What changed in this filing

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Item 1. Business

2021-11-17 compared with 2020-12-14 · 205 added, 105 removed, 135 unchanged (70% of the section changed)

ITEM 1 — BUSINESS

is a Delaware corporation headquartered in Austin, Texas.

We are a leading provider of pawn loans in the United States and Latin America with over 1,000 locations and approximately 5,900 team members.

Our vision is to be our customers’ first and best choice for their short-term cash needs.

This vision is supported by a customer-centric strategy that includes the following:

Purpose, Vision and Strategy

is a leading provider of pawn services in the United States and Latin America with over 1,100 locations and approximately 6,500 Team Members.

We are a Delaware corporation headquartered in Austin, Texas.

Our purpose statement:

“We exist to serve our customers’ short-term cash needs, helping them to live and enjoy their lives.

We are driven by a diverse team with a passion for pawn who are motivated to be their best — because our customers, families, stakeholders, and the communities and environment in which we live deserve it.”

This purpose is supported by a customer-centric strategy that includes the following:

• Providing fast, easy and simple access to cash;

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• Always being competitive and fair;

• Passionately solving customer needs;

• Passionately serving customer needs;

• Building enduring relationships;

• Recognizing and rewarding customer loyalty.

At September 30, 2020, we operated a total o f 1,005 locations, consisting of:

That strategy consists of three fundamental pillars:

• Strengthen the Core — Relentless focus on superior execution and operational excellence in our core pawn business.

• Cost Efficiency and Simplification — Shape a culture of cost efficiency through ongoing focus on simplification and optimization.

• Innovate and Grow — Broaden customer engagement to service more customers more frequently in more locations.

And we rely on three foundational capabilities to execute our strategy and achieve our purpose:

• Team Members — We enable diverse, engaged and tenured teams with a true passion for pawnbroking.

• IT & Data Modernization — We modernize our IT and data assets to capitalize on growth opportunities and create greater value at every customer interaction.

• Risk Management & Building a Culture of Compliance — We are continually focused on improving foundational capabilities to manage operational, financial, regulatory, compliance, information security and reputational risk.

Overview of Our Business

At September 30, 2021, we operated a total of 1,148 locations, consisting of:

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).

At our pawn stores, we offer non-recourse pawn loans collateralized by tangible personal property, and sell merchandise to customers looking for good value.

The merchandise we sell primarily consists of second-hand collateral forfeited from our pawn lending activities or merchandise purchased from customers.

• 508 Mexico pawn stores (operating primarily as Empeño Fácil and Cash Apoyo Efectivo);

• 124 pawn stores in Guatemala, El Salvador and Honduras (operating as GuatePrenda and MaxiEfectivo).

At our pawn stores, we advance cash against the value of collateralized tangible personal property and sell merchandise to customers looking for good value.

The merchandise we sell primarily consists of second-hand collateral forfeited from our pawn activities or merchandise purchased from customers.

By store count, we ar e the second la rgest pawn store owner and operator in the U.S.

and one of the largest in Latin America.

We also offer a web-based application called Lana that allows customers to manage their pawn loans in one place.

We also offer web-based applications named Lana and EZ+ that allow customers to manage their pawn transactions, layaways and loyalty rewards online.

In addition to our core pawn business in the U.S.

and Latin America, we own 34.75% of Cash Converters International Limited (“Cash Converters International”), a publicly traded company (ASX:

and Latin America, we have made the following strategic investments:

• We own 37.72% of Cash Converters International Limited (“Cash Converters”), a publicly traded company (ASX:

CCV) headquartered in Perth, Western Australia.

Cash Converters International and its controlled companies comprise a diverse group generating reve nues from franchising, store operations, personal finance and vehicle finance, controlling over 700 stores across 16 countries .

We also own approximately 13% 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.

Cash Converters and its controlled companies comprise a diverse group generating revenues from franchising, store operations, personal finance (including pawn transactions) and vehicle finance, controlling almost 700 stores across 15 countries.

Our ownership of Cash Converters includes 13 million shares (representing a 2.05% ownership interest) that we acquired in October 2021.

• We own approximately 13% 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.

• In October 2021, we invested $15 million for a preferred interest in a private company that has majority ownership in Simple Management Group, Inc.

(“SMG”), which owns and operates more than 20 pawn stores principally in the Caribbean, with plans to build and acquire more stores in that region.

We generate revenues primarily from pawn services charges (“PSC”) on pawn loans outstanding (“PLO”), merchandise sales and jewelry scrapping.

We remain focused on optimizing our balance of PLO and the resulting higher pawn service charges (“PSC”).

The fo llowing charts present sources of net revenues, including PSC, merchandise sales gross profit (“Merchandise sales GP”) and jewelry scrapping gross profit (“Jewelry scrapping GP”):

We remain focused on optimizing our balance of PLO and the resulting higher PSC.

The following chart presents sources of net revenues, including PSC, merchandise sales gross profit ("Merchandise sales GP") and jewelry scrapping gross profit ("Jewelry scrapping GP") for fiscal 2021, fiscal 2020 and fiscal 2019:

The following charts present sources of net revenues by geographic disbursement for fiscal 2021, fiscal 2020 and fiscal 2019:

Segment and Geographic Information

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Pawn, which includes our EZPAWN, Value Pawn & Jewelry and other branded pawn operations in the United States;

• Latin America Pawn, which includes our Empeño Fácil and other branded pawn operations in Mexico, as well as our GuatePrenda and MaxiEfectivo pawn operations in Guatemala, El Salvador, Honduras and Peru;

• Lana, which is our customer-centric web-based engagement platform;

• Other International, which includes the consumer finance activities in Canada that we closed in the fourth quarter and our equity interests in Cash Converters International and RDC.

We began reporting separate financial results for our Lana business in the first quarter of fiscal 2020, and our historical segment results have been recast to conform to current presentation.

The following table presents store data by segment (excluding Lana, which has no separate physical store locations), included in our continuing operations:

• Latin America Pawn, which includes our Empeño Fácil, Cash Apoyo Efectivo (“CAE”) and other branded pawn operations in Mexico, as well as our GuatePrenda and MaxiEfectivo pawn operations in Guatemala, El Salvador and Honduras (referred to as “GPMX”);

• Other International, which includes the consumer finance activities in Canada that we closed in the fourth quarter of fiscal 2020 and our equity interests in Cash Converters, RDC and SMG.

The following table presents store data by segment included in our continuing operations:

Company-owned Stores

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516 632 — 1,148

For additional information about our segments and geographic areas, see Note 14 of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.”

For additional information about our segments and geographic areas, see Note 14:

Segment Information of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

Pawn Activities

At our pawn stores, we offer pawn loans, which are typically small, non-recourse loans collateralized by tangible personal property.

We earn pawn service charges on our pawn loans, which varies by state and loan size.

Collateral for our pawn loans consists of tangible personal property, generally jewelry, consumer electronics, tools, sporting goods and musical instruments.

Security for our pawn loans is provided via the estimated resale value of the collateralized personal property and the perceived probability of the loans' redemption.

As of September 30, 2020, we had a closing pawn loan principal balance of $131.3 million, from which we earn pawn service charges.

In fiscal 2020, pawn service charges accounted for approximately 33% of our total revenues and 61% of our net revenues.

pawn loans primarily earn 13% to 25% per month as permitted by applicable law, excluding forfeitures.

pawn loan term generally ranges between 30 and 90 days.

While individual loans vary depending on the valuation of each item pawned, our U.S.

pawn loans typically average between $100 and $120.

In Mexico, pawn loans earn 15% to 21% per month as permitted by applicable law, excluding forfeitures.

The Mexico pawn loan primary term is 30 days.

Individual loans are made in Mexican pesos and vary depending on the valuation of each item pawned.

Mexico pawn loans typically average between 1,100 and 1,300 Mexican pesos, or approximately $50 to $60 on average using the average exchange rate for fiscal 2020.

In Guatemala, El Salvador, Honduras and Peru, pawn loans earn 12% to 18% per month as permitted by applicable law, excluding forfeitures.

The pawn loan primary term in these countries is 30 days.

Individual loans are made in the local currency of the country and vary depending on the valuation of each item pawned.

Our pawn loans in these countries typically average between $100 and $120 using the average exchange rates for fiscal 2020.

The average loan amounts tend to be higher in these countries than in Mexico due to the higher concentration of jewelry loans.

If a customer chooses not to repay, renew or extend a pawn loan, the collateral is forfeited and becomes inventory available for sale.

We do not record loan losses or charge-offs of pawn loans because the principal amount of an unpaid loan becomes the inventory carrying cost of the forfeited collateral.

The difference between the subsequent sale of the forfeited collateral and the loan value is reflected in merchandise sales gross margin.

The redemption rate represents the percentage of loans made that are repaid, renewed or extended, including loans that may extend multiple times in a given time period.

The following table presents our pawn loan redemption rates by segment:

At our pawn stores, we advance cash against the value of collateralized tangible personal property.

We earn pawn service charges (“PSC”) for those cash advances, and the PSC rate varies by state and transaction size.

At the time of the transaction, we take possession of the pawned collateral, which consists of tangible personal property, generally jewelry, consumer electronics, tools, sporting goods and musical instruments.

If the customer chooses to redeem their pawn, they will repay the amount advanced plus any accrued PSC.

If the customer chooses not to redeem their pawn, the pawned collateral becomes our inventory, which we sell in our retail merchandise sales activities or, in some cases, scrap for its inherent gold or precious stone content.

Consequently, the success of our pawn business is largely dependent on our ability to accurately assess the probability of pawn redemption and the estimated resale or scrap value of the collateralized personal property.

As of September 30, 2021, we had a closing PLO balance of $175.9 million.

In fiscal 2021, PSC accounted for approximately 36% of our total revenues and 58% of our net revenues.

In the U.S., our PSC rates vary between 13% and 25% per month as permitted by applicable law, and the pawn term generally ranges between 30 and 90 days.

Individual pawn transactions typically average between $130 and $150.

In Mexico, PSC rates vary between 15% and 21% per month as permitted by applicable law, and the pawn primary term is 30 days.

Individual pawn transactions typically average between 1,100 and 1,300 Mexican pesos, or approximately $50 to $60 on average using the average exchange rate for fiscal 2021.

In GPMX, PSC rates vary between 12% and 18% per month as permitted by applicable law, and the pawn primary term is 30 days.

Individual pawn transactions are made in the local currency of the country and typically average between $100 and $120 using the average exchange rates for fiscal 2021.

The average transaction amounts tend to be higher in the GPMX countries than in Mexico due to the higher concentration of jewelry used as pawn collateral.

If a customer chooses not to redeem, renew or extend their pawn, the pawn collateral is forfeited and becomes inventory available for sale.

We do not record losses or charge-offs when the pawned collateral is forfeited because the amount advanced for the unpaid pawn becomes the inventory carrying cost of the forfeited collateral.

The difference between the subsequent sale of the forfeited collateral and the amount of the pawn (offset by any inventory reserve) is reflected in merchandise sales gross margin.

The redemption rate represents the percentage of pawns made that are repaid, renewed or extended, including pawns that may be extended multiple times in a given time period.

The following table presents our redemption rates by segment:

Fiscal Year Ended September 30,

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Our ability to offer quality second-hand goods at prices significantly lower than original retail prices attracts value-conscious customers.

The gross profit on sales of inventory depends primarily on our assessment of the loan or purchase value at the time the property is either accepted as loan collateral or purchased and our ability to sell that merchandise in a timely manner.

The gross profit on sales of inventory depends primarily on our assessment of the estimated resale or scrap value at the time the property is either accepted as pawn collateral or purchased and our ability to sell that merchandise in a timely manner.

As a significant portion of our inventory and sales involve gold and jewelry, our results can be influenced by the market price of gold and diamonds.

Customers in the United States and the majority of our Latin America stores may purchase a product protection plan that allows them to exchange certain general merchandise (non-jewelry) sold through our retail pawn operations within six months of purchase.

We also offer a jewelry VIP package, which guarantees customers a minimum future pawn loan amount on the item sold, allows them full credit if they trade in the item to purchase a more expensive piece of jewelry, and provides minor repair service on the item sold.

Customers in the U.S.

and the majority of our Latin America stores may purchase a product protection plan that allows them to exchange certain general merchandise (non-jewelry) sold through our retail pawn operations within six months of purchase.

We also offer a jewelry VIP package, which guarantees customers a minimum future pawn advance amount on the item sold, allows them full credit if they trade in the item to purchase a more expensive piece of jewelry and provides minor repair service on the item sold.

Customers may also purchase an item on layaway by paying a minimum layaway deposit of typically 10% of the item’s sale price, in addition to an upfront fee.

We hold items on layaway for a 90-to-180-day period, during which the customer is required to pay the balance of the sales price through a series of installment payments.

If a payment is missed, we hold the item for a maximum of 30 days, after which it is returned to active inventory for sale.

Closure of CASHMAX

We operated 22 fina ncial services stores in Canada under the CASHMAX brand during the fiscal year.

All of the stores were located in the Ontario province, in and around Toronto.

During the fourth quarter, as part of a review of our growth strategies and cost optimization initiatives, we closed our CASHMAX business.

If a payment is missed, we hold the item for up to 30 days, after which it is returned to active inventory for sale.

Operations and Risk Management

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Human Capital Management

We employ 5,900 Team Members in the U.S., Mexico, Guatemala, El Salvador, Honduras, Peru and Canada, all of whom are expected to be guided by our vision and values and by an underlying set of ethical principles.

Incorporated into our Code of Conduct, our vision, values and principles define our culture and strengthen the workforce.

We strive to demonstrate to our customers, shareholders, business partners, communities and Team Members that we are worthy of their trust and continually strive to enhance and differentiate our brand reputation as the best in our industry.

Globally, we invest in Team Members at all levels who are expected to integrate our vision and values in all that we do.

While the People and Compensation Committee of the Board of Directors has the primary responsibility of overseeing our human capital management activities (including assessing the effectiveness of employee programs and advising management with regard to the quality of the workforce to carry out our strategic goals and overall human resource strategies), other Board committees also have responsibilities that impact our human capital management as outlined in their respective Charters.

Within management, our Human Resources function has global management responsibility for advising and assisting the business on human resource matters and executing our overall human capital management strategies.

We are committed to fostering work environments that value diversity and inclusion.

This commitment includes providing equal access to, and participation in, equal employment opportunities, programs and services without regard to race, creed, religion, color, national origin, disability, sex (including pregnancy), sexual orientation, gender identity, veteran status, age or stereotypes or assumptions based thereon.

We welcome and celebrate our Team Members’ differences, experiences and beliefs, and we are investing in a more productive, engaged, diverse and inclusive workforce.

During fiscal 2020, we appointed a Senior Manager of Diversity and Inclusion, who is responsible for strategic management and planning for diversity and inclusion within the Company, as well as enhancing our understanding, providing training and development, and partnering with and assisting all of us to be accountable.

During the year, our new Diversity and Inclusion function drove a number of initiatives to enhance our focus on diversity and inclusion and raise our awareness, including mandatory compliance training on unconscious bias, introduction of the Diversity Word of the Month (a recurring program to raise awareness and promote constructive conversations about various diversity and inclusion issues), and conducting a series of surveys and group feedback sessions, the results of which are shared with senior management and help guide our ongoing Diversity and Inclusion activities.

We strive to engage and retain our Team Members throughout the employment life-cycle with effective recruiting and onboarding;

competitive pay, benefits and other total rewards;

mandatory and optional programs for professional development and career advancement;

compliance training;

succession planning;

and a safe, healthy and respectful workplace.

Our EZCORP University includes mandatory global compliance training at hire and periodically thereafter, career advancement training requirements and thousands of self-directed developmental courses.

In response to the COVID-19 pandemic, we quickly implemented safety and health standards and protocols for our Team Members while continuing to offer a safe environment as an essential service to our customers.

Team Members in our Corporate Support Centers have been working from home since March.

Our pawn locations are provided with PPE, other equipment and enhanced cleaning supplies, and are required to adhere to appropriate protocols for social distancing, limiting density, taking temperatures, reporting and documenting exposures and wearing masks at all times, all as recommended by the Centers for Disease Control or mandated by local regulations.

We maintain an Ethics Hotline that is available to all of our Team Members to report (anonymously if desired) any matter of concern.

Communications to the hotline (which is facilitated by an independent third party) are routed to appropriate functions (whether Human Resources, Legal or Compliance) for investigation and resolution.

Engagement Survey

We launched a Global Employee Engagement Survey in June 2021, and had a 82% participation rate with an overall engagement score of 82.

This is seven points higher than the global benchmark, which contains data from over 750 companies across a variety of industries and company sizes and includes results from over 150 countries.

Our top focus areas included Recognition, Action Taking and Work-Life Balance.

These items were emphasized throughout the COVID-19 pandemic and continue to be top of mind for our Team Members.

Team Members provided over 9,000 comments with mixed sentiment, 31% positive, 36% neutral and 33% negative.

To ensure we address issues raised in the survey, our leadership team will have Engagement Objectives for fiscal 2022, guided by actions that will yield the greatest business and Team Member impact.

Talent Management and Development

We employ approximately 6,500 Team Members across all of our geographies.

We seek to hire and promote Team Members to lead the way today and to step into greater roles in the future.

We achieve this goal through Training and Development programs that Team Members can use to plan their careers and identify future growth opportunities.

We engage Team Members at all levels so we can understand their professional and personal goals, identify high potential future leaders to strengthen our internal bench, support them in their journey and retain our talent.

In our pawn stores we provide:

• An onboarding program that blends online and hands-on training in the art and science of pawnbroking;

• Career path programs aligned with our talent and succession strategy, emphasizing career progression and individual development programs;

• A learning experience that unlocks and accelerates Team Member potential as well as business growth.

Our investment in store-level Team Members produced tangible results during fiscal 2021:

• Top scoring questions in our 2021 Global Employee Engagement Survey included “I know the career path(s) available to me at EZCORP” (with an 85% favorability rating) and “I have good opportunities to learn and develop at EZCORP” (with an 82% favorability rating).

• A preponderance of our Lead Pawnbroker and managerial positions are filled via internal promotion.

In our Corporate Support Center, we launched a career and competency framework that guides the career paths of corporate Team Members and recommends training to prepare them for future roles.

Culture and Ethics

Culture is critical to our long-term success and to our ability to attract, develop and retain the top talent needed to accomplish our Purpose, Vision and Strategy.

In fiscal 2021, as part of our cultural transformation, we adopted guiding principles that support our mission and are consistent with our values.

Our values — People, Pawn, Passion — define our priorities as a business, and our Guiding Principles — Leadership, Customer Service, Accountability, Respect, Diversity and Sustainability — characterize the expectations for how we interact with Team Members, customers and communities.

In addition, our Code of Conduct serves as the foundation of our global policies and ethical business practices.

To support our ethical business practices, we maintain an Ethics Hotline available to all Team Members and external stakeholders to report (anonymously if desired) any matter of concern.

Communications to the hotline (which is managed by an independent third party) are routed to appropriate functions (whether Human Resources, Legal or Compliance), and in some cases directly to the Board of Directors, for

investigation and resolution.

In addition, any shareholder or other interested party may send communications to the Board of Directors, either individually or as a group, through a process that is outlined in the Investor Relations section of our website.

Diversity and Inclusion

At EZCORP, we foster an environment that values diversity, inclusion and development for all.

According to our 2021 Global Employee Engagement Survey, 80% of respondents feel a sense of belonging and 77% believe we foster an inclusive workplace.

In fiscal 2021, we implemented a two-year Diversity and Inclusion Strategic Plan with four goals:

• Commitment and Accountability — Demonstrate commitment and accountability through corporate policy, communications and actions that advance the goals of the plan.

• Workplace Inclusion — Foster work environments that value diversity and inclusion and encourage collaboration, flexibility and fairness.

• Diverse Workforce — Recruit and promote from diverse, qualified candidate pools to increase diversity of perspectives and experiences.

• Sustainability — Identify and eliminate systemic barriers by embedding diversity and inclusion in all human capital life cycle policies and practices.

Fiscal 2021 U.S.

Race and Ethnicity Demographics (1) (2)

Fiscal 2021 Global Gender Demographics (2)

(1) The term underrepresented minority is used to describe diverse populations, including African American, Hispanic, Asian and Native American Team Members who self-identified their race and ethnicity at hire.

(2) The term Management is used to describe Team Members with one or more direct reports.

Total Rewards

Our compensation programs are designed to align the compensation of Team Members with individual and Company performance and to provide the proper incentives to attract, retain and motivate Team Members to achieve results.

The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.

Specifically:

• We provide wages and incentive plans that are competitive and consistent with positions, skill levels, experience, knowledge and geographic location.

• We engage nationally recognized outside compensation and benefits consulting firms to independently evaluate the effectiveness of our executive compensation and to provide benchmarking against our selected peer group, which includes direct competitors in the pawn industry and similarly-sized companies from relevant industries that serve similar customer bases, operate in the retail or consumer finance industries and typically have similar operating dynamics.

• We align our executives’ long-term equity compensation with our shareholders’ interests by linking realizable pay with stock performance.

• All employees are eligible for paid time off, retirement savings plan and Company-paid life insurance.

To aid and support Team Members during COVID-19, we provided quarantine pay and implemented an additional four hours of paid time off to encourage Team Member vaccinations.

Health and Safety

Our commitment to our Team Members is to provide a safe and injury-free workplace.

We continue to invest in programs designed to improve physical, mental and social well-being.

Throughout our response to COVID-19, our priority has remained protecting the health and safety of our Team Members and customers.

In fiscal 2021, our leadership team regularly reviewed and adapted our policies and practices based on evolving information related to the COVID-19 pandemic.

Our pawn locations are provided with personal protective equipment and enhanced cleaning supplies and are required to adhere to appropriate protocols for social distancing, limiting density, taking temperatures and reporting exposures.

To encourage our Team Members to report potential exposures and to limit the spread of the virus, we provided over 26,000 hours of quarantine pay to Team Members in fiscal 2021.

Management and Oversight

The People and Compensation Committee of the Board of Directors has primary responsibility for analyzing, advising and (as appropriate) approving executive compensation.

The committee is also responsible for organizational development matters and otherwise assisting the Board in its overall responsibility to enable EZCORP to attract, retain, develop and motivate qualified executives who will contribute to the long-term success of the Company.

The committee actively participates in the executive recruitment and selection process.

Committee members are instrumental in the executive talent management and succession processes, including the review and attainment of annual objectives for our executive officers.

Environmental, Social and Governance (ESG)

EZCORP is committed to meeting our customers’ needs in a responsible manner, and in that regard, we have aligned purpose, vision, values, guiding principles and business strategy with environmental, social and governance sustainability factors.

Our pawnbroking and related retail sales activities inherently contribute to the “circular economy” and promote environmental sustainability.

We provide unique options for our customers to satisfy their needs for cash — options that are not offered by traditional lenders such as banks and credit unions, credit card providers or installment and short-term lenders.

For many of our customers, pawn transactions provide an essential and financially responsible lifeline for meeting their unexpected expenses.

Our retail activities rely primarily on local sourcing of pre-owned merchandise and the recirculation of those items back into the neighborhoods we serve.

In short, our business is unique, essential and sustainable.

Environmental Sustainability

Our business contributes to overall environmental sustainability in the following ways:

• Our business is fundamentally a neighborhood business, where each store principally serves the surrounding neighborhood.

This “local” focus reduces the need of our customers to travel long distances to access our products and services and eliminates the need for delivery services.

• Each of our stores serves as its own “supply chain.” We take in pre-owned merchandise, either through pawn or purchases from customers, and then sell that merchandise (after forfeiture, in the case of pawn transactions) generally in the same store.

Thus, we do not maintain or rely on mass supply, distribution or warehousing facilities.

In fiscal 2021, we procured over 7 million pre-owned items through pawn forfeitures and direct purchasing from customers.

• Virtually all of the merchandise we sell is pre-owned, which contributes to second-hand goods recycling and the circular economy.

In fiscal 2021, we sold more than 5 million pre-owned items, including over 2.8 million items in the consumer electronics, camera and household goods categories, 1.4 million other general merchandise items (such as tools and musical instruments) and 650,000 jewelry items.

In addition, through our jewelry scrapping activities, we recycle significant volumes of gold and diamonds.

All of these activities effectively extend the useful life of many products, reducing waste and lessening the demand for new manufacturing and mining.

• Our store operations themselves leave a relatively small carbon footprint when compared to big-box or other mass retailers that rely on manufacturers and extensive supply chain and distribution channels.

Our stores are relatively small (generally 3,000 square feet or less).

To reduce energy consumption, we have installed energy-efficient LED lighting in 65% of our U.S.

stores and are working to convert the remaining stores.

• In all of our facilities, including our corporate support offices, we promote environmental stewardship by reducing consumption, recycling paper products (1.8 million pounds across all U.S.

locations during fiscal 2021) and responsibly disposing of end-of-life computers, electronics and related accessories through recycling or other sound e-waste processing.

Our corporate office in Austin, Texas is LEED Certified Silver status.

Social Responsibility

Our business promotes social responsibility in the following ways:

• Our business serves an essential and responsible financial resource for many unbanked and or underserved consumers who have limited access to traditional forms of capital or credit and comprise a large majority of our customer base.

We improve the reach and access to financial services through neighborhood-based stores, supported by digital offerings.

We provide instant access to cash in transactions that generally average around $150 or less.

Our pawn transactions are simple, transparent, regulated and safe, and funding approval is based on the valuation of the collateral item, not on the credit worthiness of the customer.

The customer is under no legal obligation to repay the amount advanced;

we do not engage in collection efforts or take other legal actions against our customers;

and we do not report transaction histories to external credit agencies.

Rather, the customer may choose to repay the amount advanced or forfeit the collateralized merchandise.

• Our stores facilitate transactions in a safe and secure environment for Team Members and customers.

During the COVID-19 pandemic, we implemented various safety protocols, including social distancing, mask wearing and enhanced cleaning and sanitation practices, for the health and safety of our Team Members and customers.

In addition, we introduced curbside pick-up services in some locations, so that our customers would have an additional option to safely transact without entering the store if that was their preference.

• For a discussion of our Diversity and Inclusion initiatives, see “Human Capital Management — Diversity and Inclusion” above.

At EZCORP, we believe that “The Way We Do Business is as Important as the Business We Do.” That belief underlies our Code of Conduct, which outlines our expectations and provides guidance on how our Team Members can carry out their daily activities ethically and responsibly.

Our ethical principles include Honesty, Integrity, Reliability, Loyalty, Respect, Responsibility, Fairness, Caring, Leadership and Diversity, and these principles form the foundation for how we govern our business.

• Even though we are a “Controlled Company” under the Nasdaq Listing Rules, we maintain the governance standards required of all publicly-listed Nasdaq companies, including:

• Independent directors comprise a majority of our Board of Directors.

In fact, four of the six members of our Board of Directors meet all of the “independence” requirements set forth in the Nasdaq Listing Rules, and none of the independent directors have any past or existing relationship with our controlling stockholder outside of their Board service.

• All of our standing Board committees (Audit Committee, People and Compensation Committee and Nominating Committee) are comprised of solely independent directors.

• We satisfy Nasdaq’s recently enacted board diversity rules, with two of our six Board members being diverse directors, one of whom self-identifies as female and one whom self-identifies as an underrepresented minority.

For further discussion of our corporate governance standards, see “Part III, Item 10 — Directors, Executive Officers and Corporate Governance.”

• Our pawn operations are licensed and supervised in all jurisdictions in which we operate.

We maintain a strong compliance culture that is monitored and overseen by our Board of Directors and supported by seasoned regulatory and compliance teams.

• Protecting the privacy, integrity and security of our customers’ data and our enterprise network is a top priority that is also monitored and overseen by our Board of Directors.

We maintain a separate IT Security team that is responsible for the design and implementation of our cyber risk strategy, including deployment of systems, enterprise-wide training, monitoring and reporting of threat incidents and response preparedness.

Growth and Expansion

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Our ability to add new stores is dependent on several variables, such as projected achievement of internal investment hurdles, the availability of acceptable sites or acquisition candidates, the alignment of acquirer/seller price expectations, the regulatory environment, local zoning ordinances, access to capital and availability of qualified personnel.

During fiscal 2020, we continued our expansion in Latin America with the opening of 23 de novo stores (14 in Mexico, 7 in Guatemala, 1 in Honduras and 1 in Peru).

In June 2021, we completed the acquisition of 128 pawn stores in Mexico.

These stores, operating under the name "Cash Apoyo Efectivo,” are located principally in the Mexico City metropolitan area and have strong brand recognition in that market.

This was our largest acquisition to date in terms of store-count.

In May 2021, we acquired substantially all of the assets associated with 11 pawn stores in the Houston, Texas area, providing an immediate market leading position in the South Houston area and enhancing our already strong position in the strategically important Houston metro market.

Additionally, during fiscal 2021, we continued our expansion in Latin America with the opening of 15 de novo stores (12 in Mexico and 3 in Guatemala).

We now own a total of 632 stores in Latin America, representing 55% of our total pawn stores.

In fiscal 2020, these stores represente d 19% of our consolidated net revenues as the average scale of Latin

America pawn stores is smaller than in the U.S.

In fiscal 2021, these stores represented 22% of our consolidated net revenues as the average scale of Latin America pawn stores is smaller than in the U.S.

We see opportunity for further expansion in Latin America through both acquisitions and de novo openings.

For further information about our acquisitions, se e Note 3 of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.”

For further information about our acquisitions, see Note 3:

Acquisitions of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

Seasonality and Quarterly Results

In the United States, pawn service charges are historically highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season and lowest in our third fiscal quarter (April through June) following the tax refund season, and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds.

In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on loan balances and fueling some merchandise sales in those periods.

In the U.S., PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average PLO balance during the summer and lowest in our third fiscal quarter (April through June) following the tax refund season, and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds.

In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on PLO balances and fueling some merchandise sales in those periods.

As a net effect of these and other factors and excluding discrete charges, our consolidated profit before tax is generally highest in our first fiscal quarter (October through December) and lowest in our third fiscal quarter (April through June).

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Our competitors for merchandise sales include numerous retail and wholesale stores such as jewelry stores, discount retail stores, consumer electronics stores, other pawn stores, other resale stores, electronic commerce retailers and auction sites.

Competitive factors in our retail operations include the ability to provide the customer with a variety of merchandise at an exceptional value coupled with exceptional customer service and convenient locations.

Competitive factors in our retail operations include the ability to provide customers with a variety of merchandise at an exceptional value coupled with exceptional customer service and convenient locations.

The pawn industry in the United States is large, relatively mature and highly fragmented.

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We are the second largest for-profit operator in Mexico.

The pawn industry, particularly full-line stores offering general merchandise and jewelry loans and resale, remains in an expansion stage in Latin America.

The pawn industry, particularly full-line stores dealing in both general merchandise and jewelry, remains in an expansion stage in Latin America.

Trademarks and Trade Names

We operate our U.S.

pawn stores principally under the names “EZPAWN” or “Value Pawn & Jewelry,” our Mexico pawn stores principally under the name “EMPEÑO FÁCIL,” our Guatemala pawn stores under the name “GuatePrenda,” and our El Salvador, Honduras and Peru pawn stores under the name “MaxiEfectivo.” We have registered the names EZPAWN and EZCORP, among others, with the United States Patent and Trademark Office.

In Mexico, we have registered the names “EMPEÑO FÁCIL,” “Bazareño,” “Presta Dinero” and “Montepio San Patricio” with the Instituto Mexicano de la Propiedad Industrial.

We have registered the name “GuatePrenda” in Guatemala and the name “MaxiEfectivo” in Guatemala, El Salvador, Honduras and Peru.

pawn stores principally under the names “EZPAWN” or “Value Pawn & Jewelry,” our Mexico pawn stores principally under the name “EMPEÑO FÁCIL” and “Cash Apoyo Efectivo,” our Guatemala pawn stores under the name “GuatePrenda,” and our El Salvador and Honduras pawn stores under the name “MaxiEfectivo.” We have registered the names EZPAWN and EZCORP, among others, with the United States Patent and Trademark Office.

In Mexico, we have registered the names “EMPEÑO FÁCIL,” “Bazareño,” “Presta Dinero”, “Montepio San Patricio” and “Cash Apoyo Efectivo” with the Instituto Mexicano de la Propiedad Industrial.

We have registered the name “GuatePrenda” in Guatemala and the name “MaxiEfectivo” in Guatemala, El Salvador and Honduras.

Compliance with federal, state and local laws and regulations is an integral part of how we manage our business, and we conduct our business in material compliance with all of these rules.

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The applicable statutes, ordinances and regulations vary from location to location and typically impose licensing requirements for pawn stores or individual pawn store Team Members.

Licensing requirements

typically relate to financial responsibility and character and may establish restrictions on where pawn stores can operate.

Additional rules regulate various aspects of the day-to-day pawn operations, including the pawn service charges that a pawn store may charge, the maximum amount of a pawn loan, the minimum or maximum term of a pawn loan, the content and format of the pawn ticket, and the length of time after a loan default that a pawn store must hold a pawned item before it can be offered for sale.

Licensing requirements typically relate to financial responsibility and character and may establish restrictions on where pawn stores can operate.

Additional rules regulate various aspects of the day-to-day pawn operations, including the pawn service charges that a pawn store may charge, the maximum amount of a pawn loan, the minimum or maximum term of a pawn loan, the content and format of the pawn ticket, and the length of time after a pawn loan default that a pawn store must hold a pawned item before it can be offered for sale.

Failure to observe applicable regulations could result in a revocation or suspension of pawn licenses, the imposition of fines or requirements to refund service charges and fees, and other civil or criminal penalties.

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the designation of a compliance officer;

an ongoing team member training program;

and an independent audit function to test the program.

an ongoing Team Member training program and an independent audit function to test the program.

• We are subject to the Bank Secrecy Act and its underlying regulations, which require us to report and maintain records of certain high-dollar transactions.

In addition, federal laws and regulations require us to report certain suspicious transactions to the Financial Crimes Enforcement Network of the Treasury Department (“FinCen”).

Generally, a transaction is considered to be suspicious if we know, suspect or have reason to suspect that the transaction (a) involves funds derived from illegal activity or is intended to hide or disguise such funds, (b) is designed to evade the requirements of the Bank Secrecy Act or (c) appears to serve no legitimate business or lawful purpose.

In addition, federal laws and regulations require us to report certain transactions (or series of transactions) deemed suspicious to the Financial Crimes Enforcement Network of the Treasury Department (“FinCen”).

Generally, a transaction is considered suspicious if we know, suspect or have reason to suspect that the transaction (a) involves funds derived from illegal activity or is intended to hide or disguise such funds, (b) is designed to evade the requirements of the Bank Secrecy Act or (c) appears to serve no legitimate business or lawful purpose.

• The Office of Foreign Assets Control (“OFAC”) of the Department of the Treasury administers and enforces economic and trade sanctions based on U.S.

of mass destruction and other threats to the national security, foreign policy or economy of the United States.

foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction and other threats to the national security, foreign policy or economy of the United States.

We are prohibited from doing business with named individuals, businesses and countries subject to sanctions and restrictions, and we are required to report any transactions involving those named by the US.

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Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of mail or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.

• The Department of Defense regulations promulgated under the Military Lending Act (the “MLA”) limit the annual percentage rate charged on certain consumer loans (including pawn loans) made to active military personnel or their dependents to 36%.

• The Department of Defense regulations promulgated under the Military Lending Act limit the annual percentage rate charged on certain consumer loans (including pawn loans) made to active military personnel or their dependents to 36%.

Under certain circumstances, the federal Consumer Financial Protection Bureau (“CFPB”) may be able to exercise regulatory authority over the U.S.

pawn industry through its rule making authority.

To date, the CFPB has not taken any steps to exercise such authority or indicated any intention to do so.

To date, the CFPB has not taken any steps to exercise such authority or indicated any intention to do so, although it has initiated actions against pawn companies for alleged violations of consumer lending regulations, including the Military Lending Act discussed above.

Mexico Regulations

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There are significant fines and sanctions, including operating suspensions, for failure to comply with PROFECO’s rules and regulations.

PROFECO requires that we report certain transactions (or series of transactions) that exceed certain monetary limits.

PROFECO requires that we report certain transactions (or series of transactions) when a customer pawns more than three items of the same category.

Anti-money laundering regulations restrict the use of cash in certain transactions.

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State and local agencies often have authority to suspend store operations pending resolution of actual or alleged regulatory, licensing and permitting issues.

Other Regulations — Our pawn business in Mexico is subject to the General Law of Administrative Responsibility (“GLAR”), effective July 2017.

Other Regulations — Our pawn business in Mexico is subject to the General Law of Administrative Responsibility (“GLAR”), effective July 2017, which requires us to implement an integrity policy that contains mechanisms to ensure integrity standards throughout the organization.

GLAR establishes administrative penalties for improper payments to government officials, influence peddling (including the hiring of public officials and the use of undue influence) and other corrupt acts in public procurement processes.

We are also subject to The Federal Law for the Prevention and Identification of Transactions with Funds from Illegal Sources, which requires reporting of certain transactions exceeding certain monetary limits, maintenance of customer identification records and controls, and reporting of all non-Mexican customer transactions.

This law affects all industries in Mexico and is intended to detect commercial activities arising from illicit or ill-gotten means through bilateral cooperation between Mexico’s Ministry of Finance and Public Credit and Mexico’s Attorney General’s Office.

We are also subject to The Federal Law for the Prevention and Identification of Transactions with Funds from Illegal Sources, which requires reporting of certain transactions exceeding certain monetary limits, the appointment of a compliance officer and maintenance of customer

identification records and controls.

This law affects all vulnerable activities in Mexico and is intended to detect commercial activities arising from illicit or ill-gotten means through bilateral cooperation between Mexico’s Ministry of Finance and Public Credit and Mexico’s Attorney General’s Office.

The law also restricts the use of cash in certain transactions associated with high-value assets and limits, and to the extent possible, money laundering activities protected by the anonymity that such cash tra nsactions provide.

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Other Latin American Regulations

Local governmental entities in Guatemala, El Salvador, Honduras and Peru also regulate lending and retail businesses.

Local governmental entities in Guatemala, El Salvador and Honduras also regulate lending and retail businesses.

Certain laws and local zoning and permitting ordinances require basic commercial business licenses and signage permits.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business