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, 2025, 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 Developments Share Repurchase Program On November 11, 2025, the Board of Directors (“Board”) approved a new share repurchase program which replaced the previous program that expired on May 3, 2025. See Note 9 of Notes to Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.” Under the new program, we are authorized to repurchase up to $50 million of our Class A Non-Voting common shares over the next three years. 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. 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. Acquisition of Founders One, LLC On January 2, 2026, we acquired a controlling interest in Founders One, LLC (“Founders”), which through its subsidiary, Simple Management Group, Inc. (“SMG”), operates 105 pawn stores in the U.S. and 11 additional countries. This transaction expands our geographic footprint in attractive markets, including Florida and Puerto Rico, strengthens our partnership with a proven management team, and provides a platform for domestic and international growth. The total consideration transferred is estimated to be approximately $64.4 million, consisting of the conversion of our existing $45.0 million preferred equity investment, $10.0 million of Demand Promissory Notes, and an additional $9.4 million in cash. The acquisition was funded through a combination of the conversion of existing investments and cash on hand. Following the transaction, we own approximately 87.7% of Founders, which controls SMG with an 85.1% ownership interest, and we expect to consolidate Founder’s financial results going forward. We expect this acquisition to be immediately accretive to earnings and to meaningfully contribute to our financial results. In connection with the acquisition, we entered into a three-year, senior secured debt facility to provide SMG $156.4 million in funding at 13% per annum, replacing SMG’s third-party debt. This intercompany debt will be eliminated upon consolidation. 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 non-recourse 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 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 20 Table of Contents 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 and musical instruments. If the customer chooses to redeem their pawn, they repay the amount advanced plus any 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 pre-owned goods for sale 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. Because a significant portion of our inventory and sales involve gold and jewelry, our results can be influenced by the market price of gold and diamonds. Growth and Expansion Part of our strategy is to grow the number of locations we operate through opening new (“de novo”) locations and through acquisitions in both Latin America and the U.S. and potential new markets. Our ability to add new stores is dependent on several variables, such as projected achievement of internal investment hurdles, the availability of acceptable sites or acquisition candidates, the alignment of acquirer/seller price expectations, the regulatory environment, local zoning ordinances, access to capital and availability of qualified personnel. Seasonality and Quarterly Results In the U.S., PSC historically is highest in our fourth fiscal quarter (July through September) due to a higher average PLO balance during the summer and is lowest in our third fiscal quarter (April through June) following the tax refund season. Merchandise sales historically are highest in the U.S. in our first and second fiscal quarters (October through March) due to the holiday season, Valentine’s Day jewelry sales and our customers’ receipt of tax refunds. In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on PLO balances and fueling merchandise sales in those periods. 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). 21 Table of Contents 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 scrap gross profit (“Jewelry Scrap GP”) for the three months ended December 31, 2025 and 2024: The following chart presents sources of gross profit by geographic disbursement for the three months ended December 31, 2025 and 2024: 22 Table of Contents 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 reflects an additional way of viewing aspects of our business that, when viewed with GAAP results, provides 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 months ended December 31, 2025 and 2024 were as follows: December 31, Three Months Ended December 31, 2025 2024 2025 2024 Mexican peso 18.0 20.8 18.3 20.1 Guatemalan quetzal 7.6 7.5 7.5 7.5 Honduran lempira 26.1 25.0 26.0 24.8 Australian dollar 1.5 1.6 1.5 1.5 23 Table of Contents 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 Cash Converters and our investment in and notes receivable from Founders. Store Count by Segment Three Months Ended December 31, 2025 U.S. Pawn Latin America Pawn Consolidated As of September 30, 2025 545 815 1,360 New locations opened — 7 7 Locations acquired 3 14 17 Locations combined or closed (1) — (1) As of December 31, 2025 547 836 1,383 Three Months Ended December 31, 2024 U.S. Pawn Latin America Pawn Consolidated As of September 30, 2024 542 737 1,279 New locations opened — 4 4 As of December 31, 2024 542 741 1,283 24 Table of Contents Three Months Ended December 31, 2025 vs. Three Months Ended December 31, 2024 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: Three Months Ended December 31, Change (in thousands) 2025 2024 Gross profit: Pawn service charges $ 95,174 $ 87,876 8% Merchandise sales 139,042 128,800 8% Merchandise sales gross profit 53,355 47,244 13% Gross margin on merchandise sales 38.4 % 36.7 % 170bps Jewelry scrap sales 35,514 15,498 129% Jewelry scrap sales gross profit 12,150 3,530 244% Gross margin on jewelry scrap sales 34.2 % 22.8 % 1,140bps Other revenues 30 27 11% Gross profit 160,709 138,677 16% Segment operating expenses: Store expenses 87,166 81,481 7% Depreciation and amortization 2,723 2,717 —% Loss on sale or disposal of assets and other 87 — 100% Segment operating contribution 70,733 54,479 30% Other segment income — (11) (100)% Segment contribution $ 70,733 $ 54,490 30% Other data: Average monthly ending pawn loan balance per store (a) $ 427 $ 396 8% Monthly average yield on pawn loans outstanding 13 % 14 % (100)bps Pawn collateral - general merchandise (b) 32 % 35 % (310)bps Pawn collateral - jewelry (b) 68 % 65 % 310bps * 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. (b) Prior period has been recast to conform to an updated allocation methodology implemented in the current period. The change was not material. During the three months ended December 31, 2025, segment store count increased to 547. Pawn service charges increased 8% as a result of higher average PLO. Merchandise sales increased 8%, and merchandise sale gross profit increased 170 bps. Jewelry scrap sales increased 129%, and jewelry scrap sales gross margin increased from 22.8% to 34.2% due to increase in gold price and jewelry purchases. Store expenses increased 7% (6% on a same-store basis), primarily due to increased labor, in line with store activity. Segment contribution increased $16.2 million, or 30%, primarily due to the changes described above. 25 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. Three Months Ended December 31, (in thousands) 2025 (GAAP) 2024 (GAAP) Change (GAAP) 2025 (Constant Currency) Change (Constant Currency) Gross profit: Pawn service charges $ 36,743 $ 29,176 26% $ 34,459 18% Merchandise sales 71,105 57,543 24% 66,172 15% Merchandise sales gross profit 24,036 17,275 39% 22,344 29% Gross margin on merchandise sales 33.8 % 30.0 % 380bps 33.8 % 380bps Jewelry scrap sales 4,394 1,234 256% 4,069 230% Jewelry scrap sales gross profit 1,461 260 * 1,351 * Gross margin on jewelry scrap sales 33.3 % 21.1 % 1,218bps 33.2 % 1,213bps Other revenues, net 17 16 6% 16 —% Gross profit 62,257 46,727 33% 58,170 24% Segment operating expenses: Store expenses 39,606 29,455 34% 36,883 25% Depreciation and amortization 2,535 2,046 24% 2,374 16% Loss on sale or disposal of assets and other — 8 (100)% — (100)% Segment operating contribution 20,116 15,218 32% 18,913 24% Other segment income (23) (71) (68)% (83) 17% Segment contribution $ 20,139 $ 15,289 32% $ 18,996 24% Other data: Average monthly ending pawn loan balance per store (a) $ 92 $ 80 15% $ 85 6% Monthly average yield on pawn loans outstanding 16 % 16 % —bps 16 % —bps Pawn collateral - general merchandise 53 % 60 % (650)bps 53 % (737)bps Pawn collateral - jewelry 47 % 40 % 650bps 47 % 737bps * 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. 2025 Change (GAAP) 2025 Change (Constant Currency) Same-store data: PLO 23% 12% PSC 17% 10% Merchandise Sales 16% 8% Merchandise Sales Gross Profit 32% 22% Store Expenses 24% 16% During the three months ended December 31, 2025, net store count increased by 21 due to the acquisition of 14 stores and the opening of 7 de novo stores. 26 Table of Contents PSC increased 26% to $36.7 million (18% to $34.5 million on a constant currency basis) as a result of higher average PLO and new stores. Merchandise sales increased 24% (15% on a constant currency basis) and 16% on a same-store basis (8% on a constant currency basis). Merchandise sales gross margin increased 380 bps to 33.8% from 30.0%. Store expenses increased 34% (25% increase on a constant currency basis)) and increased by 24% on a same-store basis (16% increase on a constant currency basis). The constant currency increase was primarily due to increased labor, in line with store activity and minimum wage increases. Segment contribution increased $4.9 million, or 32% ($3.7 million, or 24%, on a constant currency basis), due to the changes noted above. Other Investments The following table presents selected financial data for our Other Investments segment after translation to U.S. dollars from its functional currency of primarily Australian dollars: Three Months Ended December 31, Change (in thousands) 2025 2024 Segment operating (income) expenses: Interest (income) $ (963) $ (594) 62% Equity in net (income) of unconsolidated affiliates (1,823) (1,623) 12% Segment contribution $ 2,786 $ 2,217 26% Segment income was $2.8 million, an increase of $0.6 million from the prior year period, primarily due to an increase in interest income from our notes receivable due from Founders. 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 December 31, Change (in thousands) 2025 2024 Segment contribution $ 93,658 $ 71,996 30% Corporate expenses (income): General and administrative 26,743 24,184 11% Depreciation and amortization 3,498 3,572 (2)% Interest expense 8,166 3,147 159% Interest income (3,851) (1,499) 157% Equity in net loss of unconsolidated affiliates — 148 (100)% Other loss (income) (69) 1,060 (107)% Income before income taxes 59,171 41,384 43% Income tax expense 14,867 10,368 43% Net income $ 44,304 $ 31,016 43% * Represents a percentage computation that is not mathematically meaningful. Segment contribution increased $21.7 million or 30% over the prior year period, primarily due to improved operating results of the U.S. Pawn and Latin America Pawn segments above. General and administrative expenses increased $2.6 million or 11%, primarily due to labor costs (including higher incentive compensation) and professional fees related to acquisitions. Interest expense increased $5.0 million or 159%, primarily driven by the issuance of 2032 Senior Notes in the second quarter fiscal 2025. Interest income increased $2.4 million or 157%, primarily due to the increase in Cash and cash equivalents held as compared to the prior period. 27 Table of Contents Income tax expense increased $4.5 million, primarily due to an increase in income before income taxes of $17.8 million for the three months ended December 31, 2025 compared to the same period in the prior year. 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, 2025, Note 10: 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 cash equivalents balance was $465.9 million at December 31, 2025 compared to $469.5 million at September 30, 2025. Our cash and equivalents are primarily held in cash depository accounts with banks in geographies we operate 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: Three Months Ended December 31, Percentage Change (in thousands) 2025 2024 Net cash provided by operating activities $ 39,146 $ 25,991 51% Net cash used in investing activities (30,958) (14,040) 120% Net cash used in financing activities (6,520) (7,102) (8)% Effect of exchange rate changes on cash and cash equivalents and restricted cash (260) (764) (66)% Net increase in cash, cash equivalents and restricted cash $ 1,408 $ 4,085 (66)% * Represents a percentage computation that is not mathematically meaningful. The $13.2 million increase in cash flows provided by operating activities year-over-year was primarily due to an increase in net income as well as changes in working capital primarily related to the timing of payments of accounts payable, prepaid expenses, customer layaway deposits and income taxes. The $16.9 million increase in cash flows used in investing activities year-over-year was primarily due to a $8.5 million increase in net pawn lending outflows and a $22.1 million increase in net cash flows used related to investments, acquisitions and capital expenditures, partially offset by a $13.7 million increase in cash inflows from the sale of forfeited collateral. Th e $0.6 million decrease i n cash flows used in financing activities was primarily related to the purchase and retirement of treasury shares in the first quarter of fiscal 2025, partially offset by increased tax withholding for the settlement of equity awards in the first quarter of fiscal 2026. The net effect of these changes w as a $1.4 million increase in cash on hand during the current year to date period, resulting in a $486.1 million ending cash, cash equivalents and restricted cash balance. Sources and Uses of Cash On November 11, 2025, the Board approved a new share repurchase program which replaced the previous program that expired on May 3, 2025. Under the new program, we are authorized to repurchase up to $50 million of our Class A Non-Voting common shares over the next three years (the “2026 Common Stock Repurchase Program”). During the three months ended December 31, 2025, we did not repurchase and retire any shares under the 2026 Common Stock Repurchase Program. See Note 9 of Notes to Condensed Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.” 28 Table of Contents 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 December 2029 and the senior notes due April 2032, 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 There have been no material changes to the contractual obligations disclosed 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, 2025. Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements See Note 1 of 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. 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, 2025 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.