EZCORP INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to inform the reader about matters affecting the financial condition and results of operations of EZCORP, Inc. and its subsidiaries (collectively, “we,” “us”, “our”, “EZCORP” or the “Company”). The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere within this report. This discussion contains forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. See “ Part I, Item 1A — Risk Factors ” of our Annual Report on Form 10-K for the year ended September 30, 2023, as supplemented by the information set forth in “Part I, Item 3 — Quantitative and Qualitative Disclosures about Market Risk” and “Part II, Item 1A — Risk Factors” of this Report, for a discussion of certain risks, uncertainties and assumptions associated with these statements. Business Overview EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a leading provider of pawn services in the United States and Latin America. Pawn loans are nonrecourse loans collateralized by personal property. We also sell merchandise, primarily collateral forfeited from unpaid loans and pre-owned merchandise purchased from customers. We exist to serve our customers’ short-term cash needs, helping them to live and enjoy their lives. We are focused on three strategic 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 Pawn Activities 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 or 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. 23 Table of Contents Growth and Expansion 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, 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. In Mexico, we saw similar downward pressure in loan balances during the third quarter of fiscal 2023 due to a change in law related to company profit sharing payments to employees. We anticipated this change would impact pawn loan redemptions annually in May and June; however, in 2024, the demand for pawn loans in Mexico exceeded any downward pressure related to profit sharing payments. As a net effect of these and other factors and excluding discrete charges, our consolidated income before tax is generally highest in our first fiscal quarter (October through December) and lowest in our third fiscal quarter (April through June). Financial Highlights We remain focused on optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher PSC. 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 the three and nine months ended June 30, 2024 and 2023: 24 Table of Contents The following chart presents sources of gross profit by geographic disbursement for the three and nine months ended June 30, 2024 and 2023: Results of Operations Non-GAAP Constant Currency and Same-Store 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”) and “same-store” basis. 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 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. We use this non-GAAP financial information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to, but not rather than or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes. Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. In addition, we have an equity method investment that is denominated in Australian dollars and is translated into U.S. dollars. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and are not directly calculable from the rates below. Constant currency results, where presented, also exclude the foreign currency gain or loss. 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, 2024 and 2023 were as follows: 25 Table of Contents June 30, Three Months Ended June 30, Nine Months Ended June 30, 2024 2023 2024 2023 2024 2023 Mexican peso 18.3 17.1 17.2 17.7 17.3 18.7 Guatemalan quetzal 7.6 7.7 7.6 7.6 7.6 7.6 Honduran lempira 24.3 24.4 24.3 24.3 24.3 24.3 Australian dollar 1.5 1.5 1.5 1.5 1.5 1.5 Operating Results Segments We manage our business and report our financial results in three reportable segments: • U.S. Pawn — Represents all pawn activities in the United States; • Latin America Pawn — Represents all pawn activities in Mexico and other parts of Latin America; and • Other Investments — Represents our equity interest in the net income of Cash Converters along with our investment in Rich Data Corporation (“RDC”) and our investment in and notes receivable from Founders. Store Count by Segment Three Months Ended June 30, 2024 U.S. Pawn Latin America Pawn Consolidated As of March 31, 2024 535 711 1,246 New locations opened 1 6 7 Locations acquired 5 — 5 As of June 30, 2024 541 717 1,258 Three Months Ended June 30, 2023 U.S. Pawn Latin America Pawn Consolidated As of March 31, 2023 527 672 1,199 New locations opened 1 12 13 As of June 30, 2023 528 684 1,212 Nine Months Ended June 30, 2024 U.S. Pawn Latin America Pawn Consolidated As of September 30, 2023 529 702 1,231 New locations opened 1 20 21 Locations acquired 12 — 12 Locations combined or closed (1) (5) (6) As of June 30, 2024 541 717 1,258 Nine Months Ended June 30, 2023 U.S. Pawn Latin America Pawn Consolidated As of September 30, 2022 515 660 1,175 New locations opened 3 25 28 Locations acquired 10 — 10 Locations combined or closed — (1) (1) As of June 30, 2023 528 684 1,212 26 Table of Contents Three Months Ended June 30, 2024 vs. Three Months Ended June 30, 2023 These tables, as well as the discussion that follows, should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes. U.S. Pawn The following table presents selected summary financial data for our U.S. Pawn segment: Three Months Ended June 30, Change (in thousands) 2024 2023 Gross profit: Pawn service charges $ 77,416 $ 68,790 13% Merchandise sales 107,849 102,177 6% Merchandise sales gross profit 40,620 39,378 3% Gross margin on merchandise sales 38 % 39 % (100)bps Jewelry scrapping sales 13,757 13,098 5% Jewelry scrapping sales gross profit 1,870 1,997 (6)% Gross margin on jewelry scrapping sales 14 % 15 % (100)bps Other revenues 28 27 4% Gross profit 119,934 110,192 9% Segment operating expenses: Store expenses 81,441 75,389 8% Depreciation and amortization 2,408 2,505 (4)% Gain on sale or disposal of assets and other (2) — * Segment operating contribution $ 36,087 $ 32,298 12% Other segment income — (1) (100)% Segment contribution $ 36,087 $ 32,299 12% Other data: Net earning assets (a) $ 321,218 $ 293,787 9% Inventory turnover 2.6 2.6 —% Average monthly ending pawn loan balance per store (b) $ 352 $ 325 8% Monthly average yield on pawn loans outstanding 14 % 14 % —bps General merchandise as a % of PLO 34 % 35 % (100)bps Jewelry as a % of PLO 66 % 65 % 100bps * 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. PLO ended the quarter at $199.3 million, up 11% or 10% on a same-store basis. Total revenues was up 8% and gross profit was up 9%, reflecting increased PSC and higher merchandise sales. PSC increased 13% as a result of higher average PLO. Merchandise sales increased 6%, and gross margin decreased to 38% from 39%. Aged general merchandise, which is inventory over one year old, increased to 5.0% to $2.0 million of total general merchandise inventory. Excluding luxury handbags in our three Max Pawn stores in Las Vegas, aged general merchandise remains under 1%. Net inventory increased 6%, as expected with the growth in PLO. Inventory turnover remained flat at 2.6x. Store expenses increased 8% and 6% on a same-store basis, primarily due to increased labor in-line with store activity and to a lesser extent, expenses related to our loyalty program. 27 Table of Contents Segment contribution increased 12% to $36.1 million, due to the changes noted above. During the quarter, store count increased by six, due to the acquisition of five stores and opening of one de novo store. Latin America Pawn The following table presents selected summary financial data for the Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currencies noted above under “Results of Operations — Non-GAAP Constant Currency and Same-Store Financial Information.” Three Months Ended June 30, (in thousands) 2024 (GAAP) 2023 (GAAP) Change (GAAP) 2024 (Constant Currency) Change (Constant Currency) Gross profit: Pawn service charges $ 30,414 $ 25,029 22% $ 29,822 19% Merchandise sales 50,291 45,803 10% 49,263 8% Merchandise sales gross profit 16,309 13,533 21% 15,954 18% Gross margin on merchandise sales 32 % 30 % 200bps 32 % 200bps Jewelry scrapping sales 1,638 833 97% 1,600 92% Jewelry scrapping sales gross profit 42 (24) 275% 43 279% Gross margin on jewelry scrapping sales 3 % (3) % 600bps 3 % 600bps Other revenues, net 28 40 (30)% 26 (35)% Gross profit 46,793 38,578 21% 45,845 19% Segment operating expenses: Store expenses 34,894 29,543 18% 34,110 15% Depreciation and amortization 2,090 2,303 (9)% 2,044 (11)% Other income — (2,632) (100)% — (100)% Loss (gain) on sale or disposal of assets and other 22 (29) (176)% 21 (172)% Segment operating contribution 9,787 9,393 4% 9,670 3% Other segment income (554) (321) 73% (505) 57% Segment contribution $ 10,341 $ 9,714 6% $ 10,175 5% Other data: Net earning assets (a) $ 112,439 $ 90,536 24% $ 118,080 30% Inventory turnover 3.0 3.4 (12)% 3.0 (12)% Average monthly ending pawn loan balance per store (b) $ 90 $ 74 22% $ 89 20% Monthly average yield on pawn loans outstanding 16 % 17 % (100)bps 16 % (100)bps General merchandise as a % of PLO 65 % 70 % (500)bps 65 % (500)bps Jewelry as a % of PLO 35 % 30 % 500bps 35 % 500bps * 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. 28 Table of Contents 2024 Change (GAAP) 2024 Change (Constant Currency) Same-Store data: PLO 20% 26% PSC 19% 17% Merchandise Sales 6% 4% Merchandise Sales Gross Profit 18% 15% Store Expenses 14% 12% PLO improved to $62.4 million, up 24% (30% on constant currency basis). On a same-store basis, PLO increased 20% (26% on a constant currency basis) due to improved operational performance and increased loan demand. Total revenues was up 15% (13% on constant currency basis), and gross profit increased 21% (19% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved merchandise sales gross profit. PSC increased 22% (19% on a constant currency basis) as a result of higher average PLO. Merchandise sales gross margin increased to 32% from 30%. Aged general merchandise was less than 1% of total merchandise inventory. Net inventory increased 25% (32% on a constant currency basis). Inventory turnover decreased to 3.0x, from 3.4x. Store expenses increased 18% (15% on a constant currency basis) and 14% (12% on a constant currency basis) on a same-store basis, primarily due to increased labor, in line with store activity and to a lesser extent, rent. Segment contribution increased 6% (5% on a constant currency basis) to $10.3 million, due to the changes noted above, in addition to the impact of the prior year reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other income.” During the quarter, store count increased by six de novo stores. 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 dollars: Three Months Ended June 30, Change (in thousands) 2024 2023 Gross profit: Consumer loan fees, interest and other $ — $ 15 (100)% Gross profit — 15 (100)% Segment operating expenses: Interest income (605) — * Equity in net income of unconsolidated affiliates (1,406) (1,523) (8)% Segment operating contribution 2,011 1,538 31% Other segment loss 12 10 20% Segment contribution $ 1,999 $ 1,528 31% * Represents a percentage computation that is not mathematically meaningful. Segment contribution was $2.0 million, an increase of $0.5 million primarily due to our interest income from our notes receivable investment in Founders offset by the decrease in our share of equity in income of Cash Converters. 29 Table of Contents Other Items 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) 2024 2023 Segment contribution $ 48,427 $ 43,541 11% Corporate expenses (income): General and administrative 20,060 17,876 12% Depreciation and amortization 3,660 3,218 14% Interest expense 3,539 3,414 4% Interest income (1,956) (2,327) (16)% Equity in net loss of unconsolidated affiliates 143 — * Other (income) expense (19) 50 138% Income before income taxes 23,000 21,310 8% Income tax expense 5,050 3,088 64% Net income $ 17,950 $ 18,222 (1)% * Represents a percentage computation that is not mathematically meaningful. Segment contribution increased $4.9 million or 11% over the prior year quarter, primarily due to improved operating results of the U.S. Pawn and Latin America Pawn segments above. General and administrative expense increased $2.2 million or 12%, primarily due to labor, incentive compensation and, to a lesser extent, costs related to the implementation and ongoing support of Workday. Income tax expense increased $2.0 million primarily due to an increase in the effective tax rate this quarter compared to the prior year. In the prior year there was a benefit to the effective tax rate due to the reversal of contingent consideration liability in connection with a previously completed acquisition. 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 the foreign rate differential. See our Annual Report on Form 10-K for the year ended September 30, 2023, 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. 30 Table of Contents Nine Months Ended June 30, 2024 vs. Nine Months Ended June 30, 2023 The tables below and discussion that follows should be read in conjunction with the accompanying condensed consolidated financial statements and related notes. U.S. Pawn The following table presents selected summary financial data for the U.S. Pawn segment: Nine Months Ended June 30, Change (in thousands) 2024 2023 Gross profit: Pawn service charges $ 236,499 $ 208,045 14% Merchandise sales 348,211 329,231 6% Merchandise sales gross profit 129,475 125,533 3% Gross margin on merchandise sales 37 % 38 % (100)bps Jewelry scrapping sales 39,258 30,088 30% Jewelry scrapping sales gross profit 5,293 4,221 25% Gross margin on jewelry scrapping sales 13 % 14 % (100)bps Other revenues 94 84 12% Gross profit 371,361 337,883 10% Segment operating expenses: Store expenses 239,536 220,639 9% Depreciation and amortization 7,548 7,820 (3)% (Gain) loss on sale or disposal of assets and other (6) 84 107% Segment operating contribution 124,283 109,340 14% Other segment income — (2) (100)% Segment contribution $ 124,283 $ 109,342 14% Other data: Average monthly ending pawn loan balance per store (a) $ 352 $ 317 11% Monthly average yield on pawn loans outstanding 14 % 14 % —bps (a) Balance is calculated based upon the average of the monthly ending balances during the applicable period. During the nine months ended June 30, 2024, net store count increased by 12 due to the acquisition of 12 stores, opening of one de novo store, and the consolidation of one store. Pawn service charges increased 14% as a result of higher average PLO. Merchandise sales increased 6%, and merchandise sale gross profit increased 3%, reflecting a 100bps decrease in gross margin. Store expenses increased 9%, primarily due to increased labor in-line with store activity and to a lesser extent, expenses related to our loyalty program. Segment contribution increased $14.9 million, or 14%, primarily due to the changes described above. 31 Table of Contents 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 Constant Currency and Same-Store Financial Information” above. Nine Months Ended June 30, (in thousands) 2024 (GAAP) 2023 (GAAP) Change (GAAP) 2024 (Constant Currency) Change (Constant Currency) Gross profit: Pawn service charges $ 84,943 $ 71,397 19% $ 80,401 13% Merchandise sales 154,019 135,043 14% 144,538 7% Merchandise sales gross profit 50,075 41,456 21% 46,938 13% Gross margin on merchandise sales 33 % 31 % 200bps 32 % 100bps Jewelry scrapping sales 3,933 4,552 (14)% 3,742 (18)% Jewelry scrapping sales gross profit 419 (394) 206% 385 (198)% Gross margin on jewelry scrapping sales 11 % (9) % * 10 % * Other revenues, net 59 75 (21)% 55 (27)% Gross profit 135,496 112,534 20% 127,779 14% Segment operating expenses: Store expenses 101,936 86,365 18% 95,812 11% Depreciation and amortization 6,821 6,850 —% 6,385 (7)% Other income — (5,097) (100)% — (100)% Gain on sale or disposal of assets and other (240) (56) 329% (234) 318% Segment operating contribution 26,979 24,472 10% 25,816 5% Other segment income (1,629) (767) 112% (1,653) 116% Segment contribution $ 28,608 $ 25,239 13% $ 27,469 9% Other data: Average monthly ending pawn loan balance per store (a) $ 83 $ 72 15% $ 79 10% Monthly average yield on pawn loans outstanding 16 % 17 % (100)bps 16 % (100)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. 2024 Change (GAAP) 2024 Change (Constant Currency) Same-Store data: PLO 20% 26% PSC 17% 11% Merchandise Sales 11% 4% Merchandise Sales Gross Profit 19% 11% Store Expenses 14% 7% During the nine months ended June 30, 2024, net store count increased by 15 due to the opening of twenty de novo stores and the consolidation of five stores. PSC increased 19% to $84.9 million (13% to $80.4 million on a constant currency basis) as a result of higher average PLO. Merchandise sales increased 14% (7% on a constant currency basis) and 11% on a same-store basis (4% on a constant currency basis). Merchandise sales gross margin increased 200 bps to 33% from 31%. 32 Table of Contents Store expenses increased by 18% (11% on a constant currency basis) and 14% (7% on a constant currency basis) on a same-store basis, primarily due to increased labor, in line with store activity and to a lesser extent, rent. Segment contribution increased $3.4 million, or 13% ($2.2 million, or 9%, on a constant currency basis), due to the changes noted above, in addition to the impact of the prior year reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other income.” 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 dollars: Nine Months Ended June 30, Change (in thousands) 2024 2023 Gross profit: Consumer loan fees, interest and other $ 35 $ 47 (26)% Gross profit 35 47 (26)% Segment operating expenses: Interest income (1,811) — * Equity in net (income) loss of unconsolidated affiliates (4,278) 29,394 115% Segment operating contribution (loss) 6,124 (29,347) 121% Other segment loss 27 20 35% Segment contribution (loss) $ 6,097 $ (29,367) 121% * Represents a percentage computation that is not mathematically meaningful. Segment income was $6.1 million, an increase of $35.5 million from the prior-year nine months ended June 30, 2023, primarily due to our share of the prior year net loss from Cash Converters related to their non-cash goodwill impairment charge. Other Items 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: Nine Months Ended June 30, Percentage Change (in thousands) 2024 2023 Segment contribution $ 158,988 $ 105,214 51% Corporate expenses (income): General and administrative 54,869 48,964 12% Depreciation and amortization 10,573 9,307 14% Gain on sale or disposal of assets 97 — * Other income (765) — * Interest expense 10,381 12,994 (20)% Interest income (5,243) (4,421) 19% Equity in net loss of unconsolidated affiliates 143 — * Other income (423) (138) 207% Income before income taxes 89,356 38,508 132% Income tax expense 21,457 10,298 108% Net income $ 67,899 $ 28,210 141% * Represents a percentage computation that is not mathematically meaningful. Segment contribution increased $53.8 million or 51% over the prior year nine months ended June 30, 2023, primarily due to our share of the net loss from Cash Converters related to their non-cash goodwill impairment charge during the prior year and the improved operating results of the segments above. 33 Table of Contents General and administrative expenses increased $5.9 million or 12%, primarily due to labor, incentive compensation and, to a lesser extent, costs related to the implementation and ongoing support of Workday. Interest expense decreased $2.6 million, primarily due to the loss on extinguishment of debt in the prior year. In December 2022, the Company repurchased approximately $109.4 million aggregate principal amount of 2.875% Convertible Senior Notes Due 2024 for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of 2.375% Convertible Senior Notes Due 2025 for approximately $62.9 million plus accrued interest and recorded a $3.5 million loss on extinguishment of debt. Interest income increased $0.8 million, due primarily to our treasury management with increased market interest rates. Income tax expense increased $11.2 million, primarily due to an increase in income before income taxes of $50.8 million for the nine months ended June 30, 2024 compared to the same prior year nine month period due to our share of the net loss from Cash Converters in the prior year quarter, the non-deductible loss on the convertible debt refinancing during the first quarter of 2023, and an increase in the effective tax rate this quarter compared to the prior year. In the prior year there was a benefit to the effective tax rate due to the reversal of contingent consideration liability in connection with a previously completed acquisition. 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 the foreign rate differential. See Annual Report on Form 10-K for the year ended September 30, 2023, 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 Cash and Cash Equivalents Our cash and equivalents balance was $218.0 million at June 30, 2024 compared to $220.6 million at September 30, 2023. At June 30, 2024, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments. Cash Flows The table and discussion below presents a summary of the selected sources and uses of our cash: Nine Months Ended June 30, Percentage Change (in thousands) 2024 2023 Net cash provided by operating activities $ 70,264 $ 74,309 (5)% Net cash used in investing activities (59,234) (70,547) (16)% Net cash (used in) provided by financing activities (12,648) 26,972 (147)% Effect of exchange rate changes on cash, cash equivalents and restricted cash (108) 1,420 (108)% Net (decrease) increase in cash, cash equivalents and restricted cash $ (1,726) $ 32,154 (105)% The decrease in cash flows provided by operating activities year-over-year was primarily due to changes in working capital primarily related to the timing of payments of accounts payable and income taxes, offset by an increase in net income (when considering adjustments for non-cash items affecting net income). The $11.3 million decrease in cash flows used in investing activities year-over-year was primarily due to a $29.6 million decrease in cash flows used to fund acquisitions, strategic investments and capital expenditures and a $21.2 million increase in cash inflows from the sale of forfeited collateral, offset by an increase of $43.0 million in net pawn lending outflows. The $39.6 million decrease in cash flows provided by financing activities was primarily related to the December 2022 financing of the 2029 Convertible Notes, in which we issued $230.0 million principal amount of 3.750% Convertible Senior Notes Due 2029 offset by the extinguishment of approximately $109.4 million aggregate principal amount of our 2024 Convertible Notes for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of our 2025 Convertible Notes for approximately $62.9 million plus accrued interest. In addition, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase 578,703 shares of our Class A common stock from purchasers of the notes in privately negotiated transactions. The net effect of these changes was an $1.7 million decrease in cash on hand during the current year to date period, resulting in a $227.2 million ending cash and restricted cash balance. 34 Table of Contents Sources and Uses of Cash In December 2022, we issued $230.0 million aggregate principal amount of 2029 Convertible Notes. In conjunction with the issuance of the 2029 Convertible Notes, we extinguished approximately $109.4 million aggregate principal amount of our 2024 Convertible Notes for approximately $117.5 million plus accrued interest and approximately $69.1 million aggregate principal amount of our 2025 Convertible Notes for approximately $62.9 million plus accrued interest. In addition, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase 578,703 shares of our Class A common stock from purchasers of the notes in privately negotiated transactions. See Note 7 of Notes to Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.” The shares repurchased in conjunction with the transactions discussed above were authorized separately from, and not considered part of, the publicly announced share repurchase program referred to below. On May 3, 2022, our Board authorized the repurchase of up to $50 million of our Class A Common Stock over three years. As of June 30, 2024, we have repurchased 2,572,794 shares of our Class A Common Stock under the program for $23.0 million. Execution of the program will be responsive to fluctuating market conditions and valuations, liquidity needs and the expected return on investment compared to other opportunities. Under the stock repurchase program, we may purchase Class A Non-Voting common stock from time to time at management’s discretion in accordance with applicable securities laws, including through open market transactions, block or privately negotiated transactions, or any combination thereof. In addition, we may purchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934. The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows 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. See Note 8 of Notes to Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.” On July 1, 2024, the 2024 Convertible Notes matured and the remaining $34.4 million aggregate principal amount outstanding plus accrued interest was repaid using cash on hand. We anticipate that cash flows from operations and cash on hand will be adequate to fund ongoing operations, current debt service requirements, tax payments, any future stock repurchases, strategic investments, our contractual obligations, planned de novo store growth, capital expenditures and working capital requirements through the next twelve months. We continue to explore acquisition opportunities, both large and small, and may choose to pursue additional debt, equity or equity-linked financings in the future should the need arise. 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 2025 and 2029, 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 In “Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2023, we reported that we had $736.6 million in total contractual obligations as of September 30, 2023. There have been no material changes to this total obligation since September 30, 2023. We are responsible for the maintenance, property taxes and insurance at most of our locations. In the fiscal year ended September 30, 2023, these collectively amounted to $16.3 million. Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements See Note 1 of the Notes to Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report for recently issued accounting pronouncements including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements. 35 Table of Contents Cautionary Statement Regarding Risks and Uncertainties that May Affect Future Results This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements, other than statements of historical facts, regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans and objectives are forward-looking statements. These statements are often, but not always, made with words or phrases like “may,” “should,” “could,” “will,” “predict,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “projection” and similar expressions. Such statements are only predictions of the outcome and timing of future events based on our current expectations and currently available information and, accordingly, are subject to substantial risks, uncertainties and assumptions. Actual results could differ materially from those expressed in the forward-looking statements due to a number of risks and uncertainties, many of which are beyond our control. In addition, we cannot predict all of the risks and uncertainties that could cause our actual results to differ from those expressed in the forward-looking statements. Accordingly, you should not regard any forward-looking statements as a representation that the expected results will be achieved. Important risk factors that could cause results or events to differ from current expectations are identified and described in “ Part I, Item 1A — Risk Factors ” of our Annual Report on Form 10-K for the year ended September 30, 2023 and “Part II, Item 1A — Risk Factors” of this Report. We specifically disclaim any responsibility to publicly update any information contained in a forward-looking statement except as required by law. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.