304,323 288,502 266,962 Capital expenditures, net ( 28,526 ) ( 38,839 ) ( 40,474 ) Acquisitions, net of cash acquired — ( 8,116 ) ( 93,165 ) Investment in unconsolidated affiliate — — ( 14,036 ) Principal collections on notes receivable 8,000 34,067 32,396 Net cash provided by (used in) investing activities 109,898 ( 27,829 ) ( 134,206 ) Financing activities: Taxes paid related to net share settlement of equity awards ( 1,459 ) ( 3,288 ) ( 311 ) Payout of deferred consideration ( 350 ) — — Proceeds from borrowings, net of issuance costs 912 1,064 171,409 Payments on borrowings ( 198 ) ( 196,093 ) ( 3,510 ) Repurchase of common stock ( 5,158 ) — — Net cash (used in) provided by financing activities ( 6,253 ) ( 198,317 ) 167,588 Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 2,612 ) ( 507 ) ( 654 ) Net increase (decrease) in cash and cash equivalents and restricted cash 150,111 ( 123,136 ) 121,709 Cash and cash equivalents and restricted cash at beginning of period 162,442 285,578 163,869 Cash and cash equivalents and restricted cash at end of period $ 312,553 $ 162,442 $ 285,578 Supplemental disclosure of cash flow information Cash and cash equivalents $ 304,542 $ 157,567 $ 285,311 Restricted cash 8,011 4,875 267 Total cash and cash equivalents and restricted cash $ 312,553 $ 162,442 $ 285,578 Cash paid during the period for interest $ 8,489 $ 12,900 $ 8,412 Cash paid during the period for income taxes, net $ 9,753 $ 11,132 $ 13,676 Non-cash investing and financing activities: Pawn loans forfeited and transferred to inventory $ 241,252 $ 301,357 $ 274,590 See accompanying notes to consolidated financial statements. 45 Table of Contents EZCORP, Inc. Notes to Consolidated Financial Statements NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business EZCORP, Inc. was founded in 1989 and is a leading provider of pawn loans in the United States and Latin America. Pawn loans are non-recourse loans collateralized by tangible property. We also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers. We are dedicated to satisfying the short-term cash needs of consumers, with a focus on delivering an industry-leading customer experience. As of September 30, 2020, we operated a total of 1,005 locations, consisting of: • 505 United States pawn stores (operating primarily as EZPAWN or Value Pawn & Jewelry); • 368 Mexico pawn stores (operating primarily as Empeño Fácil); • 132 pawn stores in Guatemala, El Salvador, Honduras and Peru (operating as GuatePrenda and MaxiEfectivo). We have a 34.75 % equity interest in Cash Converters International Limited (“Cash Converters International”), a publicly traded company (ASX:CCV) headquartered in Perth, Western Australia with operations in Australia and the United Kingdom. Cash Converters International and its controlled companies comprise a diverse group generating revenues from franchising store operations, personal finance and vehicle finance, controlling over 700 stores across 16 countries. We also own 13.14 % of Rich Data Corporation (RDC), a Singapore-based software-as-a-service company that utilizes global financial services expertise, advanced artificial intelligence and non-traditional data to deliver a next-generation credit scoring and decisioning platform. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles and are expressed in U.S. dollars. They include the accounts of EZCORP, Inc., and its wholly-owned subsidiaries. We use the equity method of accounting for entities in which we have a 50% or less investment and exercise significant influence. We account for equity investments for which we do not have significant influence and without readily determinable fair values at cost with adjustments for observable changes in price in orderly transactions for identical or similar investments of the same issuer or impairments. All inter-company accounts and transactions have been eliminated in consolidation. We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation. Use of Estimates and Assumptions The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly evaluate estimates and judgments, including those related to revenue recognition, inventory, loan loss allowances, long-lived and intangible assets, share-based compensation, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and various other assumptions that we believe are reasonable, the results of which form the basis for making judgements about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Actual results may differ materially from the estimates under different assumptions or conditions. Pawn Loans and Revenue Recognition The carrying value of our pawn loans is based on the initial amounts loaned to customers, which are fully collateralized. We record pawn service charges using the effective interest method over the life of the loan for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following months. Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our results of operations and financial condition. If a pawn loan is not repaid, we value the forfeited collateral (inventory) at the lower of cost (pawn loan principal) or net realizable value of the item. Of our consolidated pawn loans outstanding balance of $ 131.3 million as of September 30, 2020, $ 51.9 million ( 40 %) is attributable to stores in Texas and $ 14.8 million ( 11 %) is attributable to stores in Florida. 46 Table of Contents Merchandise Sales Revenue Recognition Our performance obligations for merchandise sales primarily relate to point in time retail sales in our stores. We recognize the satisfaction of the performance obligation and record merchandise sales revenue and the related cost when merchandise inventory is sold and delivered to the customer or, in the case of a layaway sale, when we receive the final payment. Customers have a limited period of time to return merchandise for a refund or exchange, and actual returns for refunds are not material. Sales tax collected on the sale of inventory is excluded from the amount recognized as sales and is recorded as a liability in “Accounts payable, accrued expenses and other current liabilities” in our consolidated balance sheets until remitted to the appropriate governmental authorities. We recognize the satisfaction of the performance obligation and record scrapping (precious metals and stones) sales revenue and the related cost when scrap inventory is legally transferred to the refiner and the refiner obtains control of the inventory. The receivables outstanding at the end of a given reporting period are not material. Payment of the receivable from the customer is generally received within a short period of time after the legal transfer of the scrap materials to the refiner. Our transaction prices are explicitly stated within the contracts with our customers. Inventory and Cost of Goods Sold If a pawn loan is not redeemed, we record the forfeited collateral at cost (the principal amount of the pawn loan) in "Inventory, net" in our consolidated balance sheets. We do not record loan loss allowances or charge-offs on the principal portion of pawn loans, as they are fully collateralized. We record our inventory using the specific identification method of accounting. In order to state inventory at the lower of cost or net realizable value, we record an allowance for excess, obsolete or slow-moving inventory based on the type and age of merchandise. Our inventory consists primarily of general merchandise and jewelry. Our "Merchandise cost of goods sold" includes the historical cost of inventory sold, inventory shrinkage and any change in the allowance for inventory shrinkage and valuation. We include the cost of operating our central jewelry processing unit under “Jewelry scrapping cost of goods sold,” as it relates directly to sales of precious metals to refiners. We consider our estimates of obsolete or slow-moving inventory and shrinkage critical estimates in determining the appropriate overall valuation allowance for inventory. We monitor our sales margins for each type of inventory on an ongoing basis and compare to historical margins. Significant variances in those margins may require a revision to future inventory reserve estimates. We monitor our reserve estimates pertaining to jewelry inventory depending on the current and projected prices of gold. Future declines in the value of gold prices may cause an increase in reserve rates pertaining to jewelry inventory. Situations that may result in excess or obsolete inventory include changes in business and economic conditions, changes in consumer confidence caused by changes in market conditions ,decreases in demand for our products or inventory obsolescence resulting from changes in technology. During fiscal 2020, we took a charge of $ 2.6 million to merchandise cost of sales for inventory provisions primarily related to the write-off of excess and obsolete inventory due to the impact of COVID-19. With respect to our Mexico pawn operations, we do not own the forfeited collateral; however, we assume the risk of loss on such collateral and are solely responsible for its care and disposition and, therefore, record such collateral under “Inventory, net” in our consolidated bal ance sheets. The amount of inventory from our Mexico pawn operations classified as “Inventory, net” in our consolidated balance sheets was $ 12.9 million and $ 26.9 million as of September 30, 2020 and 2019, respectively. Cash and Cash Equivalents and Cash Concentrations Cash and cash equivalents consist primarily of cash on deposit or highly liquid investments with original contractual maturities of three months or less, or money market mutual funds. We hold cash at major financial institutions that often exceed FDIC insured limits. We manage our credit risk associated with cash and cash equivalents and cash concentrations by concentrating our cash deposits in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions issuing investments or holding such deposits. Historically, we have not experienced any losses due to such cash concentrations. Restricted Cash Restricted cash consists of $ 8.0 million held in escrow pending resolution of a pre-closing tax indemnity claim related to the sale of Grupo Finmart. 47 Table of Contents Equity Method Investments We account for our investment in Cash Converters International and RDC under the equity method. Since Cash Converters International’s fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. Thus, income reported for fiscal years ended September 30, 2020, 2019 and 2018 represents our percentage interest in the results of Cash Converters International’s operations for the twelve-month periods ended June 30, 2020, 2019 and 2018, respectively. Because Cash Converters International publicly files semi-annual financial reports with the Australian Securities & Investments Commission as of and for the periods ended June 30 and December 31, we make estimates for our equity in Cash Converters International’s net income (loss) for the three-month periods ended March 31 (our reporting period ended June 30) and September 30 (our reporting period ended December 31). Those estimates may vary from actual results. We adjust our estimates as necessary in our reporting periods ended March 31 and September 30 to conform to Cash Converters International actual results as shown in their published semi-annual reports. We measure and record all other-than-temporary impairments as of the date of our reporting period. Leases We enter into operating lease agreements for real estate related to pawn locations and corporate offices. We determine if an arrangement contains a lease at inception by determining whether there is an identified asset and whether the arrangement conveys the right to control the use of the identified asset. Operating lease liabilities are recognized at the lease commencement date based on the present value of fixed lease payments using the Company’s incremental borrowing rate. As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying the portfolio approach to groups of leases with similar characteristics. Right-of-use operating assets are recognized based on the initial present value of fixed lease payments over the lease term. Our lease terms include options to extend the lease when it is reasonably certain we will exercise its option. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of October 1, 2019 to initially measure our lease liability. We evaluate renewal options periodically for any changes in assumptions. Effective October 1, 2019, we adopted ASC Topic 842: Leases (“ASC 842”). Upon adoption, we elected to utilize the modified retrospective method, including not to account for lease and non-lease components separately. Lease components generally include rent, taxes and insurance, and non-lease components generally include common area maintenance. Right-of-use assets are tested for impairment in the same manner as long-lived assets. Under ASC 842, lease expense is recognized on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. Our lease portfolio consists of pawn locations and corporate offices with leases terms ranging from three to ten years , including options to renew. We generally account for the initial lease term of our pawn locations as up to ten years . Our primary corporate office is leased through March 2029 with escalating rent payments annually and includes two five-year extension options at the end of the initial lease term. Definite-lived Intangible Assets Goodwill and indefinite-lived intangible assets are not subject to amortization. We test goodwill and indefinite-lived intangible assets for impairment annually as of September 30, or more frequently if an event occurs or circumstances change that could indicate a potential impairment. We compare the fair value of our reporting units with their carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, without exceeding the total amount of goodwill allocated to that reporting unit. We perform our impairment analyses utilizing the income approach. This approach uses estimated future cash flows and terminal values for each of our reporting units (discounted using a market participant perspective) to determine the fair value of each reporting unit, which is then compared to the carrying value of the reporting unit to determine if there is an impairment. We have determined that our reporting units are equivalent to our operating segments for fiscal 2020. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. We use discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in our internally developed forecasts. Discount rates used in fiscal 2020 for the goodwill impairment analysis ranged from 11 % to 19 %. In testing other indefinite-lived intangible assets for potential impairment, we apply key assumptions that are consistent with those utilized in our goodwill impairment test. We may perform a qualitative assessment in making our determination of whether it is more likely than not goodwill and other indefinite-lived intangible assets are impaired in future reporting periods. In addition to the assumptions discussed above pertaining to the income approach, we consider the assessment of potential triggering events to be a critical estimate. 48 Table of Contents Property and Equipment We record property and equipment at cost. We depreciate these assets on a straight-line basis using estimated useful lives of 30 years for buildings and two to seven years for furniture, equipment and software development costs. We depreciate leasehold improvements over the shorter of their estimated useful life (typically 10 years) or the reasonably assured lease term at the inception of the lease. Valuation of Long-Lived Assets The carrying values of long-lived assets, inclusive of right of use (ROU) assets, are periodically reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as historical operating losses or plans to close stores before the end of their previously estimated useful lives. A potential impairment has occurred if projected future undiscounted cash flows are less than the carrying value of the assets. The estimate of cash flows includes management's assumptions of cash inflows and outflows directly resulting from the use of those assets in operations. In addition to the assumptions associated with the determination of projected future cash flows, we consider the assessment of potential triggering events to be a critical estimate. When a potential impairment has occurred, an impairment write-down is recorded if the carrying value of the long-lived asset exceeds its fair value. Software Development Costs and Cloud Computing Arrangements We capitalize certain costs incurred in connection with developing or obtaining software for internal use and amortize the costs on a straight-line basis over the estimated useful lives of the software, typically five years . Net capitalized development costs are included in “Capital expenditures, net” in our consolidated statements of cash flows. In evaluating whether our cloud computing arrangements include a software license, we consider whether we have the contractual right to take possession of the software at any time during the hosting period without significant penalty and whether it is feasible for us to either run the software on our own hardware or contract with another party unrelated to the vendor to host the software. If a cloud computing arrangement includes a software license, we account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, we account for the arrangement as a service contract. Business Combinations We allocate the total acquisition price to the fair value of assets and liabilities acquired under the acquisition method with goodwill representing the excess of purchase price over the fair value of net assets acquired. We expense transaction costs as incurred. We recognize any adjustments to provisional amounts and goodwill that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, with the effect on current period earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Convertible Debt Securities In accounting for our convertible debt securities at issuance, we separated the securities into debt and equity components pursuant to the accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion. The carrying value of the liability components was calculated by measuring the fair value of similar liabilities that do not have an associated conversion feature, including discount rates of approximately 8 %. The excess of the principal amount over the fair value of the liability component was recorded as a discount with a corresponding increase in additional paid-in capital. The debt discounts will be accreted to “Interest expense” over the respective terms of the convertible debt securities using the effective interest method. The amount recorded to “Additional paid-in capital” will not be remeasured as long as they continue to meet the conditions for equity classification. We account for the conversion premium of the convertible debt securities under the treasury method in accordance with our accounting policy, which assumes settlement of the conversion premium (equal to the as-converted value over the face principal amount) in shares of our Class A Common Stock. Foreign Currency Our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities of our foreign subsidiaries' balance sheet accounts and our equity method investments are translated from their respective functional currencies into United States dollars at the exchange rate at the end of each quarter, and their earnings are translated into United States dollars at the average exchange rate each quarter. We present resulting translation adjustments as a separate component of stockholders’ equity. 49 Table of Contents Foreign currency transaction gains and losses not accounted for as translations are included in “Other expense (income)” in our consolidated statements of operations. These gains were $ 0.5 million, $ 0.3 million and $ 0.4 million for fiscal 2020, 2019 and 2018, respectively. Operations Expense Included in “Operations” expense are costs related to operating our stores and any direct costs of support offices. These costs include labor, other direct expenses such as utilities, supplies and banking fees and indirect expenses such as store rent, building repairs and maintenance, advertising, store property taxes and insurance and regional and area management expenses . Administrative Expense Included in “Administrative” expense are costs related to our executive and administrative offices. This includes executive and administrative salaries, wages, stock and incentive compensation, professional fees, license fees, costs related to the operation of our administrative offices such as rent, property taxes, insurance, information technology and other corporate costs. Advertising Advertising costs are expensed as incurred and included primarily under “Operations” expense in our consolidated statements of operations. These costs were $ 2.0 million, $ 2.0 million and $ 2.5 million for fiscal 2020, 2019 and 2018, respectively. Stock Compensation We measure share-based compensation expense at the grant date based on the price of underlying shares at that date and recognize it as expense, net of estimated forfeitures, ratably over the vesting or service period, as applicable, of the stock award. Our policy is to recognize expense on performance-based awards, where satisfaction of the performance condition is probable, ratably over the awards’ vesting period and recognize expense on awards that only have service requirements on a straight-line basis. Income Taxes We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying value of assets and liabilities and their tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We have not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes of our undistributed earnings of foreign subsidiaries indefinitely invested outside the U.S. We may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which we operate or have operated within a relevant period. Significant judgment is required in determining uncertain tax positions. We utilize the required two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We believe adequate provisions for income taxes have been made for all periods. We recognize interest and penalties related to unrecognized tax benefits as “Income tax expense” in our consolidated statements of operations. We consider our assessment of the recognition of deferred tax assets as well as estimates of uncertain tax positions to be critical estimates. 50 Table of Contents Earnings per Share and Common Stock We compute basic earnings per share based on the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding, including conversion features embedded in our outstanding convertible debt, during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock awards as well as shares issuable on conversion of our outstanding convertible debt securities and exercise of outstanding warrants. Potential common shares are required to be excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vest are greater than the cost to re-acquire the same number of shares at the average market price, and therefore the effect would be anti-dilutive. There were no participating securities outstanding during fiscal 2020, 2019 and 2018 requiring the application of the two-class method. When we are in a loss position for the period, dilutive securities are excluded from the calculation of earnings per share, as they would have an anti-dilutive effect. Our capital stock consists of two classes of common stock designated as Class A Non-Voting Common Stock (“Class A Common Stock”) and Class B Voting Common Stock (“Class B Common Stock”). The rights, preferences and privileges of the Class A and Class B Common Stock are similar except that each share of Class B Common Stock has one vote and each share of Class A Common Stock has no voting privileges, except as required by law. All Class A Common Stock is publicly held. Holders of Class B Common Stock may, individually or as a class, convert some or all of their shares into Class A Common Stock on a one -to-one basis. Class A Common Stock becomes voting common stock upon the conversion of all Class B Common Stock to Class A Common Stock. We are required to reserve the number of authorized but unissued shares of Class A Common Stock that would be issuable upon conversion of all outstanding shares of Class B Common Stock. Impact of COVID-19 In December 2019, a novel strain of coronavirus “COVID-19” was identified in Wuhan, China. COVID-19 has caused a global health emergency and was declared a worldwide pandemic by the World Health Organization on March 11, 2020. In an effort to slow and contain the spread of COVID-19, local, state and national governments implemented various measures, which have impacted businesses worldwide. Many of these measures have expired or been rescinded, but some are continuing and others are being reimplemented or considered for reimplementation as COVID-19 continues to spread at rapid rates in many parts of the U.S. We began to see the impact of COVID-19 to our operations in mid-March when the closure of non-essential businesses and the implementation of stay-at-home requirements began in our geographic locations. During the third quarter, we were able to keep virtually all of our stores in the U.S. and Mexico open for business and operating under enhanced safety measures and restrictions on occupancy, but store closure orders in our GPMX countries (Guatemala, El Salvador, Honduras and Peru) had a more severe impact on our business. Since that time and continuing through the fourth quarter, we have been able to keep virtually all of our stores open for business. Starting in mid-March and continuing through most of the fourth quarter, we experienced a significant decline in pawn loan originations and associated loan balances as a result of a change in customer borrowing behaviors due to COVID-19. This reduced activity resulted in net revenue losses for the year, which were partially offset by a strong increase in merchandise sales. The factors described above impacted the forecast of future net revenues and earnings and resulted in lower present value of future cash flows. We recorded a goodwill impairment charge of $ 41.3 million in the second quarter of fiscal 2020. In addition, we (a) determined an impairment had occurred in the fair values of trade names of previously acquired entities in our Mexico and GPMX reporting units and recorded a related impairment of $ 2.9 million and $ 1.7 million respectively, and (b) determined the carrying amount of certain long-lived asset groups were not recoverable and recorded a related impairment of $ 1.1 million, all in the second quarter of 2020. The full extent and duration of the COVID-19 impact on the global economy generally, and on our business specifically, is currently unknown and cannot be reasonably estimated. The pandemic has had an adverse effect on our net revenues and earnings in fiscal 2020. We expect the impact of the pandemic, and the recovery therefrom, will continue to adversely affect net revenues and earnings into fiscal 2021. A prolonged pandemic and recovery may have an adverse effect on our results of operations, financial position and liquidity in future periods. 51 Table of Contents Recently Adopted Accounting Policies In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate. ASU 2020-04 is effective upon issuance through December 31, 2022. This ASU has not had a significant impact on our consolidated financial statements and related disclosures to date. We will continue to assess the applicability to any future arrangements. Effective October 1, 2019, we adopted ASC - Leases (Topic 842) which requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet using the modified retrospective method provided under ASU 2018-11, Leases- (Topic 842): Targeted Improvements. Additionally, we elected the package of practical expedients under Accounting Standards Codification ("ASC") 842 as well as the transition guidance elections to not separate lease and non-lease components for leases under ASC 842. Further, we have elected an accounting policy to not record right-of-use assets and lease liabilities for leases that have a duration of 12 months or less. See Note 12 for additional discussion. Recently Issued Accounting Pronouncements In August 2020, the FASB issued its Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU 2020-06 amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are assessing the amendments in ASU 2020-06 to determine the impact on our consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) (ASU 2016-13). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to consider other factors, such as economic conditions and future economic conditions. A reporting entity should generally apply the amendment on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendment is effective. We are still assessing the amendments in ASU 2016-13 and do not expect the amendments will have a significant impact on our consolidated financial statements and related disclosures. ASU 2016-13 is effective for the first quarter of fiscal 2021 . NOTE 2: OTHER CHARGES Strategic Initiatives . During the fourth quarter of fiscal 2020, we began to implement strategic initiatives to refocus on our core pawn business and optimize our cost structure in order to improve our bottom line performance and position the Company for sustainable growth. The initiatives focused on workforce reductions, closure of our CASHMAX operations, store closures and write-offs of other miscellaneous charges. Charges and adjustments related to our initiatives are summarized below: • $ 6.4 million in severance and other payroll-related costs related to a headcount reduction in the corporate office; • $ 4.9 million in costs related to the closure of the CASHMAX business and related operations, primarily consisting of severance and other payroll-related costs, net asset write-offs, impairment of internally developed software and contract termination costs; • $ 4.1 million in costs primarily related to the closure of four stores in U.S. Pawn and three stores in Latin America Pawn, consisting primarily of severance and other payroll-related costs and reserves on net assets; and • $ 5.0 million in other miscellaneous charges, primarily consisting of impairment of internally developed software and contract termination costs. 52 Table of Contents (in millions) Accrued Charges at September 30, 2019 Charges and Adjustments Payments and Adjustments Accrued Charges at September 30, 2020 Cash charges: Labor reduction costs $ — $ 6.4 $ 0.5 $ 5.9 CASHMAX shutdown costs — 1.8 1.0 0.8 Store closure costs — 1.8 — 1.8 Other — 2.5 0.3 2.2 $ — $ 12.5 $ 1.8 $ 10.7 Non-cash charges: Labor reduction costs $ — CASHMAX shutdown costs 3.1 Store closure costs 2.3 Other 2.5 $ 20.4 NOTE 3: ACQUISITIONS Fiscal 2019 Acquisitions In June 2019, we acquired assets related to seven pawn stores operating under the name "Metro Pawn" in Nevada, entering the Reno market and expanding our presence in the Las Vegas metropolitan area, for an aggregate purchase price of $ 7.0 million in cash, of which $ 3.9 million was recorded as goodwill. In December 2018, we acquired assets related to five pawn stores in Mexico for an aggregate purchase price of $ 0.3 million in cash, of which $ 0.1 million was recorded as goodwill. Substantially all goodwill attributable to the fiscal 2019 acquisitions is deductible for tax purposes. We have concluded these acquisitions were immaterial to our overall consolidated financial results and, therefore, have omitted information that would otherwise be required. Fiscal 2018 Acquisitions Camira Administration Corp. and subsidiaries (“GPMX”) In October 2017, we completed the acquisition of 100 % of the outstanding stock of Camira Administration Corp. and subsidiaries (“GPMX”), a business that, at the time, owned and operated 112 stores located in Guatemala, El Salvador, Honduras and Peru. The GPMX acquisition significantly expanded our store base into Latin American countries outside of Mexico and provided us with a platform for further growth in the region. Under the terms of the stock purchase agreement (“SPA”), we paid $ 53.4 million in cash upon closing and, subsequent to the closing, paid $ 6.7 million to satisfy the acquired company's indebtedness to members of the seller’s affiliated group. The SPA specified a further $ 2.25 million to be paid contingent upon performance of GPMX’s business during a period up to 24 months following the closing date, and the business achieved the specified performance goal during the first quarter of fiscal 2018. Consequently, we made a final payment of $ 1.6 million in January 2018 in satisfaction of the contingent purchase price obligation, after reduction for certain adjustments under the SPA, yielding a total purchase price of $ 61.7 million. All Other In June 2018, we acquired 40 pawn stores operating under the name “Montepio San Patricio” in and around Mexico City, the largest market in Mexico. The acquisition of these stores was our largest acquisition in Mexico to date and significantly strengthened our competitive position in the strategically important Mexico City metropolitan area. The physical space in these stores is substantially larger than our average store in Mexico, giving us the capacity to increase their focus on general merchandise pawn loan and retail activities. In June 2018, we acquired 23 pawn stores operating under the name “Presta Dinero,” giving us a presence in a number of cities within seven central-Mexico states in which we already had stores. These stores complemented our existing stores, allowing us to achieve synergies in management and administration while giving us a presence in new cities and neighborhoods. 53 Table of Contents In December 2017, we acquired 21 pawn stores located in the Mexican state of Sinaloa operating under the name “Bazareño.” The Bazareño stores made up the largest chain of pawn stores in Culiacan, the capital city of Sinaloa, giving us the number one position in that market and an important strategic presence in the northwest region of Mexico. The purchase prices of the above acquisitions were paid in cash. These acquisitions, collectively referred to as "All Other" below, were individually immaterial and we have therefore omitted or aggregated certain disclosures. Other Information for Fiscal 2018 Acquisitions The acquisitions described above were all attributable to our Latin America Pawn segment. The allocation of the consideration for the acquired net assets from our fiscal 2018 acquisitions was as follows: GPMX All Other (in thousands) Cash and cash equivalents $ 2,560 $ — Earning assets 17,247 8,347 Other assets 2,145 3,737 Property and equipment, intangible assets, deferred taxes and other assets, net* 11,671 13,678 Goodwill 34,816 7,770 Accounts payable, deferred taxes and other liabilities ( 6,723 ) 1,621 Total consideration $ 61,716 $ 35,153 * As September 30, 2018 i ntangible assets consist primarily of $ 9.8 million and $ 6.6 million in trade names acquired with indefinite useful lives, for GPMX and All Other, respectively. The factors contributing to the recognition of goodwill, which is recorded in our Latin America Pawn segment, were based on several strategic and synergistic benefits we expect to realize from the acquisitions, including expansion of our store base as well as the ability to further leverage our pawn expertise, investments in information technology and other back office and support functions of our existing Mexico pawn business. None of the goodwill resulting from these business combinations is deductible for tax purposes. The results of the acquired businesses have been included in our consolidated financial statements beginning after the acquisition dates as indicated above in our Latin America Pawn segment with revenue and net income amounts as presented below. Such net income does not include acquisition-related costs of approximately $ 0.6 million for fiscal 2018, which were expensed as incurred and primarily included under “Administrative” expense in our consolidated statements of operations. It is impracticable to provide historical supplemental pro forma financial information for GPMX and All Other acquisitions due to a variety of factors, including complexity of restructured entities acquired and access to historical information, such as information necessary to eliminate intercompany transactions. Fiscal Year Ended September 30, 2018 Revenue Net Income GPMX $ 46.5 $ 8.0 All Other 7.5 1.3 54 Table of Contents NOTE 4: (LOSS) EARNINGS PER SHARE Components of basic and diluted (loss) earnings per share and excluded antidilutive potential common shares are as follows: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands, except per share amounts) Net (loss) income from continuing operations attributable to EZCORP (A) $ ( 68,463 ) $ 2,998 $ 38,138 Loss from discontinued operations, net of tax (B) — ( 457 ) ( 856 ) Net (loss) income attributable to EZCORP (C) $ ( 68,463 ) $ 2,541 $ 37,282 Weighted average outstanding shares of common stock (D) 55,313 55,341 54,456 Dilutive effect of restricted stock and 2024 Convertible Notes* — 643 3,440 Weighted average common stock and common stock equivalents (E) $ 55,313 $ 55,984 $ 57,896 Basic (loss) earnings per share attributable to EZCORP: Continuing operations (A/E) $ ( 1.24 ) $ 0.05 $ 0.70 Discontinued operations (B / D) — ( 0.01 ) ( 0.02 ) $ ( 1.24 ) $ 0.04 $ 0.68 Diluted (loss) earnings per share attributable to EZCORP: Continuing operations (A / E) $ ( 1.24 ) $ 0.05 $ 0.66 Discontinued operations (B / E) — ( 0.01 ) ( 0.02 ) Diluted (loss) earnings per share (C / E) $ ( 1.24 ) $ 0.04 $ 0.64 Potential common shares excluded from the calculation of diluted earnings per share above*: Restricted stock** 2,786 2,121 2,218 * See Note 9 for discussion of the terms and conditions of the potential impact of the 2024 Convertible Notes and 2025 Convertible Notes. This amount excludes all potential common shares for periods when there is a loss from continuing operations. ** Includes antidilutive share-based awards as well as performance-based share-based awards that are contingently issuable, but for which the condition for issuance has not been met as of the end of the reporting period. NOTE 5: STRATEGIC INVESTMENTS As of September 30, 2020, we owned 214,183,714 shares, or approximately 34.75 %, of Cash Converters International. Our total investment in Cash Converters International was acquired between November 2009 and June 2018 for approximately $ 96.1 million, including the acquisition of 57,631,230 shares in June 2018 for $ 14.0 million (increasing our ownership by three percentage points) in connection with an underwritten placement of 123.3 million shares by Cash Converters International for AUD $ 39.5 million, excluding related costs. Our equity in Cash Converters International’s net loss was $ 2.1 million and $ 0.1 million in fiscal 2020 and 2019, and our equity in net income was $ 5.5 million in 2018. Cash Converters International did not declare or pay a dividend in fiscal 2020, 2019 or 2018. Cash Converters International’s accumulated undistributed after-tax earnings included in our consolidated retained earnings were $ 13.7 million as of September 30, 2020. The following tables present summary financial information for Cash Converters International’s most recently reported results as of September 30, 2020, 2019 and 2018 as applicable after translation to U.S. dollars: June 30, 2020 2019 (in thousands) Current assets $ 157,183 $ 173,826 Non-current assets 172,833 152,483 Total assets $ 330,016 $ 326,309 Current liabilities $ 68,028 $ 77,434 Non-current liabilities 51,275 26,163 Shareholders’ equity 210,713 222,712 Total liabilities and shareholders’ equity $ 330,016 $ 326,309 55 Table of Contents Fiscal Year Ended June 30, 2020 2019 2018 (in thousands) Gross revenues $ 187,025 $ 201,365 $ 201,800 Gross profit 112,511 111,932 128,366 Net (loss) profit ( 7,032 ) ( 1,210 ) 17,443 At September 30, 2020 , the fai r value of our investment in Cash Converters International, as estimated by reference to its quoted market price per share, was greater than its carrying value. For the first and second quarters of fiscal 2019, we determined that our investment was impaired and that such impairment was "other-than-temporary." In reaching this conclusion, we considered all available evidence, including evidence in existence as of September 30, 2018. Additionally, we noted the following developments subsequent to September 30, 2018: (i) continued decline in Cash Converters International's share price; and (ii) ongoing uncertainty around the Queensland, Australia class action lawsuit regarding historical lending practices by Cash Converters International, for which a settlement agreement was reached subsequent to September 30, 2019. As a result, we recognized "other-than-temporary" impairments in Cash Converters International of $ 13.3 million ($ 10.3 million, net of taxes) and $ 6.5 million ($ 5.0 million, net of taxes) during the first and second quarters of fiscal 2019, respectively. The fair value of our investment in Cash Converters International was $ 6.2 million below its carrying value as of September 30, 2019, which we determined was not other-than temporary primarily as a result of the subsequent settlement of the remaining Queensland, Australia class action lawsuit and recovery of share price. We will continue to monitor the fair value of our investment in Cash Converters International for other-than-temporary impairments in future reporting periods and may record additional impairment charges should the fair value of our investment in Cash Converters International decline below its carrying value for an extended period of time. See Note 6 for the fair value and carrying value of our investment in Cash Converters International. We hold a 13.14 % ownership in "RDC" and recognized a $ 0.3 million net loss for fiscal year 2020. NOTE 6: FAIR VALUE MEASUREMENTS The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories: • Level 1 — Quoted market prices in active markets for identical assets or liabilities. • Level 2 — Other observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3 — Unobservable inputs that are not corroborated by market data. Financial Assets and Liabilities Not Measured at Fair Value The tables below present our financial assets and liabilities that were not measured at fair value: Carrying Value Estimated Fair Value September 30, 2020 September 30, 2020 Fair Value Measurement Using Level 1 Level 2 Level 3 (in thousands) Financial assets: 2.89 % promissory note receivable due April 2024 $ 1,148 $ 1,148 $ — $ — $ 1,148 Investments in unconsolidated affiliates 32,458 32,597 24,833 — 7,764 Financial liabilities: 2024 Convertible Notes $ 117,193 $ 129,979 $ — $ 129,979 $ — 2025 Convertible Notes 133,164 137,569 — 137,569 — 8.5 % unsecured debt due 2024 872 872 — — 872 Carrying Value Estimated Fair Value September 30, 2019 September 30, 2019 Fair Value Measurement Using Level 1 Level 2 Level 3 (in thousands) Financial assets: Notes receivable from Grupo Finmart, net $ 7,182 $ 7,582 $ — $ — $ 7,582 2.89 % promissory note receivable due April 2024 1,117 1,117 — — 1,117 Investments in unconsolidated affiliates 34,516 28,308 20,252 — 8,056 Financial liabilities: 2024 Convertible Notes $ 111,311 $ 139,969 $ — $ 139,969 $ — 2025 Convertible Notes 126,210 138,345 — 138,345 — 8.5 % unsecured debt due 2024 1,092 1,092 — — 1,092 CASHMAX secured borrowing facility 634 634 — — 634 Based primarily on the short-term nature of cash and cash equivalents, pawn loans, pawn service charges receivable and other debt, we estimate that their carrying value approximates fair value. We consider our cash and cash equivalents to be measured using Level 1 inputs and our pawn loans, pawn service charges receivable and other debt to be measured using Level 3 inputs. Significant increases or decreases in the underlying assumptions used to value pawn loans, pawn service charges receivable, consumer loans, fees and interest receivable and other debt could significantly increase or decrease these fair value estimates. In September 2020, we received the final payment from AlphaCredit on the notes receivable related to the sale of Grupo Finmart and recorded the amount under “Restricted cash” in our consolidated balance sheet as of September 30, 2020. In August 2019, AlphaCredit notified us of an indemnity claim for certain pre-closing taxes, but the nature, extent and validity of such claim has yet to be determined. The inputs used to generate the fair value of the investment in unconsolidated affiliate (Cash Converters International) were considered Level 1 inputs. These inputs are comprised of (a) the quoted stock price on the Australian Stock Exchange multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate as of the end of our reporting period. We included no control premium for owning a large percentage of outstanding shares. We use the equity method of accounting for our 13.14 % ownership in a previously consolidated variable interest entity, RDC, over which we no longer have the power to direct the activities that most significantly affect its economic performance. We believe its fair value approximates carrying value although such fair value is highly variable and includes significant unobservable inputs. We measured the fair value of the 2024 and 2025 Convertible Notes using quoted price inputs. The notes are not actively traded, and thus the price inputs represent a Level 2 measurement. As the quoted price inputs are highly variable from day to day, the fair value estimates disclosed above could significantly increase or decrease. In March 2019, we received $ 1.1 million in previously escrowed seller funds as a result of settling certain indemnification claims with the seller of GPMX. In April 2019, we loaned the $ 1.1 million back to the seller of GPMX in exchange for a promissory note. The note bears interest at the rate of 2.89 % per annum and is secured by certain marketable securities owned by the seller and held in a U.S. brokerage account. All principal and accrued interest is due and payable in April 2024. The note approximated its carrying value as of September 30, 2020. NOTE 7: PROPERTY AND EQUIPMENT Major classifications of property and equipment were as follows: September 30, 2020 2019 (in thousands) Carrying Amount Accumulated Depreciation Net Book Value Carrying Amount Accumulated Depreciation Net Book Value Land $ 4 $ — $ 4 $ 4 $ — $ 4 Buildings and improvements 105,137 ( 75,445 ) 29,692 103,486 ( 68,895 ) 34,591 Furniture and equipment 127,793 ( 101,888 ) 25,905 127,531 ( 96,142 ) 31,389 Software 33,729 ( 33,190 ) 539 34,245 ( 33,528 ) 717 Construction in progress 846 — 846 656 — 656 $ 267,509 $ ( 210,523 ) $ 56,986 $ 265,922 $ ( 198,565 ) $ 67,357 NOTE 8: GOODWILL AND INTANGIBLE ASSETS We test goodwill and intangible assets with indefinite useful lives for impairment annually, or more frequently when there are events or circumstances that indicate a potential impairment exists. During the second quarter of fiscal 2020, there was an indicator of impairment due to a decline in our market capitalization. We performed a quantitative analysis as of March 31, 2020 utilizing the income approach. This approach uses future cash flows and estimated terminal values for each reporting unit (discounted using a market participant perspective) to determine the fair value of each reporting unit, which is then compared to the carrying value of the reporting unit to determine if an impairment exists. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. There is inherent uncertainty associated with these key assumptions, including the duration of the economic downturn associated with COVID-19 and the recovery period. As a result of our quantitative analysis, we determined the fair value of each of our reporting units was below its carrying value because of the impact of COVID-19, including a significant decline in pawn loan balances due to changes in typical customer behavior and mandated store closures in our GPMX countries. These factors impacted the forecast of future net revenues and earnings and resulted in lower present value of future cash flows. We recorded a goodwill impairment charge of $ 41.3 million in the second quarter of fiscal 2020. In addition, we (a) determined an impairment had occurred in the fair values of trade names of previously acquired entities in our Mexico and GPMX reporting units and recorded a related impairment of $ 2.9 million and $ 1.7 million respectively, and (b) determined the carrying amount of certain long-lived asset groups were not recoverable and recorded a related impairment of $ 1.1 million in the second quarter of 2020. These impairments were recorded under "Impairment of goodwill, intangible and other assets" in the Consolidated Statements of Operations. We further evaluated events and circumstances as of September 30, 2020 and determined there were no indicators of impairment. The following table presents the changes in the carrying value of goodwill by segment: U.S. Pawn Latin America Pawn Consolidated (in thousands) Balances as of September 30, 2018 $ 247,894 $ 51,354 $ 299,248 Acquisitions 3,858 ( 1,721 ) 2,137 Effect of foreign currency translation changes — ( 858 ) ( 858 ) Balances as of September 30, 2019 $ 251,752 $ 48,775 $ 300,527 Measurement period adjustments 176 ( 149 ) 27 Goodwill impairment * ( 10,000 ) ( 31,340 ) ( 41,340 ) Effect of foreign currency translation changes — ( 1,632 ) ( 1,632 ) Balances as of September 30, 2020 $ 241,928 $ 15,654 $ 257,582 * Represents cumulative goodwill impairment. 56 Table of Contents The following table presents the balance of each major class of intangible assets: September 30, 2020 2019 (in thousands) Non-amortizing intangible assets: Trade names $ 19,094 $ 19,938 Accumulated impairment losses ( 4,598 ) — $ 14,496 $ 19,938 Pawn licenses 9,509 9,517 $ 24,005 $ 29,455 Amortizing intangible assets: Internally developed software $ 67,457 $ 59,436 Accumulated amortization ( 33,646 ) ( 24,280 ) Accumulated impairment losses $ ( 2,579 ) — $ 31,232 $ 35,156 Non-compete agreements $ 3,417 $ 3,563 Accumulated amortization ( 3,394 ) ( 3,399 ) $ 23 $ 164 Other $ 5,600 $ 5,598 Accumulated amortization ( 2,222 ) ( 2,329 ) $ 3,378 $ 3,269 Intangible assets, net $ 58,638 $ 68,044 The amortization of most definite-lived intangible assets is recorded as amortization expense and included under “Depreciation and amortization” expense in our consolidated statements of operations. These amounts were $ 11.2 million, $ 7.8 million and $ 5.8 million for fiscal 2020, 2019 and 2018, respectively. The following table presents our estimate of future amortization expense for definite-lived intangible assets: Fiscal Year Ended September 30, Amortization expense (in thousands) 2021 $ 8,344 2022 7,631 2023 5,892 2024 5,159 2025 1,685 As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates. 57 Table of Contents NOTE 9: DEBT The following tables present our debt instruments outstanding, contractual maturities and interest expense: September 30, 2020 September 30, 2019 Gross Amount Debt Discount and Issuance Costs Carrying Amount Gross Amount Debt Discount and Issuance Costs Carrying Amount (in thousands) 2024 Convertible Notes $ 143,750 $ ( 26,557 ) $ 117,193 $ 143,750 $ ( 32,439 ) $ 111,311 2025 Convertible Notes 172,500 ( 39,336 ) 133,164 172,500 ( 46,290 ) 126,210 8.5 % unsecured debt due 2024* 872 — 872 1,092 — 1,092 CASHMAX* — — — 634 ( 653 ) ( 19 ) Total $ 317,122 $ ( 65,893 ) $ 251,229 $ 317,976 $ ( 79,382 ) $ 238,594 Less current portion 213 — 213 214 — 214 Total long-term debt $ 316,909 $ ( 65,893 ) $ 251,016 $ 317,762 $ ( 79,382 ) $ 238,380 * Amounts translated from Guatemalan quetzals and Canadian dollars as of the applicable period end. Schedule of Contractual Maturities Total Less Than 1 Year 1 - 3 Years 3 - 5 Years (in thousands) 2024 Convertible Notes* $ 143,750 $ — $ — $ 143,750 2025 Convertible Notes* 172,500 — — 172,500 8.5 % unsecured debt due 2024 872 213 427 232 Total $ 317,122 $ 213 $ 427 $ 316,482 * Excludes the potential impact of embedded derivatives. Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) 2019 Convertible Notes: Contractual interest expense $ — $ 3,074 $ 4,144 Amortization of debt discount and deferred financing costs — 7,556 9,952 Total interest expense $ — $ 10,630 $ 14,096 2024 Convertible Notes: Contractual interest expense $ 4,133 $ 4,133 $ 4,133 Amortization of debt discount and deferred financing costs 5,883 5,452 5,057 Total interest expense $ 10,016 $ 9,585 $ 9,190 2025 Convertible Notes: Contractual interest expense $ 4,097 $ 4,097 $ 1,559 Amortization of debt discount and deferred financing costs 6,954 6,468 2,383 Total interest expense $ 11,051 $ 10,565 $ 3,942 2.375 % Convertible Senior Notes Due 2025 In May 2018, we issued $ 172.5 million aggregate principal amount of 2.375 % Convertible Senior Notes Due 2025 (the “2025 Convertible Notes”). All of the 2025 Convertible Notes were issued pursuant to an indenture dated May 14, 2018 (the "2018 Indenture") by and between us and Wells Fargo Bank, National Association, as the trustee. Effective October 1, 2019, Branch Banking and Trust Company (“BB&T”), a North Carolina Bank, has assumed the duties and responsibilities as trustee under the 2018 Indenture. The 2025 Convertible Notes were issued in a private offering and resold under Rule 144A under the Securities Act of 1933. The 2025 Convertible Notes pay interest semi-annually in arrears at a rate of 2.375 % per annum on May 1 and November 1 of each year, commencing November 1, 2018, and will mature on May 1, 2025 (the "2025 Maturity Date"), unless converted, redeemed or repurchased in accordance with their terms prior to such date. At maturity, the holders of the 2025 Convertible Notes will be entitled to receive cash equal to the principal amount of the 2025 Convertible Notes plus unpaid accrued interest. 58 Table of Contents The 2025 Convertible Notes are convertible based on an initial conversion rate of 62.8931 shares of Class A Non-Voting Common Stock (“Class A Common Stock”) per $1,000 principal amount (equivalent to an initial conversion price of $ 15.90 per share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2025 Convertible Notes contain certain make-whole fundamental change premiums and customary anti-dilution adjustments. Upon conversion, we may settle in cash, shares of Class A Common Stock or any combination thereof, at our election. We account for the Class A Common Stock issuable upon conversion under the treasury stock method. If our average share price is over $ 15.90 per share for any fiscal quarter, we are required to recognize incremental dilution of our earnings per share. Prior to November 1, 2024, the 2025 Convertible Notes are convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ended on June 30, 2018 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the 2018 Indenture, per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; (3) if we call any or all of the 2025 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events, as defined in the 2018 Indenture. On or after November 1, 2024 until the close of business on the business day immediately preceding the 2025 Maturity Date, holders of 2025 Convertible Notes may, at their option, convert their 2025 Convertible Notes at any time, regardless of the foregoing circumstances. We may not redeem the 2025 Convertible Notes prior to May 1, 2022. At our option, we may redeem for cash all or any portion of the 2025 Convertible Notes on or after May 1, 2022, if the last reported sale price of the Class A Common Stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100 % of the principal amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. We measured the fair value of the liability component of the 2025 Convertible Notes under a discounted cash flow approach considering our synthetic credit rating, as determined with external consultation, including inputs that are not observable in the market. The fair value of the liability component was estimated by calculating the present value of the cash flows using a discoun t rate of 8 % for a similarly stru ctured liability with no conversion feature, maturing in seven years . Our estimate resulted in an initial carrying value of the liability component of the 2025 Convertible Notes of $ 121.3 million with an associated original issue discount of $ 51.2 million, exclusive of deferred financing costs, accreted to the face value of the 2025 Convertible Notes based on the effective interest method through the 2025 Maturity Date. We accounted for the conversion feature of the 2025 Convertible Notes as a separate equity-classified instrument (“2025 Convertible Notes Embedded Derivative”). The carrying amount of the 2025 Convertible Notes conversion feature (the “2025 Convertible Notes Embedded Derivative”) is currently included under “Additional paid-in capital” in our consolidated balance sheets of September 30, 2020 and was initially calculated as $ 49.6 million ($ 39.1 million, net of tax). The 2025 Convertible Notes Embedded Derivative is expected to remain recorded in equity in our consolidated balance sheets as long as it continues to meet the criteria as an equity-classified instrument in subsequent reporting periods. We incurred transaction costs of $ 5.5 million related to the issuance of the 2025 Convertible Notes, which we recorded as deferred financing costs and are included under “Long-term debt, net” and “Additional paid-in capital” in our consolidated balance sheets. The effective interest rate for fiscal 2020 was approximately 9 %. As of September 30, 2020, the remaining unamortized debt discount and issuance costs will be amortized through the 2025 Maturity Date assuming no early conversion. As of September 30, 2020, the 2025 Convertible Notes were not convertible as no conditions of conversion had been met. Accordingly, the net balance of the 2025 Convertible Notes was classified as a non-current liability in our consolidated balance sheets as of September 30, 2020. The classification of the 2025 Convertible Notes as current or non-current in the consolidated balance sheets is evaluated at each balance sheet date and may change from time to time depending on whether any of the conversion conditions has been met. If one of the conversion conditions is met in any future fiscal quarter, we will classify our net liability under the 2025 Convertible Notes as a current liability in the consolidated balance sheets as of the end of that fiscal quarter. If none of the conversion conditions have been met in a future fiscal quarter prior to the one-year period immediately preceding the 2025 59 Table of Contents Maturity Date, we will classify our net liability under the 2025 Convertible Notes as a non-current liability in the consolidated balance sheets as of the end of that fiscal quarter. If the note holders elect to convert their 2025 Convertible Notes prior to maturity, any unamortized discount and transaction costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2020, we would have recorded an expense associated with the conversion, comprised of $ 39.3 million of unamortized debt discount and issuance costs. As of September 30, 2020, none of the note holders had elected to convert their 2025 Convertible Notes. As of September 30, 2020, the if-converted value of the 2025 Convertible Notes did not exceed the principal amount. 2.875 % Convertible Senior Notes Due 2024 In July 2017, we issued $ 143.75 million aggregate principal amount of 2.875 % Convertible Senior Notes Due 2024 (the “2024 Convertible Notes”). All of the 2024 Convertible Notes were issued pursuant to an indenture dated July 5, 2017 (the “2017 Indenture”) by and between us and Wells Fargo Bank, National Association, as the trustee. Effective October 1, 2019, BB&T has assumed the duties and responsibilities as trustee under the 2017 Indenture. The 2024 Convertible Notes were issued in a private offering and resold under Rule 144A under the Securities Act of 1933. The 2024 Convertible Notes pay interest semi-annually in arrears at a rate of 2.875 % per annum on January 1 and July 1 of each year, commencing January 1, 2018, and will mature on July 1, 2024 (the “2024 Maturity Date”), unless converted, redeemed or repurchased in accordance with their terms prior to such date. At maturity, the holders of the 2024 Convertible Notes will be entitled to receive cash equal to the principal amount of the 2024 Convertible Notes plus unpaid accrued interest. The 2024 Convertible Notes are convertible based on an initial conversion rate of 100 shares of Class A Common Stock per $1,000 principal amount (equivalent to an initial conversion price of $ 10.00 per share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2024 Convertible Notes contain certain make-whole fundamental change premiums and customary anti-dilution adjustments. Upon conversion, we may settle in cash, shares of Class A Common Stock or any combination thereof, at our election. We account for the Class A Common Stock issuable upon conversion under the treasury stock method. If our share priced increases over $ 10.00 per share, we are required to recognize incremental dilution of our earnings per share. Prior to January 1, 2024, the 2024 Convertible Notes will be convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2017 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the 2017 Indenture, per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; (3) if we call any or all of the 2024 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events, as defined in the 2017 Indenture. On or after January 1, 2024 until the close of business on the business day immediately preceding the 2024 Maturity Date, holders of 2024 Convertible Notes may, at their option, convert their 2024 Convertible Notes at any time, regardless of the foregoing circumstances. We may not redeem the 2024 Convertible Notes prior to July 6, 2021. At our option, we may redeem for cash all or any portion of the 2024 Convertible Notes on or after July 6, 2021, if the last reported sale price of the Class A Common Stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100 % of the principal amount of the 2024 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. We measured the fair value of the liability component of the 2024 Convertible Notes under a discounted cash flow approach considering our synthetic credit rating, as determined with external consultation, including inputs that are not observable in the market. The fair value of the liability component was estimated by calculating the present value of the cash flows using discount rates slightly above 8 % for a similarly structured liability with no conversion feature, maturing in seven years . Our estimate resulted in an initial carrying value of the liability component of the 2024 Convertible Notes of $ 102.7 million with an associated original issue discount of $ 41.0 million, exclusive of deferred financing costs, accreted to the face value of the 2024 Convertible Notes based on the effective interest method through the 2024 Maturity Date. We accounted for the conversion feature of the 2024 Convertible Notes as a separate equity-classified instrument (the “2024 Convertible Notes Embedded Derivative”), initially recorded as $ 39.8 million ($ 25.3 million, net of tax), inclusive of deferred 60 Table of Contents financing costs, on the issuance date and included under “Additional paid-in capital” in our consolidated balance sheet, including an allocated portion of the deferred financing costs. The 2024 Convertible Notes Embedded Derivative is expected to remain recorded in equity in our consolidated balance sheets as long as it continues to meet the criteria as an equity-classified instrument in subsequent reporting periods. The carrying amount of the 2024 Convertible Notes Embedded Derivative included under “Additional paid-in capital” in our consolidated balance sheet of September 30, 2020 was $ 25.3 million. We incurred transaction costs of $ 4.2 million related to the issuance of the 2024 Convertible Notes, which we recorded as deferred financing costs and are included under “Long-term debt, net” and “Additional paid-in capital” in our consolidated balance sheets. Deferred financing costs recorded under “Long-term debt, net” are being amortized to interest expense over the expected term of the 2024 Convertible Notes. The effective interest rate for fiscal 2020 was approximately 9 %. As of September 30, 2020, the remaining unamortized debt discount and issuance costs will be amortized through the 2024 Maturity Date assuming no early conversion. As of September 30, 2020, the 2024 Convertible Notes were not convertible as no conditions of conversion had been met. Accordingly, the net balance of the 2024 Convertible Notes was classified as a non-current liability in our consolidated balance sheets as of September 30, 2020. The classification of the 2024 Convertible Notes as current or non-current in the consolidated balance sheets is evaluated at each balance sheet date and may change from time to time depending on whether any of the conversion conditions has been met. If one of the conversion conditions is met in any future fiscal quarter, we will classify our net liability under the 2024 Convertible Notes as a current liability in the consolidated balance sheets as of the end of that fiscal quarter. If none of the conversion conditions have been met in a future fiscal quarter prior to the one-year period immediately preceding the 2024 Maturity Date, we will classify our net liability under the 2024 Convertible Notes as a non-current liability in the consolidated balance sheets as of the end of that fiscal quarter. If the note holders elect to convert their 2024 Convertible Notes prior to maturity, any unamortized discount and transaction costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2020, we would have recorded an expense associated with the conversion, comprised of $ 26.6 million of unamortized debt discount and issuance costs. As of September 30, 2020, none of the note holders had elected to convert their 2024 Convertible Notes. As of September 30, 2020, the if-converted value of the 2024 Convertible Notes did not exceed the principal amount. 2.125 % Cash Convertible Senior Notes Due 2019 In June 2014, we issued $ 200 million aggregate principal amount of 2.125 % Cash Convertible Senior Notes Due 2019 (the “2019 Convertible Notes”), with an additional $ 30 million principal amount being issued in July 2014. In July 2017, we used $ 34.4 million of net proceeds from the 2024 Convertible Notes offering to repurchase and retire $ 35.0 million aggregate principal amount of 2019 Convertible Notes. The 2019 Convertible Notes paid interest semi-annually in arrears at a rate of 2.125 % per annum on June 15 and December 15 of each year. The 2019 Convertible Notes matured on June 15, 2019 (the "2019 Maturity Date") , and the remaining $ 195.0 million aggregate principal amount outstanding plus accrued interest was repaid using cash on hand. 2019 Convertible Notes Warrants In connection with the issuance of the 2019 Convertible Notes, we also sold net-share-settled warrants (the “2019 Convertible Notes Warrants”). The 2019 Convertible Notes Warrants allowed for the purchase of up to approximately 14.3 million shares of our Class A Common Stock at a strike price of $ 20.83 per share. We accounted for the Class A Common Stock issuable upon exercise under the treasury stock method. The 2019 Convertible Notes Warrants began to expire on a daily basis after we repaid the 2019 Convertible Notes and the last of the unexpired 2019 Convertible Notes Warrants expired in May 2020. As of September 30, 2020, there were no 2019 Convertible Notes Warrants outstanding, and no shares of Class A Common Stock were ever issued pursuant to the 2019 Convertible Notes Warrants. CASHMAX Secured Borrowing Facility In November 2018, we entered into a receivable's securitization facility with a third-party lender (the "lender") to provide funding for installment loan originations in our Canadian CASHMAX business. Under the facility, a variable interest entity (the "trust") had the right, subject to various conditions, to borrow up to CAD $ 25 million from the lender (the "third-party loan") and use the proceeds to purchase interests in installment loan receivables generated by CASHMAX. The trust used collections on the transferred receivables to pay various amounts in accordance with an agreed priority arrangement, including expenses, its obligations under the third-party loan and, to the extent available, amounts owned to CASHMAX with respect to the purchase price of the transferred receivables and CASHMAX's retained interest in the 61 Table of Contents receivables. CASHMAX had no obligation with respect to the third-party loan or the transferred receivables except to (a) service the underlying installment loans on behalf of the trust and (b) pay amounts owed under or repurchase the underlying installment loans in the event of a breach by CASHMAX or in certain other limited circumstances. The facility was nonrecourse to EZCORP (subject to certain limited guaranty obligations), allowed borrowing through November 2019, and was to fully mature in November 2021. As part of the closure of the operations of our CASHMAX business, we terminated this facility in September 2020. NOTE 10: COMMON STOCK AND STOCK COMPENSATION Common Stock Repurchase Program In December 2019, our Board of Directors (the "Board") authorized the repurchase of up to $ 60.0 million of our Class A Common Stock over three years . Repurchases under the program were suspended in March 2020 in order to preserve liquidity as a result of uncertainties regarding the COVID-19 pandemic, and no share repurchases under the program were executed for the remainder of fiscal 2020. Through March 2020, we repurchased and retired 943,149 shares of our Class A Common Stock for $ 5.2 million, which amount was allocated between "Additional paid-in capital" and "Retained earnings" in our consolidated balance sheets. Stock Compensation On May 1, 2010 our Board of Directors approved the adoption of the EZCORP, Inc. 2010 Long-Term Incentive Plan (the “LTI Plan”). The LTI Plan permits grants of options, restricted stock awards and stock appreciation rights covering up to 5,485,649 shares of our Class A Common Stock plus any shares that become available for issuance under either the LTI Plan or prior plans as a result of forfeitures or cancellations of awards without delivery of shares or as a result of withholding shares to satisfy tax withholding obligations. In December 2017 and November 2018, the Board of Directors and the voting stockholder approved the addition of 1,100,000 and 400,000 shares, respectively, to the LTI Plan. The purpose of our LTI Plan is to retain the services of valued employees and directors and to incentivize such persons to make contributions to our company and motivate excellent performance. Under the LTI Plan, we grant awards of restricted stock or restricted stock units to employees and non-employee directors. Awards granted to employees are typically subject to performance and service conditions. Awards granted to non-employee directors are time-based awards subject only to service conditions. Awards are measured at the grant date fair value with compensation costs associated with the awards recognized over the requisite service period, usually the vesting period, on a straight-line basis. In November 2019 and May 2020, we granted 222,912 and 12,346 , respectively, shares of restricted stock to our non-employee directors with a grant date fair value of $ 4.89 and $ 5.24 , respectively. These awards vested on September 30, 2020 and were subject only to service conditions. In December 2017, we granted 1,308,533 restricted stock awards to employees and 84,250 restricted stock awards to non-employee directors with a grant date fair value of primarily $ 9.75 per share. The awards granted to non-employee directors vested on September 30, 2018 and were subject only to service conditions. For the awards granted to employees, 190,725 vested on September 30, 2018. In November 2020, the People and Compensation Committee of the Board of Directors determined that the performance targets for the remaining employee awards were partially achieved, and 446,983 of such awards will vest on December 14, 2020. In addition, 81,896 awards were canceled, resulting in a reversal of $ 0.80 million of previously recognized stock compensation expense. In July 2019 and November 2018, we granted 61,138 and 971,615 , respectively, restricted stock awards to employees with a grant date fair value of primarily $ 10.04 and $ 9.18 per share, respectively. In November 2020, the People and Compensation Committee determined that the performance targets for such awards were not probable of achievement. This resulted in the cancellation of 458,960 awards and the reversal of $ 2.9 million of previously recognized stock compensation expense. In April and May 2019, we granted 60,088 restricted stock awards to our seven new non-employee directors with a grant date fair value of primarily $ 10.64 per share. In November 2018, we granted 59,812 restricted stock awards to our non-employee directors with a grant date fair value of $ 9.18 per share. The awards granted to non-employee directors vested on September 30, 2019 and were subject only to service conditions. In November and December 2016 and April 2017, we granted 931,260 restricted stock awards to employees and 72,500 restricted stock awards to non-employee directors, each with a grant date fair value of approximately $ 9.60 per share. The awards granted to employees vested on September 30, 2019 and 463,467 shares were released. The awards granted to non-employee directors vested over two years , 50 % on September 30, 2017 and 50 % on September 30, 2018 and were subject only to service conditions. 62 Table of Contents As of September 30, 2020, the unamortized fair value, exclusive of forfeitures, of share awards to be amortized over their remaining vesting periods was approximately $ 1.2 million. The weighted-average period over which these costs will be amortized is approximately two years . The following table presents amounts related to our stock compensation arrangements: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Share-based compensation costs $ ( 5,094 ) $ 9,751 $ 10,784 Income tax expense (benefit) on share-based compensation 420 ( 1,098 ) ( 1,656 ) The following table presents a summary of stock compensation activity: Shares Weighted Average Grant Date Fair Value Outstanding as of September 30, 2019 3,451,024 $ 9.28 Granted 1,472,578 5.73 Vested and released (a) ( 989,223 ) 8.67 Forfeited ( 2,825,459 ) 8.59 Outstanding as of September 30, 2020 1,108,920 $ 5.65 (a) 268,798 shares were withheld to satisfy related federal income tax withholding. The following table presents a summary of the fair value of shares granted: Fiscal Year Ended September 30, 2020 2019 2018 (in millions except per share amounts) Weighted average grant-date fair value per share granted (a) $ 5.73 $ 9.29 $ 9.75 Total grant date fair value of shares vested $ 5.1 $ 11.8 $ 2.3 (a) Awards with performance and time-based vesting provisions are generally valued based upon the underlying share price as of the issuance date. Other We have not declared or paid any dividends and currently do not anticipate paying any dividends in the immediate future. As described in Note 9, payment of a dividend requires an adjustment to the conversion rate of our Convertible Notes . Should we pay dividends in the future, our certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid at the same per share amounts on both classes of stock. Any future determination to pay cash dividends will be at the discretion of our Board of Directors. NOTE 11: INCOME TAXES The following table presents the components of our income from continuing operations before income taxes, including inter-segment amounts: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Domestic* $ ( 31,989 ) $ ( 9,609 ) $ 28,645 Foreign ( 38,106 ) 13,783 26,894 $ ( 70,095 ) $ 4,174 $ 55,539 * Includes the majority of our corporate administrative costs. See Note 14 for information pertaining to segment contribution. 63 Table of Contents The following table presents the significant components of the income tax provision: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Current: Federal $ ( 6,631 ) $ 431 $ ( 26 ) State and foreign 10,544 704 9,288 3,913 1,135 9,262 Deferred: Federal* ( 1,561 ) ( 4,264 ) 9,498 State and foreign ( 3,984 ) 5,535 ( 371 ) ( 5,545 ) 1,271 9,127 Total income tax (benefit) expense $ ( 1,632 ) $ 2,406 $ 18,389 * The year ended September 30, 2018 includes a $ 2.1 million charge resulting from the remeasurement of our domestic net deferred tax assets based on the new corporate income tax rate as a result of the Tax Cuts and Jobs Act(“the Act”), as well as $ 2.6 million charge resulting from recording a valuation allowance against foreign tax credit carryforwards that do not meet the “more likely than not” threshold to be utilized as a result of tax law changes included in the Act. The following table presents a reconciliation of income taxes calculated at the statutory rate and the provision for income taxes: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Income tax (benefit) expense at the federal statutory rate $ ( 14,720 ) $ 878 $ 13,623 State taxes, net of federal benefit 951 184 1,265 Mexico inflation adjustment ( 1,120 ) ( 801 ) ( 936 ) Non-deductible items 772 2,088 2,214 Tax credits — ( 551 ) ( 615 ) Foreign rate differential ( 1,671 ) 1,080 1,405 Change in valuation allowance 962 1,601 3,986 Stock compensation 598 ( 711 ) — Uncertain tax positions 2,849 ( 1,596 ) ( 4,808 ) Change in tax rate resulting from enactment of the Act — — 2,558 Non-deductible impairment 9,093 — — Other 654 234 ( 303 ) Total income tax (benefit) expense $ ( 1,632 ) $ 2,406 $ 18,389 Effective tax rate 2 % 58 % 33 % 64 Table of Contents The following table shows significant components of our deferred tax assets and liabilities: September 30, 2020 2019 (in thousands) Deferred tax assets: Cash Converters International $ 15,049 $ 14,616 Tax over book inventory 9,737 6,858 Accrued liabilities 8,924 4,518 Pawn service charges receivable 1,019 1,699 Stock compensation 1,565 2,758 Foreign tax credit 1,696 2,638 State and foreign net operating loss carryforwards 15,990 15,806 Book over tax depreciation 4,651 2,659 Other 4,350 2,159 Total deferred tax assets before valuation allowance 62,981 53,711 Valuation allowance ( 18,524 ) ( 18,094 ) Net deferred tax assets 44,457 35,617 Deferred tax liabilities: Tax over book amortization 22,444 19,042 Note receivable discount 12,257 15,416 Prepaid expenses 1,349 1,146 Total deferred tax liabilities 36,050 35,604 Net deferred tax asset $ 8,407 $ 13 As of September 30, 2020, we had state net operating loss carryforwards of approximately $ 123.0 million, which begin to expire in 2021 if not utilized. We also had foreign net operating loss carryforwards of $ 42.0 million, which will expire between 2030 and 2038 if not utilized. Additionally, we have a $ 1.7 million foreign tax credit that will expire between 2024 to 2027 if not utilized. Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. The Company has elected to account for the tax on Global Intangible Low-Taxed Income (“GILTI”) as a period cost and therefore has not recorded deferred taxes related to GILTI on its foreign subsidiaries. A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. Our valuation allowance has been established to offset certain state and foreign net operating loss carryforwards, capital loss carryforwards and foreign tax credit carryforwards that are not more likely than not to be utilized prior to expiration. The valuation allowance increased by $ 0.4 million in fiscal 2020, primarily due to the recording of a valuation allowance for losses generated during the year in certain foreign jurisdictions which we believe are not more likely than not to be utilized partially offset by a decrease for certain foreign tax credits for which we amended a tax return to take a deduction instead of a foreign tax credit thereby reversing the deferred tax asset and corresponding valuation allowance. We believe our results from future operations will generate sufficient taxable income in the appropriate jurisdictions such that it is more likely than not that the remaining deferred tax assets will be realized. Deferred taxes are not provided for undistributed earnings of foreign subsidiaries of approximately $ 63.0 million which are intended to be reinvested outside of the U.S. Accordingly, no provision for foreign withholding taxes associated with a distribution of those earnings has been made. We estimate that, upon distribution of our share of these earnings, we would be subject to withholding taxes of approximately $ 3.5 million as of September 30, 2020. We provided deferred income taxes on all undistributed earnings from Cash Converters International. 65 Table of Contents The following table presents a rollforward of unrecognized tax benefits: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Beginning balance $ 1,435 $ 3,091 $ 6,530 Increase for tax positions taken during a prior period 1,401 — 963 Increase for tax positions taken during the current period 249 — — Decrease for tax positions as a result of the lapse of the statute of limitations — ( 1,656 ) ( 4,402 ) Ending balance $ 3,085 $ 1,435 $ 3,091 All of the above unrecognized tax benefits, if recognized, would impact our effective tax rate for the respective period of each ending balance. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During 2020, 2019, and 2018, the Company recognized income tax expense consisting of interest and penalties of $ 1.2 million, $ 0.2 million and $( 0.3 ) million, respectively, due to the accrual of current year interest and penalties on existing positions offset by the reversal of previous accruals due to the lapse of the statute of limitations. The total amount of accrued interest and penalties was $ 1.5 million and $ 0.3 million in 2020 and 2019, respectively. We are subject to U.S., Mexico, Canada, Guatemala, Honduras, El Salvador, Peru and the Netherlands income taxes as well as income taxes levied by various state and local jurisdictions. With few exceptions, we are no longer subject to examinations by tax authorities for years before the tax year ended September 30, 2014. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. NOTE 12: LEASES The weighted-average remaining lease term for operating leases as of September 30, 2020 was 5.2 years, which includes options to extend when it is reasonably certain that we will exercise the option. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of October 1, 2019 to initially measure our lease liability. The weighted average incremental borrowing rate used to measure the lease liability as of September 30, 2020 was 7.37 %. The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 was computed based on the consumer price index and foreign currency exchange rate as applicable then in effect and excluding executory costs on October 1, 2019, were as follows (in thousands): Right-of-use asset $ 246,028 Straight-line rent accrual ( 8,479 ) Net lease right-of-use asset $ 237,549 Lease liability, current $ 45,272 Lease liability, non-current 200,756 Total lease liability $ 246,028 In connection with the preparation of our consolidated financial statements for the year ended September 30, 2020, we identified an error relating to certain leases on the adoption of ASC 842 at October 1, 2019. The error impacted the lease right-of-use asset and total lease liability, both of which were overstated by approximately $ 18.0 million on adoption. We concluded the impact on the interim financial statements during fiscal 2020 was immaterial and corrected the balances as of September 30, 2020. The income statement impact of this correction was immaterial. The components of lease expense included in "Operations" and "Administrative" expense, based on the underlying lease use, in our consolidated statements of operations is as follows (in thousands): Fiscal Year Ended September 30, 2020 Operating lease expense $ 62,925 Variable lease expense 11,846 Total lease expense $ 74,771 As of September 30, 2020, maturities of lease liabilities under ASC 842 by fiscal year were as follows (in thousands): 66 Table of Contents 2021 $ 66,079 2022 50,895 2023 39,076 2024 28,602 2025 19,877 Thereafter 41,639 Total lease liabilities 246,168 Less: Portion representing interest 43,386 Total net lease liabilities 202,782 Less: Current portion 49,742 Total long term net lease liabilities $ 153,040 In December 2014, we entered into a non-cancelable 13 -year operating lease for our corporate offices, with rent payments beginning February 2016 and ending March 2029. Annual rent, net of square footage subsequently terminated as a result of negotiations with the landlord, escalate from $ 2.5 million at lease inception to $ 3.9 million in the terminal year of the lease. The lease includes two five-year extension options at the end of the initial lease term. The estimated minimum future rental payments under the lease are approximately $ 38.1 million. During fiscal 2017 and 2016, we initiated subleases for a portion of our corporate operating office lease for estimated minimum future sublease payments of approximately $ 12.2 million. In addition to the above subleases, during fiscal 2018 we entered into an amendment to the operating lease surrendering another 15 % of the initial leased premises. As a result, sublease payments were expected to fully offset our original operating lease obligations through August 2023, with renewal options available until the end of the master operating lease in March 2029. During the second quarter of fiscal 2015, we entered into cancellable subleases for our Miami office for an estimated minimum future sublease payment of approximately $ 2.9 million. Sublease payments are expected to offset substantially all of our original operating lease obligations over the nine-year period beginning March 2015 and ending September 2024. Prior to the adoption of ASC 842, future minimum undiscounted lease payments due under non-cancelable leases as of September 30, 2019 for each subsequent year were as follows (in thousands): 2020 $ 69,291 2021 60,588 2022 46,720 2023 32,062 2024 19,969 Thereafter 39,256 $ 267,886 The following table presents the amount of net rent recognized as expense under ASC Topic 840 - Leases (in thousands): Fiscal Year Ended September 30, 2019 2018 Gross rent expense from continuing operations $ 65,295 $ 61,821 Sublease rent revenue from continuing operations ( 35 ) ( 109 ) Net rent expense from continuing operations $ 65,260 $ 61,712 As a result of the COVID-19 pandemic, we believe there was a significant adverse change in the business climate that impacted the office leasing market and a significant decrease in the market prices of an asset or asset group that affected the value of the right of use asset for our corporate office. We determined the undiscounted cash flows of the subleases did not exceed the net book value of the right of use asset. We then determined the discounted cash flows of the subleases did not exceed the book value of the right of use asset, and an impairment charge of $ 5.0 million was recorded in the fourth quarter of fiscal 2020 and is recorded under "Impairment of goodwill, intangible and other assets" in the Consolidated Statements of Operations. We recorded $ 29.2 million in non-cash additions to our right of use assets and lease liabilities for the fiscal year ended September 30, 2020. 67 Table of Contents NOTE 13: CONTINGENCIES Currently, and from time to time, we are involved in various claims, suits, investigations and legal proceedings. While we are unable to determine the ultimate outcome of any current litigation or regulatory actions, we do not believe the resolution of any particular matter will have a material adverse effect on our financial condition, results of operations or liquidity. NOTE 14: SEGMENT INFORMATION During the first quarter of fiscal 2020, we revised the financial information our chief operating decision maker (our chief executive officer) reviews for operational decision-making purposes and for allocation of capital to include the separate financial results of our Lana business. Our historical segment results have been recast to conform to current presentation. We currently report segment information as follows: • U.S. Pawn — All pawn activities in the United States; • Latin America Pawn —All pawn activities in Mexico and other parts of Latin America; • Lana — Our digital customer-centric engagement platform; and • Other International — Primarily our equity interest in the net income of Cash Converters International. There are no inter-segment revenues presented below, and the amounts below were determined in accordance with the same accounting principles used in our condensed consolidated financial statements. While we expect the operations of the Lana segment to have a positive impact on pawn loan redemption rates and therefore pawn service charges and yield, the pawn service charges will all be reported in our pawn segments rather than allocated to the Lana segment. Only discrete revenues related to the Lana segment will be reported in the Lana segment results. As a digital offering, Lana has no separate physical store locations. Fiscal Year Ended September 30, 2020 U.S. Pawn Latin America Pawn Lana Other International Total Segments Corporate Items Consolidated (in thousands) Revenues: Merchandise sales $ 391,921 $ 106,292 $ — $ — $ 498,213 $ — $ 498,213 Jewelry scrapping sales 36,691 11,262 — — 47,953 — 47,953 Pawn service charges 210,081 62,557 — — 272,638 — 272,638 Other revenues 150 — 34 3,823 4,007 — 4,007 Total revenues 638,843 180,111 34 3,823 822,811 — 822,811 Merchandise cost of goods sold 251,544 82,937 — — 334,481 — 334,481 Jewelry scrapping cost of goods sold 28,064 9,977 — — 38,041 — 38,041 Other cost of revenues — 101 — 953 1,054 — 1,054 Net revenues 359,235 87,096 34 2,870 449,235 — 449,235 Segment and corporate expenses (income): Operations 261,608 69,916 4,270 5,246 341,040 — 341,040 Administrative — — — — — 49,897 49,897 Impairment of goodwill, intangible and other assets 10,000 35,938 — 1,149 47,087 7,579 54,666 Depreciation and amortization 11,030 7,315 1,058 68 19,471 11,356 30,827 Loss (gain) on sale or disposal of assets and other 385 ( 72 ) — ( 20 ) 293 508 801 Other Charges 3,106 1,715 3,258 3,802 11,881 8,507 20,388 Interest expense — 685 — 549 1,234 21,238 22,472 Interest income — ( 1,586 ) — — ( 1,586 ) ( 1,587 ) ( 3,173 ) Equity in net loss of unconsolidated affiliates — — — 2,429 2,429 — 2,429 Other (income) expense — ( 156 ) — 6 ( 150 ) 133 ( 17 ) Segment contribution (loss) $ 73,106 $ ( 26,659 ) $ ( 8,552 ) $ ( 10,359 ) $ 27,536 Income (loss) from continuing operations before income taxes $ 27,536 $ ( 97,631 ) $ ( 70,095 ) 68 Table of Contents Fiscal Year Ended September 30, 2019 U.S. Pawn Latin America Pawn Lana Other International Total Segments Corporate Items Consolidated (in thousands) Revenues: Merchandise sales $ 355,996 $ 97,379 $ — $ — $ 453,375 $ — $ 453,375 Jewelry scrapping sales 45,815 14,630 — — 60,445 — 60,445 Pawn service charges 248,369 78,997 — — 327,366 — 327,366 Other revenues 233 179 — 5,631 6,043 — 6,043 Total revenues 650,413 191,185 — 5,631 847,229 — 847,229 Merchandise cost of goods sold 225,136 72,372 — — 297,508 — 297,508 Jewelry scrapping cost of goods sold 39,318 13,617 — — 52,935 — 52,935 Other cost of revenues — — — 2,338 2,338 — 2,338 Net revenues 385,959 105,196 — 3,293 494,448 — 494,448 Operating expenses (income): Operations 269,003 74,199 7,675 7,376 358,253 — 358,253 Administrative — — — — — 55,990 55,990 Impairment of goodwill, intangible and other assets — — — — — — — Depreciation and amortization 11,879 6,267 10 219 18,375 10,422 28,797 Loss on sale or disposal of assets 3,402 691 — 282 4,375 24 4,399 Interest expense — 1,609 — 491 2,100 30,537 32,637 Interest income — ( 1,601 ) — — ( 1,601 ) ( 9,485 ) ( 11,086 ) Equity in net income of unconsolidated affiliates — — — 135 135 — 135 Impairment of investment in unconsolidated affiliates — — — 19,725 19,725 — 19,725 Other income — ( 93 ) — 1,895 1,802 ( 378 ) 1,424 Segment contribution (loss) $ 101,675 $ 24,124 $ ( 7,685 ) $ ( 26,830 ) $ 91,284 Income from continuing operations before income taxes $ 91,284 $ ( 87,110 ) $ 4,174 69 Table of Contents Fiscal Year Ended September 30, 2018 U.S. Pawn Latin America Pawn Lana Other International Total Segments Corporate Items Consolidated (in thousands) Revenues: Merchandise sales $ 350,699 $ 87,673 $ — $ — $ 438,372 $ — $ 438,372 Jewelry scrapping sales 47,745 13,007 — — 60,752 — 60,752 Pawn service charges 237,086 67,491 — — 304,577 — 304,577 Other revenues 250 85 — 8,120 8,455 — 8,455 Total revenues 635,780 168,256 — 8,120 812,156 — 812,156 Merchandise cost of goods sold 216,408 60,210 — — 276,618 — 276,618 Jewelry scrapping cost of goods sold 40,417 11,873 — — 52,290 — 52,290 Other cost of revenues — — — 1,697 1,697 — 1,697 Net revenues 378,955 96,173 — 6,423 481,551 — 481,551 Operating expenses (income): Operations 263,094 61,553 — 10,194 334,841 — 334,841 Administrative — — — — — 53,639 53,639 Impairment of goodwill and intangibles assets — — — — — — — Depreciation and amortization 12,869 4,068 — 184 17,121 8,363 25,484 Loss on sale or disposal of assets 203 27 — — 230 233 463 Interest expense 71 25 — — 96 27,738 27,834 Interest income — ( 2,619 ) — — ( 2,619 ) ( 14,422 ) ( 17,041 ) Equity in net income of unconsolidated affiliates — — — ( 5,529 ) ( 5,529 ) — ( 5,529 ) Impairment of investment in unconsolidated affiliates — — — 11,712 11,712 — 11,712 Other income ( 3 ) ( 42 ) — ( 132 ) ( 177 ) ( 5,214 ) ( 5,391 ) Segment contribution $ 102,721 $ 33,161 $ — $ ( 10,006 ) $ 125,876 Income from continuing operations before income taxes $ 125,876 $ ( 70,337 ) $ 55,539 The following table presents separately identified segment assets: U.S. Pawn Latin America Pawn Lana Other International Corporate Total (in thousands) Assets as of September 30, 2020 Pawn loans $ 106,340 $ 24,983 $ — $ — $ — $ 131,323 Pawn service charges receivable, net 17,931 2,649 — — — 20,580 Inventory, net 75,807 20,084 — — — 95,891 Total assets 690,157 191,827 4,528 34,118 276,393 1,197,023 Assets as of September 30, 2019 Pawn loans $ 157,408 $ 41,650 $ — $ — $ — 199,058 Pawn service charges receivable, net 27,623 4,179 — — — 31,802 Inventory, net 142,266 37,089 — — — 179,355 Total assets 635,152 202,565 5,918 35,041 205,026 1,083,702 The net assets of our Latin America Pawn segment, exclusive of intercompany amounts and inclusive of certain other assets not separately identified above, w ere $ 194.8 million as o f September 30, 2020. 70 Table of Contents The following tables provide geographic information: Fiscal Year Ended September 30, 2020 2019 2018 (in thousands) Revenues: United States $ 638,844 $ 650,413 $ 635,780 Mexico 131,965 138,897 122,702 Other Latin America 48,146 52,288 45,554 Lana 34 — — Canada and other 3,822 5,631 8,120 Total revenues $ 822,811 $ 847,229 $ 812,156 September 30, 2020 2019 (in thousands) Long-lived tangible assets: United States $ 36,361 $ 43,274 Mexico 15,141 18,566 Other Latin America 5,484 5,432 Canada and other — 85 Total long-lived assets $ 56,986 $ 67,357 71 Table of Contents 91Leech! NOTE 15: SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION Supplemental Consolidated Financial Information The following table provides information on net amounts included in our consolidated balance sheets and consolidated statements of cash flows: September 30, 2020 2019 (in thousands) Gross pawn service charges receivable $ 27,259 $ 41,838 Allowance for uncollectible pawn service charges receivable ( 6,679 ) ( 10,036 ) Pawn service charges receivable, net $ 20,580 $ 31,802 Gross inventory $ 108,205 $ 189,092 Inventory reserves ( 12,314 ) ( 9,737 ) Inventory, net $ 95,891 $ 179,355 Prepaid expenses and other $ 10,614 $ 4,784 Accounts receivable and other 6,991 10,889 Income taxes prepaid and receivable 15,298 10,248 Prepaid expenses and other current assets $ 32,903 $ 25,921 Accounts payable $ 19,114 $ 25,946 Accrued payroll 12,993 6,149 Bonus accrual 4,895 9,901 Other payroll related expenses 9,071 5,040 Accrued interest 2,793 2,793 Accrued rent and property taxes 6,545 11,702 Accrued sales and VAT taxes 9,291 10,680 Deferred revenues 2,986 2,929 Other accrued expenses 3,173 2,510 Income taxes payable 643 307 Account payable, accrued expenses and other current liabilities $ 71,504 $ 77,957 Unrecognized tax benefits, non-current $ 4,214 $ 1,362 Other long-term liabilities 6,635 5,940 Other long-term liabilities $ 10,849 $ 7,302 72 Table of Contents Valuation and Qualifying Accounts The following table provides information on our valuation and qualifying accounts not disclosed elsewhere: Additions Description Balance at Beginning of Period Charged to Expense Charged to Revenue Deductions Balance at End of Period (in thousands) Allowance for valuation of inventory: Year Ended September 30, 2020 $ 9,737 $ 2,577 $ — $ — $ 12,314 Year Ended September 30, 2019 9,201 536 — — 9,737 Year Ended September 30, 2018 6,801 2,400 — — 9,201 Allowance for uncollectible pawn service charges receivable: Year Ended September 30, 2020 $ 10,036 $ — — $ 3,357 $ 6,679 Year Ended September 30, 2019 9,760 — 276 — 10,036 Year Ended September 30, 2018 9,129 — 631 — 9,760 Allowance for uncollectible consumer loan fees and interest receivable: Year Ended September 30, 2020 $ 540 $ — $ — 540 $ — Year Ended September 30, 2019 331 — 209 — 540 Year Ended September 30, 2018 283 — 48 — 331 Allowance for valuation of deferred tax assets: Year Ended September 30, 2020 $ 18,094 $ 430 $ — $ — $ 18,524 Year Ended September 30, 2019 20,254 — — 2,160 18,094 Year Ended September 30, 2018 17,860 2,394 — — 20,254 73 Table of Contents NOTE 16: QUARTERLY INFORMATION (UNAUDITED) First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts) Year Ended September 30, 2020 Total revenues $ 222,435 $ 223,283 $ 210,233 $ 166,860 Net revenues 130,069 127,365 102,184 89,617 Net income (loss) 1,238 ( 40,874 ) ( 5,487 ) ( 23,340 ) Basic earnings (loss) per share $ 0.02 $ ( 0.74 ) $ ( 0.10 ) $ ( 0.42 ) Diluted earnings (loss) per share $ 0.02 $ ( 0.74 ) $ ( 0.10 ) $ ( 0.42 ) First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts) Year Ended September 30, 2019 Total revenues $ 215,695 $ 214,730 $ 202,465 $ 214,339 Net revenues 130,049 127,690 115,853 120,856 (Loss) income from continuing operations, net of tax ( 3,660 ) 2,659 3,361 ( 592 ) (Loss) income from discontinued operations, net of tax ( 183 ) ( 18 ) ( 203 ) ( 53 ) Net (loss) income ( 3,843 ) 2,641 3,158 ( 645 ) Net (loss) income attributable to noncontrolling interest ( 477 ) ( 753 ) — — Net (loss) income attributable to EZCORP, Inc. $ ( 3,366 ) $ 3,394 $ 3,158 $ ( 645 ) Basic earnings per share attributable to EZCORP, Inc.: $ ( 0.06 ) $ 0.06 $ 0.06 $ ( 0.01 ) Diluted earnings per share attributable to EZCORP, Inc.: $ ( 0.06 ) $ 0.06 $ 0.06 $ ( 0.01 ) ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.