What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-02-02 compared with 2021-08-04 · 121 added, 256 removed, 162 unchanged (70% of the section changed)

8 unchanged sentences

EZCORP is a Delaware corporation headquartered in Austin, Texas.

We are a leading provider of pawn loans in the United States and Latin America.

We are a leading provider of pawn services in the United States and Latin America.

Pawn loans are nonrecourse loans collateralized by personal property.

2 unchanged sentences

We are focused on three strategic pillars:

Strengthen the Core Renewed focus on the unique and essential elements of our pawn business

Cost Reduction and Simplification Significant and sustained adjustment of cost base through ongoing simplification

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

Pawn Activities

At our pawn stores, we offer pawn loans, which are typically small, nonrecourse 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.

Our ability to offer quality pre-owned 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.

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.

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 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.

Growth and Expansion

Our strategy is to expand the number of locations we operate through opening new (“de novo”) locations and through acquisitions in both Latin America and the United States and potential new markets.

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 the availability of qualified personnel.

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

Our strategy is to expand the number of locations we operate through opening new (“de novo”) locations and through acquisitions and investments in both Latin America, the United States and potential new markets.

Our ability to open de novo stores, acquire new stores and make other related investments 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 the availability of qualified personnel.

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 the United States, PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season.

PSC is historically 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.

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).

These historical trends have been impacted by COVID-19.

However, we expect these historical trends to return in the future.

These historical trends have been impacted by COVID-19, but we expect these historical trends to return in the future.

Financial Highlights

We remain focused on optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher pawn service charges (“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 the three and nine months ended June 30, 2021 and 2020:

The following chart presents sources of net revenues by geographic disbursement for the three and nine months ended June 30, 2021 and 2020:

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

The following chart presents sources of net revenues by geographic disbursement for the three months ended December 31, 2021 and 2020:

Business Developments

The COVID-19 pandemic continues to affect the U.S.

and global economies, and as disclosed in our 2020 Annual Report on Form 10-K, the pandemic also affected our business in a variety of ways beginning in the second quarter of fiscal 2020 and continuing into fiscal 2021.

and global economies, as disclosed in our 2021 Annual Report on Form 10-K.

The full extent and duration of the COVID-19 impact on the global economy generally, and on our business specifically, is currently unknown.

We expect the impact of the pandemic, and the recovery therefrom, will continue to adversely affect net revenues and earnings in fiscal 2021.

The impact of the pandemic, and the recovery therefrom, continued to adversely effect net revenues and earnings into fiscal 2021.

During the latter part of fiscal 2021, we saw pawn transaction activity continue to rebuild, driving PLO balances closer to pre-pandemic levels, which will drive accelerating PSC revenue in the coming quarters given the natural lag between pawn originations and related fees.

We continue to assess what type of impact the recent surge of the COVID-19 Omicron variant will have to our business net revenues and operating expenses in fiscal year 2022.

A prolonged pandemic and recovery may have an adverse effect on our results of operations, financial position and liquidity in future periods.

Reinvestment of Dividends

On February 21, 2021, Cash Converters International announced that its board of directors declared an interim dividend of AUD $0.01 per share, which was payable on April 14, 2021 to ordinary shareholders of record as of the close of business on March 25, 2021.

We elected to receive our dividend entitlement in the form of additional ordinary shares pursuant to Cash Converters International's pre-existing Dividend Reinvestment Plan.

Under that plan, on April 14, 2021, we received an additional 9,519,277 shares, bringing our total ownership to 223,702,991 shares, representing 35.65% of Cash Converters International's total outstanding ordinary shares.

On June 9, 2021, we completed the acquisition of 100% of the common shares of PLO del Bajio S.

(“Bajio”) and gained control of the entity, further expanding our geographic footprint within Mexico with the addition of 128 pawn stores.

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

The total consideration paid for Bajio was $23.6 million, consisting of cash of $17.4 million, of which $11.6 million was paid in cash at closing and the remaining $5.8 million is accrued and held as restricted cash to be paid out per the acquisition agreement, and 212,870 shares of our Class A Non-Voting Common Stock valued at $1.6 million.

In addition, t h e sellers may be entitled to additional payments of up to $4.6 million over the next two years, contingent on the performance of the acquired stores with growing its loan portfolio.

We also repaid $14.9 million of Bajio’s existing debt assumed in the acquisition.

In May 2021, we acquired 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.

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 us for sustainable growth.

During the third quarter of fiscal 2021, due to uneconomic rate caps and limited synergies across our platform, we finalized our decision for the closure of our 11 stores in Peru and incurred costs of $0.5 million related to the closure.

Investments in Unconsolidated Entities

On October 1, 2021, we purchased an additional 13 million shares of Cash Converters for $2.5 million.

This purchase increased our total ownership in Cash Converters to 236,702,991 shares, representing a 37.72% ownership interest.

Additionally, on October 14, 2021, we received a cash dividend of $1.7 million from Cash Converters.

On October 6, 2021, the Company purchased $15.0 million in exchange for a non-redeemable voting participating preferred equity interest in Founders One, LLC (“Founders”), a newly-formed entity with one other member.

Founders used that $15.0 million to acquire an equity interest in Simple Management Group, Inc.

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

Executive Management Changes

On January 12, 2022, Jason A.

Kulas informed the Company's Board of Directors (the "Board") that he was resigning from his position as Chief Executive Officer to accept a position at another company.

The same day, the Board appointed Lachlan P.

Given and John Blair Powell, Jr.

as co-Interim Chief Executive Officers, effective immediately.

Given and Mr.

Powell are executive officers of the Company and have extensive experience with the Company and its business.

A description of their respective backgrounds and experiences can be found in "Part III, Item 10 — Directors, Executive Officers and Corporate Governance — Executive Officers" of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

Results of Operations

Non-GAAP Constant Currency Financial Information

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide certain other non-GAAP financial information on a constant currency basis ("constant currency").

We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzales and other Latin American currencies.

We believe presentation of constant currency results is meaningful and useful in understanding the activities and business metrics of our Latin America Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a better understanding and evaluation of factors and trends affecting our business.

We analyze results on a same store basis (which is defined as stores open during the entirety of the comparable periods) to better understand existing store performance without the influence of increases or decreases resulting solely from changes in store count.

We believe presentation of constant currency and same store results is meaningful and useful in understanding the activities and business metrics of our Latin America Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a better understanding and evaluation of factors and trends affecting our business.

We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements.

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The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S.

dollars as of and for the three and nine months ended June 30, 2021 and June 30, 2020 were as follows:

dollars as of and for the three months ended December 31, 2021 and December 31, 2020 were as follows:

Three Months Ended

Nine Months Ended

2021 2020 2021 2020

7 unchanged sentences

• Latin America Pawn — Represents all pawn activities in Mexico and other parts of Latin America;

• Other International — Represents our equity interest in the net income of Cash Converters International and Rich Data Corporation and our financial services stores in Canada, operating under the CASHMAX brand.

In the fourth quarter of fiscal 2020, we closed our stores in Canada, and closing activities related to CASHMAX in fiscal year 2021 are not material.

• Other Investments — Represents our equity interest in the net income of Cash Converters International and Rich Data Corporation, along with our investment in Founders.

See Note 11 - Segment Information for information regarding changes in reportable segments.

Our historical segment results have been recast to conform to current presentation.

Store Data by Segment

Three Months Ended June 30, 2021

Three Months Ended December 31, 2021

Pawn Latin America Pawn Consolidated

As of March 31, 2021 505 506 1,011

New locations opened — 4 4

Locations acquired 11 128 139

Locations sold, combined or closed — (11) (11)

As of June 30, 2021

As of September 30, 2021

516 632 1,148

Three Months Ended June 30, 2020

Pawn Latin America Pawn Other International Consolidated

As of March 31, 2020 512 493 22 1,027

New locations opened — 1 1

Locations sold, combined or closed (1) — — (1)

As of June 30, 2020

As of December 31, 2021

516 633 1,149

Nine Months Ended June 30, 2021

Three Months Ended December 31, 2020

Pawn Latin America Pawn Consolidated

As of September 30, 2020

New locations opened — 10 10

Locations acquired 11 128 139

Locations sold, combined or closed — (11) (11)

As of June 30, 2021

505 500 1,005

Nine Months Ended June 30, 2020

Pawn Latin America Pawn Other International Consolidated

As of September 30, 2019 512 480 22 1,014

New locations opened — 2 2

Locations sold, combined or closed (1) — — (1)

As of June 30, 2020

As of December 31, 2020

505 502 1,007

Three Months Ended June 30, 2021 vs.

Three Months Ended June 30, 2020

Three Months Ended December 31, 2021 vs.

Three Months Ended December 31, 2020

These tables, as well as the discussion that follows, should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.

1 unchanged sentence

Pawn segment:

Three Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2021 2020

19 unchanged sentences

Pawn loan redemption rate 83 % 84 % (100)bps

* Represents a percentage computation that is not mathematically meaningful.

(a) Balance includes pawn loans and inventory.

(b) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

Pawn service charges increased by 7% as a result of higher average PLO for the quarter.

Same stores pawn service charges also increased by 7%.

Merchandise sales decreased 27% on both a total and same store basis resulting from the increased demand in the prior year quarter due to the impact of federal economic stimulus.

Merchandise sales gross profit decreased 3% to $39.2 million offset by a 1,100 bps improvement in merchandise sales gross profit margin, primarily due to reduced aged inventory levels.

( There was a 900 bps improvement when excluding a loss from looting of $2.2 million from merchandise cost of goods sold in the prior year).

Store expenses decreased by 6% driven by a reduction in labor expense.

Segment contribution increased $1.6 million or 10%.

When excluding the looting charge taken in the prior year quarter, segment contribution decreased $0.6 million,

Pawn service charges increased 13% as a result of higher average PLO for the quarter.

Merchandise sales increased 24% compared to the prior year quarter.

Merchandise sales gross profit increased 29% to $44.2 million as well as a 100 bps improvement in merchandise sales gross profit margin, reflecting a continued focus on improving retailing and lower levels of aged general merchandise inventory.

Store expenses increased 4% primarily due to rising labor costs resulting from growing transaction volume and store count.

Segment contribution increased $13.7 million or 66%, due to the changes in net revenues and store expenses described above.

Latin America Pawn

1 unchanged sentence

dollars from its functional currencies noted above under “Results of Operations — Non-GAAP Financial Information."

Three Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2021 (GAAP)

14 unchanged sentences

Depreciation and amortization 1,980 1,860 6% 1,995 7%

Other Charges 497 — * 491 *

Segment operating contribution 6,176 3,642 70% 6,197 70%

Other segment income (a) (489) (442) 11% 65 (115)%

Other segment income (311) (1,320) (76)% (384) (71)%

Segment contribution $ 6,487 $ 4,962 31% $ 6,581 33%

Net earning assets (b) $ 63,075 $ 59,441 6% $ 56,453 (5)%

Net earning assets (a) $ 64,490 $ 43,263 49% $ 65,773 52%

Inventory turnover 3.6 3.8 (5)% 3.7 (3)%

Average monthly ending pawn loan balance per store (c) $ 65 $ 59 10% $ 59 —%

Average monthly ending pawn loan balance per store (b) $ 60 $ 53 13% $ 61 15%

Monthly average yield on pawn loans outstanding 17 % 17 % —bps 17 % —bps

Pawn loan redemption rate (d) 79 % 77 % 200bps 79 % 200bps

* Represents a percentage computation that is not mathematically meaningful.

(a) Fiscal 2021 constant currency amount excludes a nominal net GAAP basis foreign currency transaction adjustment resulting from movement in exchange rates.

The net foreign currency transaction adjustment for fiscal 2020 was nominal and are included in the above results.

(b) Balance includes pawn loans and inventory.

(d) Rate is solely inclusive of results from Mexico Pawn.

In the current quarter, we acquired 128 stores and opened four de novo stores, bringing total segment store-co unt to 627 at t he end of the quarter (net of the closure of 11 stores in Peru).

Pawn service charges increased 44% (30% on a constant currency basis).

Same store pawn service charges increased by 38% (24% on a constant currency basis) as a result of higher average PLO for the quarter.

Merchandise sales increased 15% (3% on a constant currency basis) and 8% on a same store basis (4% decrease on a constant currency basis).

Merchandise sales gross profit increased 91% to $8.1 million (69% to $7.2 million on a constant currency basis) driven by a 1,400 basis points improvement in merchandise sales gross profit margin primarily due to reduced aged inventory levels and improved inventory turnover.

Store expenses increased by 28% (15% on a constant currency bas is) primarily due to an increase in transaction volume and costs resulting from the re-opening of stores impacted by the COVID-19 pandemic last year.

Segment contribution increased $4.3 million primarily due to the shutdown of stores related to the COVID-19 pandemic last year.

Other International

The following table presents selected financial data for our Other International segment after translation to U.S.

dollars from its functional currency of primarily Australian and Canadian dollars:

Three Months Ended June 30,

(in thousands) 2021 2020

Net revenues:

Consumer loan fees, interest and other $ 89 $ 884 (90)%

Consumer loan debt — — *

Net revenues 89 884 (90)%

Segment operating expenses:

Store expenses — 1,057 *

Depreciation and amortization — 3 *

Gain on sale or disposal of assets — (20) *

Equity in net (income) loss of unconsolidated affiliates (643) 1,183 (154)%

Segment operating contribution 732 (1,339) 155%

Other segment expense 18 135 (87)%

Segment contribution (loss) $ 714 $ (1,474) 148%

* Represents a percentage computation that is not mathematically meaningful.

Segment contribution was $0.7 million, an increase of $2.2 million from the prior-year quarter primarily due to the increase in equity income for our unconsolidated affiliates.

We operated 22 financial services stores in Canada under the CASHMAX brand during fiscal year 2020.

During the fourth quarter of fiscal year 2020, we closed our CASHMAX business and are no longer operating stores in Canada.

The following table reconciles our consolidated segment contribution discussed above to net income attributable to EZCORP, Inc., including items that affect our consolidated financial results but are not allocated among segments:

Three Months Ended June 30,

Percentage Change

(in thousands) 2021 2020

Segment contribution $ 22,429 $ 14,345 56%

Corporate expenses (income):

General and administrative 14,589 16,176 (10)%

Depreciation and amortization 3,013 3,280 (8)%

Gain on sale or disposal of assets and other — 18 (100)%

Interest expense 5,569 5,239 6%

Interest income (28) (224) (88)%

Other expense 52 94 *

Loss before income taxes (766) (10,238) 93%

Income tax expense (benefit) 1,804 (4,751) (138)%

Net loss $ (2,570) $ (5,487) 53%

* Represents a percentage computation that is not mathematically meaningful.

Segment contribution increased $8.1 million over the prior-year quarter or 56% primarily due to the increase in the Latin America Pawn segment contribution resulting from the re-opening of stores impacted by COVID-19 last year.

General and administrative expenses decreased $1.6 million or 10% due to strategic initiatives implemented in the fourth quarter of fiscal year 2020 to optimize our cost structure at the corporate level.

Income tax expense increased $6.6 million for the quarter primarily due to a n increase in income taxes for the current year due to an approximately $9.5 million increase in income before income taxes.

Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate.

These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations.

Nine Months Ended June 30, 2021 vs.

Nine Months Ended June 30, 2020

The tables below and discussion that follows should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.

The following table presents selected summary financial data for the U.S.

Pawn segment:

Nine Months Ended June 30,

(in thousands) 2021 2020

Net revenues:

Pawn service charges $ 143,836 $ 166,859 (14)%

Merchandise sales 260,545 314,059 (17)%

Merchandise sales gross profit 115,364 111,571 3%

Gross margin on merchandise sales 44 % 36 % 800bps

Jewelry scrapping sales 9,493 32,905 (71)%

Jewelry scrapping sales gross profit 1,622 7,475 (78)%

Gross margin on jewelry scrapping sales 17 % 23 % (600)bps

Other revenues 83 107 (22)%

Net revenues 260,905 286,012 (9)%

Segment operating expenses:

Store expenses 188,256 201,921 (7)%

Impairment of goodwill, intangibles and other assets — 10,000 *

Depreciation and amortization 7,972 8,325 (4)%

Segment operating contribution 64,677 65,766 (2)%

Other segment expense 27 234 *

Segment contribution $ 64,650 $ 65,532 (1)%

Average monthly ending pawn loan balance per store (a) $ 218 $ 248 (12)%

Monthly average yield on pawn loans outstanding 14 % 14 % —bps

Pawn loan redemption rate 87 % 87 % —bps

* Represents a percentage computation that is not mathematically meaningful.

(a) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

Pawn service charges decreased 14% in total and on a same store basis.

This decrease reflects a substantial decline in new loans activity and associated loan balances as customer borrowing behaviors were impacted by COVID-19.

Merchandise sales decreased 17% in total and on a same store basis due to lower inventory levels.

Merchandise sales gross profit increased 3% to $115.4 million driven by a 800 bps improvement in merchandise sales gross profit margin, primarily driven by reduced aged inventory levels and improved inventory turnover.

Store expenses decreased by 7% due to a reduction in labor expense.

Segment contribution decreased $0.9 million primarily due to the changes in revenue and store expenses described above, offset by the $10.0 million goodwill impairment charge recorded during the prior year quarter.

Excluding the goodwill impairment charge, segment contribution decreased $10.9 million, or 14%, to $64.7 million.

Latin America Pawn

The following table presents selected summary financial data our Latin America Pawn segment, including constant currency results, after translation to U.S.

dollars from functional currencies.

See “Results of Operations — Non-GAAP Financial Information” above.

Nine Months Ended June 30,

(in thousands) 2021 (GAAP)

Change (GAAP) 2021 (Constant Currency)

Change (Constant Currency)

Net revenues:

Pawn service charges $ 43,520 $ 50,548 (14)% $ 42,873 (15)%

Pawn loan redemption rate (c) 81 % 83 % (200)bps 81 % (200)bps

(a) Balance includes pawn loans and inventory.

(b) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

(Constant Currency)

Same Store data:

Merchandise Sales 15% 16%

Merchandise Sales Gross Profit (4)% (3)%

Gross margin on merchandise sales 35 % 25 % 1,000bps 35 % 1,000bps

Jewelry scrapping sales 9,014 8,804 2% 8,757 (1)%

Jewelry scrapping sales gross profit 809 705 15% 833 18%

Gross margin on jewelry scrapping sales 9 % 8 % 100bps 10 % 200bps

Other revenues, net 7 (19) (137)% 6 (132)%

Net revenues 68,916 71,047 (3)% 67,903 (4)%

Segment operating expenses:

Store Expenses 5% 6%

Depreciation and amortization 5,459 5,476 —% 5,407 (1)%

Impairment of goodwill, intangibles and other assets — 35,936 (100)% — (100)%

Other Charges 497 — * 491 *

Segment operating contribution (loss) 8,955 (23,858) 138% 8,610 136%

Other segment income (a) (2,194) (1,106) 98% (2,110) 91%

Segment contribution (loss) $ 11,149 $ (22,752) 149% $ 10,720 147%

Average monthly ending pawn loan balance per store (b) $ 58 $ 77 (25)% $ 57 (26)%

Monthly average yield on pawn loans outstanding 16 % 15 % 100bps 16 % 100bps

Pawn loan redemption rate 81 % 77 % 400bps 81 % 400bps

* Represents a percentage computation that is not mathematically meaningful.

(a) Fiscal 2021 constant currency amount excludes a nominal net GAAP basis foreign currency transaction adjustment resulting from movement in exchange rates.

The net foreign currency transaction adjustment for fiscal 2020 was nominal and are included in the above results.

(b) Balance is calculated based upon the average of the monthly ending balances during the applicable period.

During the nine months ended June 30, 2021, our Latin America pawn segment acquired 128 stores and opened ten de novo stores.

The change in net revenue attributable to same stores and new stores added since the prior-year is summarized as follows:

Pawn service charges decreased 14% (15% on a constant currency basis).

Same stores pawn service charges also decreased by 16% (17% on a constant currency basis).

The average ending monthly pawn loan balance outstanding during the nine month period was down 25% (26% on a constant currency basis).

During most of this period, we have experienced a substantial decline in new loans activity and associated loan balances as the result of the impact of constrained traffic, limited operating hours and increased remittances from the U.S.

Merchandise sales decreased 11% (12% on a constant currency basis) and 14% on a same store basis due to lower inventory levels.

This decrease in merchandise sales was offset by an increase in merchandise sales gross profit of 24% to $24.6 million (22% to $24.2 million on a

constant currency basis) driven by a 1,000 bps improvement in merchandise sales gross profit margin primarily due to reduced aged inventory levels and improved inventory turnover.

Store expenses decreased by 1% (flat on a constant currency basis) driven by a reduction in labor expense.

Segment contribution increased $33.9 million primarily due to the impairment charges of $35.9 million recorded during the prior year quarter.

Excluding the impairment charges, segment contribution decrease d $2.0 million, or 15%, to $11.1 milli on.

This decrease was primarily due to the changes in revenue and store expenses described above.

Other International

The following table presents selected financial data for our Other International segment after translation to U.S.

In the current quarter, we opened one de novo store, bringing total segment store-count to 633.

PLO increased 37% to $35.5 million (40% on constant currency basis).

On a same store basis, PLO increased 18% (20% on a constant currency basis).

PSC increased 47% in the first quarter to $19.5 million (up 47% to $19.6 million on a constant currency basis) as a result of higher average PLO for the quarter.

Merchandise sales increased 40% (41% on a constant currency basis) and 15% on a same store basis (16% on a constant currency basis).

Offsetting the sales increase, merchandise sales gross profit margin decreased from 35% to 29% reflecting a return to more normalized margins.

Overall, merchandise sales gross profit increased 15% to $10.4 million (16% to $10.5 million on a constant currency basis).

Store expenses increased $4.9 million or 28% (29% on a constant currency basis) primarily due to growth in store count and rising labor costs resulting from growing transaction volume.

On a same-store basis, store expenses increased by $0.9 million or 5% ($1.0 million or 6% on a constant currency basis).

Segment contribution increased $1.5 million, or 31%, to $6.5 million ($1.6 million or 33% on a constant currency basis), due to the changes in net revenues and store expenses described above.

Other Investments

The following table presents selected financial data for our Other Investments segment after translation to U.S.

dollars from its functional currency of primarily Australian and Canadian dollars:

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2021 2020

1 unchanged sentence

Consumer loan fees, interest and other $ 43 $ 75 (43)%

Consumer loan debt — 1,024 (100)%

Net revenues 43 75 (43)%

Segment operating expenses:

Store expenses — 3,850 (100)%

Impairment of goodwill, intangible and other assets — 1,124 (100)%

Gain on sale or disposal of assets — (20) (100)%

Equity in net (income) loss on unconsolidated affiliates (2,409) 5,896 141%

Equity in net income of unconsolidated affiliates (1,138) (516) 121%

Segment operating contribution 1,181 591 100%

Other segment (income) expense (183) 538 134%

Segment contribution (loss) $ 2,930 $ (8,842) 133%

Segment contribution was $2.9 million, an increase of $11.8 million from the prior-year quarter primarily due to a an increase of $5.0 million of net segment operating contribution resulting from the closure of our Canada operations and a $7.1 million charge, ($10.1 million, net of a $3.0 million tax benefit) in the first quarter of fiscal 2020 for the our share of the Cash Converters International settlement of a class action lawsuit.

During the fourth quarter of fiscal year 2020, we closed our CASHMAX business and are no longer operating stores in Canada.

Other segment (income) (12) (210) (94)%

Segment contribution $ 1,193 $ 801 49%

Segment contribution was $1.2 million, an increase of $0.4 million from the prior-year quarter primarily due to the increase in equity income for our unconsolidated affiliates.

Nine Months Ended June 30,

Three Months Ended December 31,

Percentage Change

4 unchanged sentences

Depreciation and amortization 2,924 2,976 (2)%

Loss on sale or disposal of assets 63 1,118 (94)%

Gain on sale or disposal of assets and other — 52 (100)%

Interest expense 2,431 5,455 (55)%

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Other expense 26 66 (61)%

Income (loss) from continuing operations before income taxes 11,535 (41,366) 128%

Income before income taxes 21,347 5,502 288%

Income tax expense 5,626 1,203 368%

Net income (loss) attributable to EZCORP, Inc.

$ 7,059 $ (45,123) 116%

Segment contribution increased $44.8 million or 132% over the prior-year period, primarily due to a $47.1 million impairment charge of certain long-lived assets in the second quarter of fiscal 2020.

Excluding the impairment charges, segment contribution decreased by $2.3 million or

3% primarily due to reduced pawn service charges from a decline in new loan activity and associated loan balances as a result of a change in customer borrowing behaviors due to COVID-19, partially offset by increased merchandise sales gross profit and decreased store expenses.

General and administrative expenses decreased $9.5 million due to strategic initiatives implemented in the fourth quarter of fiscal year 2020 to optimize our cost structure at the corporate level.

Income tax expense increased $0.7 million primarily due to an increase in income taxes for the current year due to an approximately $52.9 million increase in income before income taxes offset by a decrease in income tax expense of approximately $14.0 million due to non-deductible goodwill impairments booked in the quarter ended March 31, 2020.

Net income $ 15,721 $ 4,299 266%

Segment contribution increased $15.6 million or 59% over the prior year quarter primarily due to the improved operating results of all three segments above.

General and administrative expenses increased $3.0 million, or 24% primarily driven by the timing of fiscal year 2021 expenses.

Interest expense decreased $3.0 million primarily driven by the ASU 2020-06 accounting policy change which no longer requires debt discount be included on our balance sheet effective October 1, 2021.

The policy change eliminates the non-cash interest amortization of that debt discount.

See Note 1 to the consolidated financials for further discussion of this recently adopted accounting policy.

Income tax expense increased $4.4 million primarily due to an increase in income before income taxes of $15.8 million this quarter compared to the prior year same quarter.

Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate.

These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations.

See Annual Report on Form 10-K for the year ended September 30, 2021 Note 11:

Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.

Liquidity and Capital Resources

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Cash and Cash Equivalents

Our cash and equivalents balance was $283.7 million at June 30, 2021 compare d to $304.5 million at September 30, 2020.

At June 30, 2021, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.

Our cash and equivalents balance was $233.3 million at December 31, 2021 compare d to $253.7 million at September 30, 2021.

At December 31, 2021, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.

The table and discussion below presents a summary of the selected sources and uses of our cash:

Nine Months Ended

Three Months Ended

(in thousands) 2021 2020

Cash flows provided by operating activities $ 33,122 $ 56,365 (41)%

Cash flows (used in) provided by investing activities (37,086) 110,389 (134)%

Cash flows provided by (used in) operating activities $ 9,018 $ (4,513) (300)%

Cash flows used in investing activities (30,603) (15,062) 103%

Cash flows used in financing activities (792) (783) (1)%

Effect of exchange rate changes on cash, cash equivalents and restricted cash 719 6,266 89%

Net (decrease) increase in cash, cash equivalents and restricted cash $ (15,090) $ 152,688 (110)%

Net cash provided by operating activities decreased $23.2 million or 41% year-over-year due to a decrease of $4.5 million in net income adjusted for non-cash items, and a decrease of $18.7 million in changes to working capital.

Changes in working capital are primarily related to the timing of collections in pawn service charges receivable, layaway deposits, inventory purchases, and the timing of outgoing payments of accounts payable and prepaid expenses.

Net cash provided by investing activities decreased by $147.5 million, or 134%, year-over-year primarily due to a $92.7 million decrease in the sale of forfeited collateral, a decrease of $41.9 million in net pawn loan lending and collections and acquisitions of $15.1 million.

Net cash used in financing activities increased $8.8 million, or 119%, year-over-year primarily due to the payment of assumed debt of $14.9 million from the Bajio acquisition (discussed in Note 2), offset by a $5.2 million decrease in the repurchase of common stock paid during the prior year.

The net effect of cash flows was a $15.1 million decrease in cash on hand during the current year-to-date period, resulting in a $297.5 million ending cash and restricted cash balance.

Net decrease in cash, cash equivalents and restricted cash $ (21,658) $ (14,092) 54%

The increase in cash flows provided by operating activities year-over-year was primarily due to a $11.4 million increase in net income.

The $15.5 million increase in cash flows used in investing activities year-over-year was primarily due to $16.5 million in outgoing cash flows used to fund investments and an increase of $5.1 million in net pawn lending, offset by an $11.3 million increase in the sale of forfeited collateral.

Of the $16.5 million used to fund investments, $15.0 million was invested in Founders, as discussed in Note 6 in Part I, Item 1:

Notes to Interim Condensed Consolidated Financial Statements.

The net effect of these changes was a $56.5 million decrease in cash on hand during the current year, resulting in a $242.0 million ending cash and restricted cash balance.

Sources and Uses of Cash

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On March 20, 2020, we suspended the repurchase of shares under the program in order to preserve current liquidity given the uncertainty of the impact of the COVID-19 pandemic to our operations.

As of September 30, 2020, we had repurchased and retired 943,149 shares of our Class A Common Stock for $5.2 million.

considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities.

As of December 31, 2021, we had repurchased and retired 943,149 shares of our Class A Common Stock for $5.2 million.

The resumption of our stock repurchase program and the amount and timing of purchases will be dependent on a variety of factors, such as the return to normal business conditions, stock price, trading volume, general market conditions, legal and regulatory requirements, cash flow levels, and corporate considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities.

The Board of Directors has reserved the right to modify, suspend or terminate the program at any time.

During the three and nine months ended June 30, 2021, there were no stock repurchases.

During the three months ended December 31, 2021, there were no stock repurchases.

We anticipate that cash flows from operations and cash on hand will be adequate to fund any future stock repurchases, our contractual obligations, planned de novo store growth, capital expenditures and working capital requirements through fiscal 2022.

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Given the current uncertainty related to the COVID-19 pandemic, we may adjust our capital or other expenditures.

Depending on the level of acquisition activity and other factors, our ability to repay our longer term debt obligations, including the convertible debt maturing in 2024 and 2025, may require us to refinance these obligations through the issuance of new debt securities, equity securities, convertible securities or through new credit facilities.

Depending on the level of acquisition activity and other factors, our ability to repay our longer term debt obligations, including the convertible

debt maturing in 2024 and 2025, may require us to refinance these obligations through the issuance of new debt securities, equity securities, convertible securities or through new credit facilities.

Contractual Obligations

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Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements

See Note 1 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."

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.

Additionally, ASU 2020-06 eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for as a single unit.

We early adopted this standard on October 1, 2021 under the modified retrospective basis.

The effect of eliminating our debt discount on the 2024 and 2025 Convertible Notes will decrease non-cash interest expense amortization on our Condensed Consolidated Statement of Operations, and the reduction of interest expense will affect our basic earnings per common share.

When calculating net income per share of common stock attributable to common shareholders, the Company uses the if-converted method as required under ASU 2020-06 to determine the dilutive effect of the Convertible Notes.

The Company did not incur any impact to liquidity or cash flows with recently adopted accounting policy.

Cautionary Statement Regarding Risks and Uncertainties that May Affect Future Results

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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-Q

Item 2. Management’s Discussion and Analysis