What changed in this filing

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Item 1. Business

2023-11-15 compared with 2022-11-16 · 49 added, 59 removed, 286 unchanged (27% of the section changed)

Purpose, Vision and Strategy

is a leading provider of pawn services in the United States and Latin America with over 1,175 locations and approximately 7,000 Team Members.

is a leading provider of pawn services in the United States (“U.S.”) and Latin America with 1,231 locations and more than 7,500 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 exist to serve our customers’ short-term cash and pre-owned retail 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.”

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That strategy consists of three fundamental pillars:

• 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.

• Strengthen the Core — Relentless focus on superior execution and operational excellence in our 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 serve more customers more frequently in more locations.

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• 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.

• Risk Management and Building a Culture of Compliance — We are continually focused on strengthening our 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.

Overview of Our Business

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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.

The merchandise we sell primarily consists of pre-owned 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.

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Cash Converters and its controlled companies comprise a diverse group generating revenues from franchising, store operations, personal finance (including pawn transactions) and vehicle finance in over 600 stores across 14 countries.

• 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.

• 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 own a preferred interest in Founders One, LLC (“Founders”) that has majority ownership in Simple Management Group, Inc.

(“SMG”), which owns and operates 95 pawn stores in the U.S., Caribbean and Central America, 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.

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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 2023, fiscal 2022 and fiscal 2021:

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

The following charts present sources of gross profit by geography for fiscal 2023, fiscal 2022 and fiscal 2021:

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

• Cash Converters, which includes our equity interest in the net loss (income) of Cash Converters;

• Other Investments, which includes our investments in Rich Data Corporation (“RDC”) and our investment in and notes receivable from Founders.

The following table presents store data by segment:

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In fiscal 2023, PSC accounted for approximately 37% of our total revenues and 63% 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.

In the U.S., 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 $160 and $180.

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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,

Redemption Rate 2022 2021 2020

Pawn 84% 86% 88%

Latin America Pawn 79% 80% 78%

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

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 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.

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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, 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.

We performed a Global Employee Engagement Survey, administered by Glint, in April 2023, and had a 91% participation rate with an overall engagement score of 84.

Our engagement score is nine 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 Continuous Improvement.

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

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Talent Management and Development

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 employ more than 7,500 Team Members across all our geographies, including over 3,400 in United States, approximately 3,300 in Mexico and 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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• High scoring questions in our 2023 Global Employee Engagement Survey included “I know the career path(s) available to me at EZCORP” (with an 89% favorability rating) and “I have good opportunities to learn and develop at EZCORP” (with an 86% favorability rating).

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

• Over 70% of managerial positions were 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.

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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.

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.

Various tools are used globally to 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.

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

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.

In our 2023 Global Employee Engagement Survey, 83% of participants responded positively to the question, “I feel a sense of belonging at EZCORP.” In fiscal 2023, we continued to further our Diversity and Inclusion strategy by focusing on the following initiatives:

• Commitment and Accountability — Demonstrate commitment and accountability through corporate policy, communications and actions.

• 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.

Sponsor affinity groups to foster an inclusive and supportive environment, where Team Members with shared characteristics, experiences or interests can connect, collaborate and contribute effectively.

The Women’s Empowerment, Black Empowerment and Hispanic Organization for Leadership Advocacy (HOLA) affinity groups in the U.S.

and the Women’s Empowerment and Working Parents affinity groups in Latin America all aim to enhance diversity, equity and inclusion efforts by providing a platform for open dialogue, resource-sharing, professional development and cultural enrichment.

• 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 2023 U.S.

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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.

• We engage a nationally recognized outside compensation and benefits consulting firm 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.

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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 2022, 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.

Management and Oversight

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

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

In fiscal 2022, we sold more than 5.6 million pre-owned items, including over 3.2 million items in the consumer electronics, camera and household goods categories, 1.5 million other general merchandise items (such as tools and musical instruments) and 775,000 jewelry items.

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

In fiscal 2023, we sold approximately 5.4 million pre-owned items, including over 3.2 million items in the consumer electronics, camera and household goods categories, 1.1 million other general merchandise items (such as tools and musical instruments) and 0.8 million jewelry items.

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

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To reduce energy consumption, we have installed energy-efficient LED lighting in 78% of our U.S.

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

stores and 60% of Latin America stores.

• In all of our facilities, including our corporate support offices, we promote environmental stewardship by reducing consumption, recycling paper products (approximately 1.24 million pounds across all U.S.

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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.

• 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.

To capture direct customer feedback, we have enabled Google Reviews across all stores and have received over 195,000 Google reviews with an average satisfaction rating of 4.8 out of 5 across U.S and Latin America.

• 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.

• We have refreshed the mission of EZCORP Foundation, our philanthropic arm that is focused on making a difference in communities where we live and operate by supporting charitable organizations that align with our operating values of People, Pawn and Passion.

Current initiatives include supporting financial literacy efforts, working to eradicate food insecurity, empowering young people to succeed and other poverty intervention activities.

• 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 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.

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.

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

During fiscal 2023, we continued our expansion in Latin America with the opening of 44 de novo stores (23 in Mexico, 19 in Guatemala and 2 in Honduras).

We now own a total of 702 stores in Latin America, representing 57% of our total pawn stores.

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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.

In Mexico, we saw similar downward pressure in loan balances during the third quarter due to a recent change in law related to company profit sharing payments to employees.

We believe this change will impact pawn loan balances in May and June going forward.

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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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.

The pawn industry in the U.S.

is large, relatively mature and highly fragmented.

The industry consists of a few large operators (of which we are the second largest) and then independent operators who primarily own one-to-three locations .

The pawn industry in Latin America is also fragmented, but less so than in the United States.

The pawn industry in Latin America is also fragmented, but less so than in the U.S.

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

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

We launched our EZ+ Rewards loyalty program in the U.S.

and Mexico in 2021 and in GPMX in 2022, and now have 3.8 million members globally.

This free program allows customers to earn points on most transactions that may be applied as a discount towards retail sales once a certain threshold is met.

We believe this program provides a distinct competitive advantage over other pawn operators.

Trademarks and Trade Names

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handle firearms and each of those stores maintains a federal firearms license as required by federal law.

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.

The federal Gun Control Act of 1968 and regulations issued by the Bureau of Alcohol, Tobacco, Firearms and Explosives 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.

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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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, which requires us to implement an integrity policy that contains mechanisms to ensure integrity standards throughout the organization.

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

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There are significant fines and sanctions for failure to comply with these rules.

We must also comply with the Official Mexican Standards issued by regulatory agencies in accordance with Article 40 of the Federal Law on Metrology and Standardization, which establishes rules applicable to a retail products and services, and related disclosures, labeling, and marketing, including NOM-179-SCFI-2016, NOM-017-SCFI-1993, and NOM-024-SCFI-2013.

In addition to the above, our pawn business in Mexico is subject to various general business regulations in the areas of tax compliance, customs, consumer protections, money laundering, civil protection regulations, municipal regulations, trade code (federal), public safety and employment matters, among others, by various federal, state and local governmental agencies.

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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