What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-11-16 compared with 2021-11-17 · 66 added, 61 removed, 279 unchanged (31% of the section changed)

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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:

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

• Cost Management and Simplification — Management of cost base through ongoing simplification.

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

And we rely on four 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.

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

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

• Environment, Social and Governance (ESG) — We prioritize developing the foundational elements of a comprehensive and integrated sustainability program to make everyday living more affordable and sustainable.

Overview of Our Business

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and one of the largest in Latin America.

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

We also offer web-based applications named 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.

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CCV) headquartered in Perth, Western Australia.

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 14.6% 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 own a preferred interest in a private company that has majority ownership in Simple Management Group, Inc.

(“SMG”), which owns and operates 21 pawn stores principally in the Caribbean, with plans to build and acquire more stores in that region.

We generate revenues primarily from pawn service 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 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:

The following chart presents sources of gross profit, including PSC, merchandise sales gross profit ("Merchandise sales GP") and jewelry scrapping gross profit ("Jewelry scrapping GP") for fiscal 2022, fiscal 2021 and fiscal 2020:

The following charts present sources of gross profit by geographic disbursement for fiscal 2022, fiscal 2021 and fiscal 2020:

Segment and Geographic Information

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• 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:

• Other Investments, which includes our equity interest in Cash Converters and our investments in RDC and SMG.

The following table presents store data by segment:

Company-owned Stores

Pawn Latin America Pawn Other International Consolidated

Pawn Latin America Pawn Other Investments Consolidated

As of September 30, 2019

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As of September 30, 2022, we had a closing PLO balance of $210.0 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.

In fiscal 2022, PSC accounted for approximately 36% of our total revenues and 61% of our gross profit.

In the U.S., our PSC rates generally 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 $140 and $170.

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

In Mexico, PSC rates generally 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 1,400 Mexican pesos, or approximately $60 to $70 on average using the average exchange rate for fiscal 2022.

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

In GPMX, PSC rates generally 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 2022.

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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.

In the U.S., 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 m inor 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.

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Our risk management structure consists of asset protection, compliance and internal audit departments, which monitor the inventory system, lending practices, regulatory compliance and compliance with our policies and procedures.

We perform full physical audits of inventory at each store at least annually, and more often in higher risk stores or those experiencing higher shrinkage.

We perform full physical audits of inventory at

each store at least annually, and more often in higher risk stores or those experiencing higher shrinkage.

Inventory counts are completed daily for jewelry and firearms, and other inventory categories more susceptible to theft are cycle counted multiple times annually.

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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.

We launched a Global Employee Engagement Survey, administered by Glint, in June 2022, and had an 81% participation rate with an overall engagement score of 81.

Our engagement score is six points higher than the global benchmark, which contains data from over 900 companies of varying size across a variety of industries (Finance, Healthcare, Manufacturing, Professional Services, Retail, Technology and Utilities) and includes results from over eight million respondents located in over 150 countries.

Our top strengths were Career, Customer Focus and Growth.

Our focus areas for improvement included Team, Valued Teammate, and Work-Life Balance.

Team Members provided over 9,200 comments with mixed sentiment, 26% positive, 39% neutral and 35% 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.

To ensure we address issues raised in the survey, all people leaders at the District Manager and above level will have Engagement Objectives for fiscal 2023, 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 employ approximately 7,000 Team Members across all our geographies, including over 3,300 in United States, just under 2,900 in Mexico and around 800 in Central America.

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

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Our investment in store-level Team Members produced tangible results during fiscal 2022:

• 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.

• High scoring questions in our 2022 Global Employee Engagement Survey included “I know the career path(s) available to me at EZCORP” (with an 86% favorability rating) and “I have good opportunities to learn and develop at EZCORP” (with an 83% favorability rating).

• Over 65% of managerial positions are filled via internal promotion.

In our Corporate Support Center, we reinforced the utilization of our career and competency framework to build individual development plans to guide the career paths of corporate Team Members and 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.

Various tools are used to globally demonstrate commitment to our principles, values, and positive culture, including a plain-language Code of Conduct and supporting policies, annual training on expectations and clear communications from executive management reinforcing ethical behavior and a positive culture.

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.

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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:

In our 2022 Global Employee Engagement Survey, 81% of participants responded positively to the question, “I feel a sense of belonging at EZCORP.” In fiscal 2022, we completed the actions of our 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.

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

Key changes include:

• Analyzing Diversity and Inclusion results within the Engagement Survey;

• Providing Diversity Dashboard reporting to the Board of Directors and executive management;

• Implementing annual training and education on Diversity and Inclusion matters;

• Implementing Women’s Empowerment (U.S.

and Latin America) and Black Empowerment (U.S.) Affinity Groups;

• Implementing required “blind” resume review process for all corporate office hiring;

• Implementing a requirement that, for all Store Manager and above positions, the interview and selection process must include one diverse Team Member.

Fiscal 2022 U.S.

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

Additionally, on an annual basis (U.S.) gender and racial/ethnic analysis is performed to ensure pay equity.

• 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.

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• 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

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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 is also responsible for organizational development matters and otherwise assisting the Board of Directors 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.

All Executive Officers have a minimum of one objective related to People, generally broken into the areas of Employee Engagement Scores, Voluntary Attrition and Inclusion.

Environmental, Social and Governance (ESG)

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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.

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To reduce energy consumption, we have installed energy-efficient LED lighting in 70% 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.

stores and are working to convert the remaining stores across all geographies.

• In all of our facilities, including our corporate support offices, we promote environmental stewardship by reducing consumption, recycling paper products (approximately 1 million pounds across all U.S.

locations during fiscal 2022) and responsibly disposing of end-of-life computers, electronics and related accessories through recycling or other sound e-waste processing.

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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.

• Our business serves as 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.

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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.

• Customer satisfaction measurement and feedback are key factors in improving our customer service and Team Member engagement.

To capture direct customer feedback, we have enabled Google Reviews across all stores and have received over 125,000 Google Reviews with an average satisfaction rating of 4.8 out of 5 in the U.S.

• We offer customers multiple payment options, including cross-store, over-the-phone and web-based and mobile platforms, reducing their need to travel to the stores to make payments.

Online payments are accepted on layaway, pawn extension and bulk payments, with electronic payment receipts delivered on these transactions.

• Through the EZCORP Foundation Scholarship Fund, we provided financial assistance to the dependents of our U.S.-based Team Members pursuing higher education, and have issued a total of $180,000 in scholarship awards towards college expenses for recipients with demonstrated financial need, academic merit and commitment to leadership.

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

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• 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.

In fact, four of the seven 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.

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

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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.

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).

During fiscal 2022, we continued our expansion in Latin America with the opening of 28 de novo stores (20 in Mexico and 8 in Guatemala).

We now own a total of 660 stores in Latin America, representing 56% of our total pawn stores.

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.

In fiscal 2022, these stores represented 23% of our consolidated gross profit 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.

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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, but we expect them to return in the future.

We encounter significant competition in connection with all of our activities.

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The industry consists of pawn stores owned by independent operators and chains, including some not-for-profit organizations.

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

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

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

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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” 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.

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, Value Pawn & Jewelry 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.

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The federal Gun Control Act of 1968 and regulations issued by the Bureau of Alcohol, Tobacco and Firearms also require each pawn store dealing in firearms to maintain a permanent written record of all receipts and dispositions of firearms.

In addition, we must comply with the Brady Handgun Violence Prevention Act, which requires us to conduct a background check before releasing, selling or otherwise disposing of firearms.

In addition, we must comply with the

Brady Handgun Violence Prevention Act, which requires us to conduct a background check before releasing, selling or otherwise disposing of firearms.

Other Regulations — Our pawn lending activities are subject to other state and federal statutes and regulations, including the following:

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Pawn Regulations — Federal law in Mexico provides for administrative regulation of the pawnshop industry by Procuraduría Federal del Consumidor (PROFECO), Mexico’s primary federal consumer protection agency.

PROFECO regulates the form and terms of pawn loan contracts (but not interest or service charge rates) and defines certain operating standards and procedures for pawnshops, including retail operations, and establishes registration, disclosure, bonding and reporting requirements.

PROFECO regulates the form and terms of pawn loan contracts (but not interest or service charge rates) and defines certain operating standards and procedures for pawnshops, including retail

operations, and establishes registration, disclosure, bonding and reporting requirements.

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

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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, 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.

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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