What changed in EZCORP INC's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of EZCORP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+177 added−179 removedSource: 10-K (2024-11-13) vs 10-K (2023-11-15)
Top changes in EZCORP INC's 2024 10-K
177 paragraphs added · 179 removed · 158 edited across 6 sections
- Item 7. Management's Discussion & Analysis+65 / −67 · 55 edited
- Item 1. Business+57 / −56 · 53 edited
- Item 1A. Risk Factors+38 / −41 · 35 edited
- Item 2. Properties+7 / −6 · 6 edited
- Item 5. Market for Registrant's Common Equity+5 / −5 · 5 edited
Item 1. Business
Business — how the company describes what it does
53 edited+4 added−3 removed86 unchanged
Item 1. Business
Business — how the company describes what it does
53 edited+4 added−3 removed86 unchanged
2023 filing
2024 filing
Biggest changeWe are subject to the Federal Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act and requires us to adopt written guidance and procedures for detecting, preventing and mitigating identity theft, and to adopt various policies and procedures (including Team Member training) that address and aid in detecting and responding to suspicious activity or identity theft “red flags.” 12 Table of Contents • As a provider of consumer financial products, we are prohibited from engaging in any unfair, deceptive or abusive act or practice (UDAAP) under the Dodd-Frank Act, as they can cause significant financial injury to consumers, erode consumer confidence and undermine the financial marketplace. • The Equal Credit Opportunity Act prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance or good faith exercise of any rights under the Consumer Credit Protection Act. • Under the USA PATRIOT Act, we must maintain an anti-money laundering compliance program that includes the development of internal policies, procedures and controls; the designation of a compliance officer; an ongoing Team Member training program and an independent audit function to test the program. • We are subject to the Bank Secrecy Act and its underlying regulations, which require us to report and maintain records of certain high-dollar transactions.
Biggest changeIn some jurisdictions, we are subject to the laws restricting the scope of data we collect and granting rights to our customers to access, correct, and/or delete the information we obtain. • We are subject to the Fair Credit Reporting Act, which was enacted, in part, to address privacy concerns associated with the sharing of consumers’ financial information and credit history contained in consumer credit reports and limits our ability to share certain consumer report information. 12 Table of Contents • We are subject to the Federal Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act and requires us to adopt written guidance and procedures for detecting, preventing and mitigating identity theft and to adopt various policies and procedures (including Team Member training) that address and aid in detecting and responding to suspicious activity or identity theft “red flags.” • As a provider of consumer financial products, we are prohibited from engaging in any unfair, deceptive or abusive act or practice (UDAAP) under the Dodd-Frank Act, as they can cause significant financial injury to consumers, erode consumer confidence and undermine the financial marketplace. • The Equal Credit Opportunity Act prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance or good faith exercise of any rights under the Consumer Credit Protection Act. • Under the USA PATRIOT Act, we must maintain an anti-money laundering compliance program that includes the development of internal policies, procedures and controls; the designation of a compliance officer; an ongoing Team Member training program and an independent audit function to test the program. • We are subject to the Bank Secrecy Act and its underlying regulations, which require us to report and maintain records of certain high-dollar transactions.
Customers may also purchase an item on layaway by paying a minimum layaway deposit of typically 10% of the item’s sale price, in addition to an upfront fee. We hold items on layaway for a 90-to-180-day period, during which the customer is required to pay the balance of the sales price through a series of installment payments.
Customers may also purchase an item on layaway by paying a minimum layaway deposit of typically 10% of the item’s sale price, in addition to an upfront fee. We typically hold items on layaway for a 90-180 day period, during which the customer is required to pay the balance of the sales price through a series of installment payments.
Four of the seven members of our Board of Directors meet all of the “independence” requirements set forth in the Nasdaq Listing Rules, and none of the independent directors have any past or existing relationship with our controlling stockholder outside of their Board service. • All of our standing Board committees (Audit Committee, People and Compensation Committee and Nominating Committee) are comprised of solely independent directors. • We satisfy Nasdaq’s board diversity rules, with two of our seven Board members being diverse directors, one of whom self-identifies as female and an underrepresented minority and one whom self-identifies as an underrepresented minority. 10 Table of Contents For further discussion of our corporate governance standards, see “Part III, Item 10 — Directors, Executive Officers and Corporate Governance.” • Our pawn operations are licensed and supervised in all jurisdictions in which we operate.
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 and Risk Committee, People and Compensation Committee and Nominating Committee) are comprised of solely independent directors. • We satisfy Nasdaq’s board diversity rules, with two of our seven Board members being diverse directors, one of whom self-identifies as female and an underrepresented minority and one whom self-identifies as an underrepresented minority. 10 Table of Contents For further discussion of our corporate governance standards, see “Part III, Item 10 — Directors, Executive Officers and Corporate Governance.” • Our pawn operations are licensed and supervised in all jurisdictions in which we operate.
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.
We 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 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: 4 Table of Contents The following charts present sources of gross profit by geography for fiscal 2023, fiscal 2022 and fiscal 2021: Segment and Geographic Information We conduct our business globally and manage our business by geography.
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 2024, fiscal 2023 and fiscal 2022: 4 Table of Contents The following charts present sources of gross profit by geography for fiscal 2024, fiscal 2023 and fiscal 2022: Segment and Geographic Information We conduct our business globally and manage our business by geography.
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). Competition We encounter significant competition in connection with all of our activities.
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). Competition We encounter significant competition in connection with all of our activities.
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 U.S. is large, relatively mature and highly fragmented.
Competitive factors in our retail operations include the ability to provide customers with a variety of merchandise at considerable value coupled with exceptional customer service and convenient locations. The pawn industry in the U.S. is large, relatively mature and highly fragmented.
To ensure we address issues raised in the survey, all people leaders at the District Manager and above level will have Engagement Objectives for fiscal 2024 guided by actions that will yield the greatest business and Team Member impact.
To ensure we address issues raised in the survey, all people leaders at the District Manager and above level will have Engagement Objectives for fiscal 2025 guided by actions that will yield the greatest business and Team Member impact.
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.
To capture direct customer feedback, we have enabled Google Reviews across all stores and have received over 349,000 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 the need to travel to stores to make payments.
In addition, any shareholder or other interested party may send communications to the Board of Directors, either individually or as a group, through a process that is outlined in the Investor Relations section of our website. Diversity and Inclusion At EZCORP, we foster an environment that values diversity, inclusion and development for all.
In addition, any shareholder or other interested party may send communications to the Board of Directors, either individually or as a group, through a process that is outlined in the Investor Relations section of our website. 7 Table of Contents Diversity and Inclusion At EZCORP, we foster an environment that values diversity, inclusion and development for all.
Our filings with the SEC, including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and Section 16 filings, are available free of charge through links maintained on our website under the heading “Investor Relations — SEC Filings.” Information contained on our website is not incorporated by reference into this report. 14 Table of Contents
Our filings with the SEC, including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and Section 16 filings, are available free of charge through links maintained on our website under the heading “Investor Relations — SEC Filings.” Information contained on our website is not incorporated by reference into this report.
By store count, we ar e the second la rgest pawn store owner and operator in the U.S. and one of the largest in Latin America. We also offer web-based applications named EZ+ that allow customers to manage their pawn transactions, layaways and loyalty rewards online.
By store count, we ar e the second la rgest pawn store owner and operator in the U.S. and one of the largest in Latin America. We also offer web-based applications under the name EZ+ that allow customers to manage their pawn transactions, layaways and loyalty rewards online.
In the U.S., we also offer a jewelry VIP package, which guarantees customers a minimum future pawn advance amount on the item sold, allows them full credit if they trade in the item to purchase a more expensive piece of jewelry and provides m inor repair service on the item sold.
In the U.S., we also offer a jewelry VIP package, which guarantees customers a minimum future pawn advance amount on the item sold, allows them full credit if they trade in the item to purchase a more expensive piece of jewelry and provides minor repair service on the item sold.
Our investment in store-level Team Members produced tangible results during fiscal 2023: • 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 70% of managerial positions were filled via internal promotion.
Our investment in store-level Team Members produced tangible results during fiscal 2024: • High scoring questions in our 2024 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 85% of managerial positions were filled via internal promotion.
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: 7 Table of Contents • 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.
In our 2024 Global Employee Engagement Survey, 83% of participants responded positively to the question, “I feel a sense of belonging at EZCORP.” In fiscal 2024, 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.
To reduce energy consumption, we have installed energy-efficient LED lighting in 78% of our U.S. 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. locations during fiscal 2023) and responsibly disposing of end-of-life computers, electronics and related accessories through recycling or other sound e-waste processing.
To reduce energy consumption, we have installed energy-efficient LED lighting in 78% of our U.S. stores and 62% 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 million pounds across all U.S. locations during fiscal 2024) and responsibly disposing of end-of-life computers, electronics and related accessories through recycling or other sound e-waste processing.
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.
In fiscal 2024, we sold approximately 5.2 million pre-owned items, including over 2.9 million items in the consumer electronics, camera and household goods categories, 1.4 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.
These adjustments are recorded as estimates during interim periods and as discovered during cycle counts. 6 Table of Contents Human Capital Management Engagement Survey 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.
These adjustments are recorded as estimates during interim periods and as discovered during cycle counts. 6 Table of Contents Human Capital Management Engagement Survey We performed a Global Employee Engagement Survey, administered by Glint, in April 2024, and had a 87% 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 engagement score is ten points higher than the global benchmark, which contains data from over 1,100 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.
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.
We reinforced the utilization of our career path (Operations) and career and competency framework (Corporate Support Center) to build individual development plans to guide the career paths of Team Members and to prepare them for future roles.
Online payments are accepted on layaway, pawn extension and bulk payments, with electronic payment receipts delivered on these transactions. • 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.
Online payments are accepted on layaways and pawn extensions, with electronic payment receipts delivered on these transactions. • 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.
Fiscal 2023 U.S. Race and Ethnicity Demographics (1) (2) Fiscal 2023 Global Gender Demographics (2) (1) The term underrepresented minority is used to describe diverse populations, including African American, Hispanic, Asian and Native American Team Members who self-identified their race and ethnicity at hire.
Race and Ethnicity Demographics (1) (2) Fiscal 2024 Global Gender Demographics (2) (1) The term underrepresented minority is used to describe diverse populations, including African American, Hispanic, Asian and Native American Team Members who self-identified their race and ethnicity at hire.
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 a preferred interest in Founders One, LLC (“Founders”) that has majority ownership in Simple Management Group, Inc.
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 669 stores across 17 countries. • 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. We remain focused on optimizing our balance of PLO and the resulting higher PSC.
(“SMG”), which owns and operates 102 pawn stores in the U.S., Caribbean and Central America, with plans to build and acquire more stores in those regions. We generate revenues primarily from pawn service charges (“PSC”) on pawn loans outstanding (“PLO”), merchandise sales and jewelry scrapping. We remain focused on optimizing our balance of PLO and the resulting higher PSC.
ITEM 1. BUSINESS Purpose, Vision and Strategy EZCORP, Inc. 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.
ITEM 1. BUSINESS Purpose, Vision and Strategy EZCORP, Inc. is a leading provider of pawn services in the United States (“U.S.”) and Latin America with 1,279 locations and more than 8,000 Team Members. We are a Delaware corporation headquartered in Austin, Texas.
In GPMX, PSC rates generally vary between 12% and 18% per month as permitted by applicable law, and the pawn primary term is 30 days. Individual pawn transactions are made in the local currency of the country and typically average between $110 and $130 using the average exchange rates for fiscal 2023.
In GPMX, PSC rates generally vary between 12% and 18% per month as permitted by applicable law, and the pawn primary term is 30 days. Individual pawn transactions are made in the local currency of the country and typically average between $120 and $140 using the average exchange rates for fiscal 2024.
We improve the reach and access to financial services through neighborhood-based stores, supported by digital offerings. We provide instant access to cash in transactions that generally average around $180 or less. Our pawn transactions are simple, transparent, regulated and safe, and funding approval is based on the valuation of the collateral item, not on the credit worthiness of the customer.
We improve the reach and access to financial services through neighborhood-based stores, supported by digital offerings. We provide instant access to cash in transactions that generally average $185 in the U.S. Our pawn transactions are simple, transparent, regulated and safe, and funding approval is based on the valuation of the collateral item, not on the credit worthiness of the customer.
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. As of September 30, 2023, we had a closing PLO balance of $245.8 million.
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. As of September 30, 2024, we had a closing PLO balance of $274.1 million.
Our corporate office in Austin, Texas is LEED Certified Silver status. Social Responsibility Our business promotes social responsibility in the following ways: • Our business serves as an essential and responsible financial resource for many unbanked and or underserved consumers who have limited access to traditional forms of capital or credit and comprise a large majority of our customer base.
Our corporate office in Austin, Texas is LEED Certified Silver status. Social Responsibility Our business promotes social responsibility in the following ways: • Our business serves as an essential and responsible financial resource for unbanked and or underserved consumers who have limited access to traditional forms of capital or credit.
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.
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 Mexico, PSC rates generally vary between 15% and 21% per month as permitted by applicable law, and the pawn primary term is 30 days. Individual pawn transactions typically average between 1,100 and 1,500 Mexican pesos, or approximately $60 to $80 on average using the average exchange rate for fiscal 2023.
In Mexico, PSC rates generally vary between 15% and 21% per month as permitted by applicable law, and the pawn primary term is 30 days. Individual pawn transactions typically average between 1,200 and 1,500 Mexican pesos, or approximately $65 to $85 on average using the average exchange rate for fiscal 2024.
Pawn, which includes our EZPAWN, Value Pawn & Jewelry and other branded pawn operations in the United States; • 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”); • Cash Converters, which includes our equity interest in the net loss (income) of Cash Converters; and • Other Investments, which includes our investments in Rich Data Corporation (“RDC”) and our investment in and notes receivable from Founders.
Pawn, which includes our EZPAWN, Value Pawn & Jewelry and other branded pawn operations in the United States; • Latin America Pawn, which includes our Empeño Fácil, Cash Apoyo Efectivo 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”); and • Other Investments, which primarily includes our equity interest in Cash Converters and our investment in and notes receivable from Founders.
Our focus areas for improvement included Team, Valued Teammate and Work-Life Balance. Team Members provided over 11,500 comments with mixed sentiment, 29% positive, 38% neutral and 33% negative.
Our focus areas for improvement included Team, Valued Teammate and Work-Life Balance. Team Members provided over 11,900 comments with mixed sentiment, 27% positive, 38% neutral and 35% negative.
Additionally, on an annual basis (U.S.) gender and racial/ethnic analysis is performed to ensure pay equity. • 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. • All employees are eligible for paid time off, retirement savings plan and Company-paid life insurance.
Additionally, on an annual basis (U.S.) gender and racial/ethnic analysis is performed to ensure pay equity. • 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 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. • All employees are eligible for paid time off, Company-paid life insurance and participation in a tenure award program which recognizes their commitment and loyalty by awarding EZ+ Rewards points based on their years of service.
Pawn Latin America Pawn Other Investments Consolidated As of September 30, 2020 505 500 — 1,005 New locations opened — 15 — 15 Locations acquired 11 128 — 139 Locations sold, combined or closed — (11) — (11) As of September 30, 2021 516 632 — 1,148 New locations opened — 28 — 28 Locations acquired 3 — — 3 Locations sold, combined or closed (4) — — (4) As of September 30, 2022 515 660 — 1,175 New locations opened 3 44 — 47 Locations acquired 12 — — 12 Locations sold, combined or closed (1) (2) — (3) As of September 30, 2023 529 702 — 1,231 5 Table of Contents For additional information about our segments and geographic areas, see Note 14: Segment Information of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Pawn Activities At our pawn stores, we advance cash against the value of collateralized tangible personal property.
Pawn Latin America Pawn Consolidated As of September 30, 2021 516 632 1,148 New locations opened — 28 28 Locations acquired 3 — 3 Locations combined or closed (4) — (4) As of September 30, 2022 515 660 1,175 New locations opened 3 44 47 Locations acquired 12 — 12 Locations combined or closed (1) (2) (3) As of September 30, 2023 529 702 1,231 New locations opened 1 40 41 Locations acquired 13 — 13 Locations combined or closed (1) (5) (6) As of September 30, 2024 542 737 1,279 For additional information about our segments and geographic areas, see Note 12: Segment Information of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” 5 Table of Contents Pawn Activities At our pawn stores, we advance cash against the value of collateralized tangible personal property.
Talent Management and Development 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.
Talent Management and Development We employ approximately 8,000 Team Members across all our geographies, including approximately 3,600 in United States, 3,500 in Mexico and 900 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.
In fiscal 2023, PSC accounted for approximately 37% of our total revenues and 63% of our gross profit. 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.
In fiscal 2024, PSC accounted for approximately 38% of our total revenues and 64% of our gross profit. In the U.S., PSC rates generally vary between 12% 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 $170 and $200.
Trademarks and Trade Names We operate our U.S. pawn stores principally under the names “EZPAWN” or “Value Pawn & Jewelry,” our Mexico pawn stores principally under the name “EMPEÑO FÁCIL” and “Cash Apoyo Efectivo,” our Guatemala pawn stores under the name “GuatePrenda,” and our El Salvador and Honduras pawn stores under the name “MaxiEfectivo.” We have registered the names EZPAWN, Value Pawn & Jewelry and EZCORP, among others, with the United States Patent and Trademark Office.
We believe this program provides a distinct competitive advantage over other pawn operators. 11 Table of Contents Trademarks and Trade Names We operate our U.S. pawn stores principally under the names “EZPAWN” or “Value Pawn & Jewelry,” our Mexico pawn stores principally under the name “EMPEÑO FÁCIL” and “Cash Apoyo Efectivo,” our Guatemala pawn stores under the name “GuatePrenda,” and our El Salvador and Honduras pawn stores under the name “MaxiEfectivo.” We have registered the names EZPAWN, Value Pawn & Jewelry and EZCORP, among others, with the United States Patent and Trademark Office.
For further information about our acquisitions, see Note 3: Acquisitions of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Seasonality and Quarterly Results In the U.S., PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average PLO balance during the summer and lowest in our third fiscal quarter (April through June) following the tax refund season, and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds.
Seasonality and Quarterly Results In the U.S., PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average PLO balance during the summer and lowest in our third fiscal quarter (April through June) following the tax refund season, and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day and the availability of tax refunds.
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.
The Women’s Empowerment, Black Empowerment, Hispanic Organization for Leadership Advocacy (HOLA) and EZ Pride 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. Fiscal 2024 U.S.
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.
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.
And we rely on four foundational capabilities to execute our strategy and achieve our purpose: • Team Members — We enable diverse, engaged and tenured teams with a true passion for pawnbroking. • IT 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 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.
And we rely on four foundational capabilities to execute our strategy and achieve our purpose: • Team Members — We enable diverse, engaged and tenured teams with a true passion for pawnbroking. • IT 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 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. 3 Table of Contents Overview of Our Business At September 30, 2024, we operated a total of 1,279 locations, consisting of: • 542 U.S. pawn stores (operating primarily as EZPAWN or Value Pawn & Jewelry); • 565 Mexico pawn stores (operating primarily as Empeño Fácil and Cash Apoyo Efectivo); and • 172 pawn stores in Guatemala, El Salvador and Honduras (operating as GuatePrenda and MaxiEfectivo).
State and local agencies often have authority to suspend store operations pending resolution of actual or alleged regulatory, licensing and permitting issues. 13 Table of Contents 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.
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.
Other Regulations — Our pawn lending activities are subject to other state and federal statutes and regulations, including the following: • We are subject to the federal Gramm-Leach-Bliley Act and its underlying regulations, as well as various state laws and regulations relating to privacy and data security.
The TILA regulations also require us to provide certain disclosure in advertising our products and services. • We are subject to the federal Gramm-Leach-Bliley Act and its underlying regulations, as well as various state laws and regulations relating to privacy and data security.
Relevant aspects of the law specifically affecting the pawn industry include monthly reporting on “vulnerable activities,” which include pawn transactions exceeding 166,502.70 Mexican pesos and retail transactions of precious metals exceeding 166,502.70 Mexican pesos. Retail transactions of precious metals in cash exceeding 333,005.40 Mexican pesos are prohibited. There are significant fines and sanctions for failure to comply with these rules.
Relevant aspects of the law specifically affecting the pawn industry include monthly reporting on “vulnerable activities,” which include pawn transactions exceedin g 174,254.85 Mexican pesos and retail transactions of precious metals exceeding 174.254.85 Mexican pesos. Retail transactions of precious metals in cash exceeding 348,509.70 Mexican pesos are prohibited.
The customer is under no legal obligation to repay the amount advanced; we do not engage in collection efforts or take other legal actions against our customers; and we do not report transaction histories to external credit agencies.
We do not engage in collection efforts or take other legal actions against our customers, and we do not report transaction histories to external credit agencies. • Customer satisfaction measurement and feedback are key factors in improving our customer service and Team Member engagement.
The Federal Law on the Protection of Personal Data Held by Private Parties requires us to protect our customers’ personal information. This law requires us to inform customers if we share customer personal information with third parties and to post (both online and in-store) our Data Privacy Policy.
The Federal Law on the Protection of Personal Data Held by Private Parties requires us to protect our customers’ personal information.
In fiscal 2023, these stores represented 25% of our consolidated gross profit as the average scale of Latin America pawn stores is smaller than in the U.S. We see opportunity for further expansion in Latin America through both acquisitions and de novo openings.
We see opportunity for further expansion in Latin America and the U.S. through both acquisitions and de novo openings.
Our pawn business in Mexico is also subject to regulation at the state and local level through state laws and local zoning and permitting ordinances. For example, some states require permits for pawn stores to operate, certification of Team Members as trained in the valuation of merchandise and strict customer identification controls.
For example, some states require permits for pawn stores to operate, certification of Team Members as trained in the valuation of merchandise and strict customer identification controls. State and local agencies often have authority to suspend store operations pending resolution of actual or alleged regulatory, licensing and permitting issues.
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.
We launched our EZ+ Rewards loyalty program in the U.S. and Mexico in 2021 and in GPMX in 2022, and now hav e 5.4 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.
Rather, the customer may choose to repay the amount advanced or forfeit the collateralized merchandise. • Customer satisfaction measurement and feedback are key factors in improving our customer service and Team Member engagement.
The customer is not required to repay the amount advanced; rather, the customer may choose to repay the amount advanced and the PSC or forfeit the collateralized merchandise.
The pawn industry, particularly full-line stores dealing in both general merchandise and jewelry, remains in an expansion stage in Latin America. 11 Table of Contents 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.
We are the second largest for-profit operator in Mexico and the largest operator in Guatemala. The pawn industry, particularly full-line stores dealing in both general merchandise and jewelry, remains in an expansion stage in Latin America.
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.
During fiscal 2024, we continued our expansion in Latin America and the U.S. with the opening of 41 de novo stores (20 in Mexico, 17 in Guatemala, 3 in Honduras and 1 in Nevada) and the acquisition of 13 stores in the U.S. We also consolidated 6 stores, 5 in Latin America and 1 in the U.S.
Removed
Overview of Our Business At September 30, 2023, we operated a total of 1,231 locations, consisting of: • 529 U.S. pawn stores (operating primarily as EZPAWN or Value Pawn & Jewelry); • 549 Mexico pawn stores (operating primarily as Empeño Fácil and Cash Apoyo Efectivo); and 3 Table of Contents • 153 pawn stores in Guatemala, El Salvador and Honduras (operating as GuatePrenda and MaxiEfectivo).
Added
We now own a total of 1,279 stores, 737 in Latin America (58%) and 542 in the U.S. (42%). In fiscal 2024, the Latin America stores represented 27% of our consolidated gross profit as the average scale of Latin America pawn stores is smaller than in the U.S.
Removed
We are the second largest for-profit operator in Mexico and the largest operator in Guatemala.
Added
We anticipated this change would impact pawn loan redemptions annually in May and June; however, in fiscal 2024, the demand for pawn loans in Mexico exceeded any downward pressure related to profit sharing payments.
Removed
We are subject to the Fair Credit Reporting Act, which was enacted, in part, to address privacy concerns associated with the sharing of consumers’ financial information and credit history contained in consumer credit reports and limits our ability to share certain consumer report information.
Added
Other Regulations — Our pawn lending activities are subject to other state and federal statutes and regulations, including the following: • We are subject to the Truth in Lending Act (“TILA”), and its underlying regulations, which requires lenders to disclose information about the terms and costs of credit in a standardized manner, including in the form of an annual percentage rate.
Added
This law requires us to inform customers if we share customer personal information with third parties and to post (both online and in-store) our Data Privacy Policy. 13 Table of Contents Our pawn business in Mexico is also subject to regulation at the state and local level through state laws and local zoning and permitting ordinances.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
35 edited+3 added−6 removed83 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
35 edited+3 added−6 removed83 unchanged
2023 filing
2024 filing
Biggest changeWe have significant operations located in areas that are susceptible to hurricanes (notably the Atlantic and Gulf Coast regions of Florida, the Gulf Coast regions of Texas including Houston, as well as Mexico and Central America). Certain areas of our operations are also susceptible to other types of natural disasters such as earthquakes, volcanoes and tornadoes.
Biggest changeLosses not covered by insurance could be substantial and may increase our expenses, which could harm our results of operations and financial condition. 17 Table of Contents We have significant operations located in areas that are susceptible to hurricanes (notably the Atlantic and Gulf Coast regions of Florida, the Gulf Coast regions of Texas including Houston, as well as Mexico and Central America).
See Note 1: Organization and Summary of Significant Accounting Policies — Investments of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Our ability to recover our investment in these companies is heavily dependent on their success and performance, potentially including their ability to obtain further debt or equity financing.
See Note 1: Organization And Summary Of Significant Accounting Policies — Investments of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” Our ability to recover our investment in these companies is heavily dependent on their success and performance, potentially including their ability to obtain further debt or equity financing.
To the extent that any of such companies is not successful, we may be required in future periods to impair our investment and recognize related investment losses. We may incur property, casualty or other losses, including losses related to natural disasters such as hurricanes, earthquakes and volcanoes. Not all such losses will be covered by insurance.
To the extent that any of such companies are not successful, we may be required in future periods to impair our investment and recognize related investment losses. We may incur property, casualty or other losses, including losses related to natural disasters such as hurricanes, earthquakes and volcanoes. Not all such losses will be covered by insurance.
See Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” If the conversion feature of any of those convertible notes is triggered, holders will be entitled to convert the notes at their option at any time during specified periods.
See Note 7: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” If the conversion feature of any of those convertible notes is triggered, holders will be entitled to convert the notes at their option at any time during specified periods.
We made the initial investment in November 2009 and have made incremental investments periodically since then. The success of this strategic investment is dependent on a variety of factors, including Cash Converters’s business performance and the market’s assessment of that performance.
We made the initial investment in November 2009 and have made incremental investments periodically since then. The success of this strategic investment is dependent on a variety of factors, including Cash Converters’ business performance and the market’s assessment of that performance.
For a description of the current regulatory environment in the Latin American countries in which we operate, see “Mexico Regulations” and “Other Latin America Regulations” under “Part I, Item 1 — Business — Regulation.” 19 Table of Contents A significant change in foreign currency exchange rates could have a material adverse impact on our earnings and financial position.
For a description of the current regulatory environment in the Latin American countries in which we operate, see “Mexico Regulations” and “Other Latin America Regulations” under “Part I, Item 1 — Business — Regulation.” A significant change in foreign currency exchange rates could have a material adverse impact on our earnings and financial position.
See Note 5: Strategic Investments of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” If the fair value of our investment declines and we determine that such decline is other-than-temporary, we may be required to further impair our investment and recognize the related investment loss, which would adversely affect our results of operations and financial position in the period of impairment.
See Note 3: Strategic Investments of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” If the fair value of our investment declines and we determine that such decline is other-than-temporary, we may be required to further impair our investment and recognize the related investment loss, which would adversely affect our results of operations and financial position in the period of impairment.
Taking into consideration the shares that are issued and outstanding, as well as the shares that have been reserved for issuance pursuant to convertible notes, outstanding equity incentive compensation awards and the conversion of the Class B Common Stock, we had approximately 3.0 million shar es of authorized Class A Common Stock available for other uses as of September 30, 2023.
Taking into consideration the shares that are issued and outstanding, as well as the shares that have been reserved for issuance pursuant to convertible notes, outstanding equity incentive compensation awards and the conversion of the Class B Common Stock, we had approximately 7.7 million shar es of authorized Class A Common Stock available for other uses as of September 30, 2024 .
A significant portion of our U.S. business is concentrated in Texas and Florida. As of September 30, 2023, more than 62% of our U.S. pawn stores were located in Texas (45%) and Florida (17%), and those stores account for a significant portion of our revenues and profitability.
A significant portion of our U.S. business is concentrated in Texas and Florida. As of September 30, 2024, more than 63% of our U.S. pawn stores were located in Texas (46%) and Florida (17%), and those stores account for a significant portion of our revenues and profitability.
The statute of limitations applicable to most of the pre-closing years has now expired, but AlphaCredit has informed us that they filed an amended return for 2016, which they claim extends the statute of limitations for that year.
The statute of limitations applicable to most of the pre-closing years has now expired, but AlphaCredit has informed us that they filed an amended return for 2016, which they claim extends the statute of limitations for that year. We are continuing to pursue release of the funds.
After an analysis of Cash Converters’ stock price performance and other factors, we determined the fair value of our investment in Cash Converters at September 30, 2023 was greater than its carrying value.
We have recorded a number of impairments to the carrying value of our investment in Cash Converters in the past. After an analysis of Cash Converters’ stock price performance and other factors, we determined the fair value of our investment in Cash Converters at September 30, 2024 was greater than its carrying value.
The carrying value of our goo dwill was $302.4 million, or approximately 21% of our total assets, as of September 30, 2023.
The carrying value of our goo dwill was $306.5 million, or approximately 21% of our total assets, as of September 30, 2024.
While we maintain asset protection and monitoring programs to mitigate these risks, as well as insurance programs to protect against catastrophic loss or exposure, there can be no assurance that these crimes will not occur or that such losses will not have an adverse effect on our business or results of operations.
While we maintain asset protection and monitoring programs to mitigate these risks, as well as insurance programs to protect against catastrophic loss or exposure, there can be no assurance that these crimes will not occur or that such losses will not have an adverse effect on our business or results of operations. 16 Table of Contents Changes in competition from various sources could have a material adverse impact on our ability to achieve our plans.
If Team Members, agents or other persons for whose conduct we are held responsible violate our policies, we may be subject to severe criminal or civil sanctions and penalties, and we may be subject to other liabilities that could have a material adverse effect on our business, results of operations and financial condition. 20 Table of Contents Changes in our liquidity and capital requirements or in access to capital markets or other financing and transactional banking sources could limit our ability to achieve our plans.
If Team Members, agents or other persons for whose conduct we are held responsible violate our policies, we may be subject to severe criminal or civil sanctions and penalties, and we may be subject to other liabilities that could have a material adverse effect on our business, results of operations and financial condition.
A significant reduction in cash flows from operations or the availability of debt or equity financing could materially and adversely affect our ability to achieve our planned growth and operating results.
Changes in our liquidity and capital requirements or in access to capital markets or other financing and transactional banking sources could limit our ability to achieve our plans. A significant reduction in cash flows from operations or the availability of debt or equity financing could materially and adversely affect our ability to achieve our planned growth and operating results.
In December 2022, the Australian Parliament passed the Financial Sector Reform Bill 2022, which establishes lending limits on small amount credit contracts. The bill became effective in June 2023, and could adversely impact Cash Converters’ financial position or results of operations.
In December 2022, the Australian Parliament passed the Financial Sector Reform Bill 2022, which establishes lending limits on small amount credit contracts and that bill became effective in June 2023.
As noted above, not all physical damage that we incur as a result of any such natural disaster will be covered by insurance due to policy deductibles and risk retentions.
Certain areas of our operations are also susceptible to other types of natural disasters such as earthquakes, volcanoes and tornadoes. As noted above, not all physical damage that we incur as a result of any such natural disaster will be covered by insurance due to policy deductibles and risk retentions.
We expect that number will be reduced to 2.1 million following the issuance of currently approved Long-Term Incentive awards in November 2023 .
We expect that number will be reduced to 7.0 million fol lowing the issuance of currently approved Long-Term Incentive awards in November 2024 .
Cohen is the beneficial owner of all our Class B Voting Common Stock, and all our publicly traded stock is non-voting stock. Consequently, stockholders other than Mr. Cohen have no vote with respect to the election of directors or any other matter requiring a vote of stockholders except in limited circumstances as required by law.
Consequently, stockholders other than Mr. Cohen have no vote with respect to the election of directors or any other matter requiring a vote of stockholders except in limited circumstances as required by law.
See Note 1: Organization and Summary of Significant Accounting Policies and Note 8: Goodwill and Intangible Assets of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for a discussion of our annual impairment tests performed for goodwill and indefinite-lived intangible assets. 18 Table of Contents The conversion feature of our convertible notes, if triggered, may adversely affect our financial condition and operating results.
See Note 1: Organization and Summary of Significant Accounting Policies and Note 6: Goodwill and Intangible Assets of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data” for a discussion of our annual impairment tests performed for goodwill and indefinite-lived intangible assets.
We may also incur fines, penalties or liabilities, or have our federal firearms licenses revoked or suspended, if we fail to properly perform required background checks for, and otherwise record and report, firearms transactions.
We may also incur fines, penalties or liabilities, or have our federal firearms licenses revoked or suspended if we fail to properly perform required background checks for, and otherwise record and report, firearms transactions. Any such actions could have a material adverse effect on our business, prospects, results of operations, financial condition and reputation.
All of these matters are subject to inherent uncertainties, and unfavorable rulings could occur, which could include monetary damages, fines and penalties or other relief. Any unfavorable ruling or outcome could have a material adverse effect on our results of operations or could negatively affect our reputation.
All of these matters are subject to inherent uncertainties, and unfavorable rulings could occur, which could include monetary damages, fines and penalties or other relief.
Furthermore, there can be no assurance that we will be able to dispose of some or all of our investment in Cash Converters on favorable terms, should we decide to do so in the future. 17 Table of Contents Our ability to recover our investments in other companies (such as our indirect investment in Simple Management Group, Inc. and our investment in Rich Data Corporation) is heavily dependent on the success and performance of those companies, including their respective ability to obtain further debt or equity financing.
Our ability to recover our investments in other companies (such as our indirect investment in Simple Management Group, Inc. and our investment in Rich Data Corporation) is heavily dependent on the success and performance of those companies, including their respective ability to obtain further debt or equity financing. We have certain investments in other companies.
Inability in accessing or maintaining transactional banking or wire services could lead to increased costs or the inability to efficiently manage our cash as we would be required to seek alternative banking services or obtain services from several regional or local retail banks.
Inability in accessing or maintaining transactional banking or wire services could lead to increased costs or the inability to efficiently manage our cash as we would be required to seek alternative banking services or obtain services from several regional or local retail banks. 20 Table of Contents We collect and store a variety of sensitive customer information, and breaches in data security or other cyber-attacks could harm our business operations and lead to reputational damage.
In addition, the existence of the convertible notes may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or anticipated conversion of the notes into shares of our Class A Common Stock could depress the price of our Class A Common Stock.
In addition, the existence of the convertible notes may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or anticipated conversion of the notes into shares of our Class A Common Stock could depress the price of our Class A Common Stock. 18 Table of Contents We have a limited number of unreserved shares available for future issuance, which may limit our ability to conduct future financings and other transactions and our ability to offer equity awards to management.
Under our certificate of incorporation, we are generally obligated to indemnify our directors and officers for costs and liabilities they incur in their capacity as directors or officers of the Company.
Any unfavorable ruling or outcome could have a material adverse effect on our results of operations or could negatively affect our reputation. 19 Table of Contents Under our certificate of incorporation, we are generally obligated to indemnify our directors and officers for costs and liabilities they incur in their capacity as directors or officers of the Company.
The escrowed funds were not impacted by that proceeding, and we are continuing to pursue release of the funds. One person beneficially owns all of our voting stock and generally controls the outcome of all matters requiring a vote of stockholders, which may influence the value of our publicly traded non-voting stock. Phillip E.
One person beneficially owns all of our voting stock and generally controls the outcome of all matters requiring a vote of stockholders, which may influence the value of our publicly traded non-voting stock. Phillip E. Cohen is the beneficial owner of all our Class B Voting Common Stock, and all our publicly traded stock is non-voting stock.
The policies are subject to deductibles and exclusions that result in our retention of a level of risk on a self-insurance basis. Losses not covered by insurance could be substantial and may increase our expenses, which could harm our results of operations and financial condition.
The policies are subject to deductibles and exclusions that result in our retention of a level of risk on a self-insurance basis.
We collect and store a variety of sensitive customer information, and breaches in data security or other cyber-attacks could harm our business operations and lead to reputational damage. In the course of conducting our business, we collect and store on our information technology systems a variety of information about our customers, including sensitive personal identifying and financial information.
In the course of conducting our business, we collect and store on our information technology systems a variety of information about our customers, including sensitive personal identifying and financial information. We may not have the resources or technical expertise to anticipate or prevent rapidly evolving types of cyber-attacks.
The nature of our business requires us to maintain significant cash on hand, loan collateral and inventories in our stores. Consequently, we are subject to loss of cash or merchandise as a result of robberies, burglaries, thefts, riots, looting and other criminal activity in our stores.
Consequently, we are subject to loss of cash or merchandise as a result of robberies, burglaries, thefts, riots, looting and other criminal activity in our stores. Further, we could be subject to liability to customers or other third parties as a result of such activities.
Changes in competition from various sources could have a material adverse impact on our ability to achieve our plans. We encounter significant competition from other pawn stores, consumer lending companies, other retailers, online retailers and auction sites, many of which have significantly greater financial resources than we do.
We encounter significant competition from other pawn stores, consumer lending companies, other retailers, online retailers and auction sites, many of which have significantly greater financial resources than we do. Increases in the number or size of competitors or other changes in competitive influences, such as aggressive marketing and pricing practices, could adversely affect our operations.
Actual or anticipated attacks may cause us to incur increased costs, including costs to hire additional personnel, purchase additional protection technologies, train Team Members and engage third-party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result in the technology we use to protect data being breached or compromised.
Advances in computer capabilities, new technological discoveries or other developments may result in the technology we use to protect data being breached or compromised.
In response to the new law, Cash Converters recognized a one-time, non-cash impairment expense of AUD $110.5 million against goodwill in their financial statements for the period ended December 31, 2022 and, based upon our 43.7% ownership of Cash Converters at the time, we recorded $32.4 million of our share of their non-cash goodwill impairment charge during the second quarter of our fiscal 2023.
To reflect the expected adverse impact to its operating results, Cash Converters recorded a one-time, non-cash impairment expense during the period ended December 31, 2022 and we recorded our share of that charge during the second quarter of our fiscal 2023.
We have a limited number of unreserved shares available for future issuance, which may limit our ability to conduct future financings and other transactions and our ability to offer equity awards to management. Our certificate of incorporation currently authorizes us to issue up to 100 million shares of Class A Common Stock.
Our certificate of incorporation currently authorizes us to issue up to 100 million shares of Class A Common Stock.
Any such actions could have a material adverse effect on our business, prospects, results of operations, financial condition and reputation. 16 Table of Contents Our business is subject to Team Member and third-party robberies, burglaries and other crimes at the store level.
Our business is subject to Team Member and third-party robberies, burglaries and other crimes at the store level. The nature of our business requires us to maintain significant cash on hand, loan collateral and inventories in our stores.
Removed
We were in discussions with AlphaCredit regarding the validity of the indemnity claim, the amount of any continuing exposure and whether some or all of the escrow can now be released. Those discussions have been interrupted due to AlphaCredit’s recent emergence from a concurso mercantil (insolvency) proceeding in Mexico with new management.
Added
Furthermore, there can be no assurance that we will be able to dispose of some or all of our investment in Cash Converters on favorable terms, should we decide to do so in the future.
Removed
Further, we could be subject to liability to customers or other third parties as a result of such activities.
Added
The conversion feature of our convertible notes, if triggered, may adversely affect our financial condition and operating results. We have a total of $333.4 million of converti ble notes outstanding as of September 30, 2024.
Removed
Increases in the number or size of competitors or other changes in competitive influences, such as aggressive marketing and pricing practices, could adversely affect our operations.
Added
Attacks may be targeted at us, our service providers, our customers or others who have entrusted us with information. Actual or anticipated attacks may cause us to incur increased costs, including costs to hire additional personnel, purchase additional protection technologies, train Team Members and engage third-party experts and consultants.
Removed
Any additional decline in Cash Converters’ operating results resulting from the change of law or other factors could adversely affect our financial performance. We have recorded a number of impairments to the carrying value of our investment in Cash Converters in the past.
Removed
We have outstanding a total of $367.8 mill ion of convertible notes.
Removed
We may not have the resources or technical expertise to anticipate or prevent rapidly evolving types of cyber attacks. Attacks may be targeted at us, our service providers, our customers or others who have entrusted us with information.
Item 2. Properties
Properties — owned and leased real estate
6 edited+1 added−0 removed2 unchanged
Item 2. Properties
Properties — owned and leased real estate
6 edited+1 added−0 removed2 unchanged
2023 filing
2024 filing
Biggest changeLeases for our U.S. locations generally have initial terms ranging from three to 10 years and typically allow for renewals in increments of three-to-five years. Our primary corporate office is located in Austin, Texas and is leased through March 2029 with escalating rent payments annually and includes two five-year extension options at the end of the lease term.
Biggest changeOur primary corporate office is located in Austin, Texas and is leased through March 2029 with escalating rent payments annually and includes two five-year extension options at the end of the lease term. Our locations in Latin America are generally leased on three-to-five year terms.
For additional information about store locations, see “Part I, Item 1 — Business — Segment and Geographic Information.”
For additional information about store locations, see “Part I, Item 1 — Business — Segment and Geographic Information.
A portion of the store interior is designed for retail operations, with merchandise displayed for sale by category. Distinctive exterior design and attractive in-store signage provide an appealing atmosphere to customers. W e maintain or reimburse our landlords for maintaining property and general liability insurance for each of our stores. Our stores are open six or seven days a week.
A portion of the store interior is designed for retail operations, with merchandise displayed for sale by category. Distinctive exterior design and attractive in-store signage provide an appealing atmosphere to customers. W e maintain or reimburse our landlords for maintaining property and general liability insurance for each of our stores.
In addition to our store leases, we lease approximately 120,000 square feet of corporate office space in Austin, Texas (82,663 square feet of which is being subleased or made available for sublease to other tenants). We lease other corporate office space in Mexico (8,600 square feet), Guatemala (3,500 square feet), El Salvador (4,500 square feet) and Honduras (1,200 square feet).
In addition to our store leases, we lease approximately 108,000 square feet of corporate office space in Austin, Texas (70,742 square feet of which is being subleased or made available for sublease to other tenants). We lease other corporate office space in Mexico (8,600 square feet), Guatemala (3,500 square feet), El Salvador (4,500 square feet) and Honduras (1,200 square feet).
As of September 30, 2023, we had a total of 1,231 stores, 529 of which are located in the U.S., with 45% located in Texas, 17% in Florida and the remainder spread across 17 other states. We also have 549 locations in Mexico, 117 in Guatemala, 18 in El Salvador, and 18 in Honduras.
As of September 30, 2024, we had a total of 1,279 stores, 542 of which are located in the U.S., with 46% located in Texas, 17% in Florida and the remainder spread across 17 other states. We also have 565 locations in Mexico, 133 in Guatemala, 18 in El Salvador and 21 in Honduras.
Our locations in Latin America are generally leased on three-to-five year terms. Our existing leases expire on various dates through fisc al 2033, with a small number of leases on month-to-month terms. All leases provide for specified periodic rental payments at market rates. Most leases require us to maintain the property and pay the cost of insurance and taxes.
Our existing leases expire on various dates through fiscal 2039, with a small number of leases on month-to-month terms. All leases provide for specified periodic rental payments at market rates. Most leases require us to maintain the property and pay the cost of insurance and taxes.
Added
Our stores are open six or seven days a w eek. Leases for our U.S. locations generally have initial terms ranging from three to ten years and typically allow for renewals in increments of three-to-five years.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed5 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed5 unchanged
2023 filing
2024 filing
Biggest changeShare Repurchases Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (1) (in thousands, except number of shares and average price information) July 1, 2023 through July 31, 2023 113,182 $ 8.83 113,182 $ 38,003 August 1, 2023 through August 31, 2023 109,845 $ 8.81 109,845 $ 37,036 September 1, 2023 through September 30, 2023 128,372 $ 8.04 128,372 $ 36,004 Quarter ended September 30, 2023 351,399 $ 8.54 351,399 $ 36,004 (1) On May 3, 2022, the Board of Directors approved a share repurchase program, under which the Company is authorized to repurchase up to $50 million of our Class A Non-Voting common shares over a three-year period.
Biggest changeShare Repurchases Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (1) (in thousands, except number of shares and average price information) July 1, 2024 through July 31, 2024 98,391 $ 10.14 98,391 $ 26,015 August 1, 2024 through August 31, 2024 92,870 $ 11.66 92,870 $ 24,933 September 1, 2024 through September 30, 2024 81,493 $ 11.22 81,493 $ 24,019 Quarter ended September 30, 2024 272,754 $ 10.98 272,754 $ 24,019 (1) On May 3, 2022, the Board of Directors approved a share repurchase program, under which the Company is authorized to repurchase up to $50 million of our Class A Non-Voting Common Stock over a three-year period.
The graph shows the value, at the end of each of the last five fiscal years, of $100 invested in our Class A Common Stock or the indices on September 30, 2018.
The graph shows the value, at the end of each of the last five fiscal years, of $100 invested in our Class A Common Stock or the indices on September 30, 2019.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A Non-Voting Common Stock (“Class A Common Stock”) is traded on the NASDAQ Stock Market under the symbol “EZPW.” As of November 1, 2023, there were approximately 71 stockholders of record of our Class A Common Stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A Non-Voting Common Stock (“Class A Common Stock”) is traded on the NASDAQ Stock Market under the symbol “EZPW.” As of November 1, 2024, there were approximately 69 registered stockholders of record of our Class A Common Stock.
There is no trading market for our Class B Voting Common Stock (“Class B Common Stock”), which was held by one stockholder as of November 1, 2023 . As of September 30, 2023, the closing sales price of our Class A Common Stock, as reported by the NASDAQ Stock Market, was $8.25 per share.
There is no trading market for our Class B Voting Common Stock (“Class B Common Stock”), which was held by one stockholder as of November 1, 2024. As of September 30, 2024, the closing sales price of our Class A Common Stock, as reported by the NASDAQ Stock Market, was $11.21 per share.
Historical stock price performance is not necessarily indicative of future stock price performance. 23 Table of Contents Company Index 2018 2019 2020 2021 2022 2023 EZCORP, INC. $100.00 $60.37 $47.01 $70.75 $72.06 $77.10 NASDAQ Composite Index $100.00 $99.42 $138.79 $179.57 $131.43 $164.29 NASDAQ Other Finance Index $100.00 $111.30 $116.51 $141.80 $97.71 $118.76 Share Repurchase Activity The table below provides certain information about our repurchase of shares of Class A Non-voting Common Stock during the quarter ended September 30, 2023.
Historical stock price performance is not necessarily indicative of future stock price performance. 23 Table of Contents Company Index 2019 2020 2021 2022 2023 2024 EZCORP, INC. $100.00 $77.86 $117.18 $119.35 $127.71 $173.53 NASDAQ Composite Index $100.00 $139.61 $180.62 $132.21 $165.26 $227.38 NASDAQ Other Finance Index $100.00 $104.68 $127.41 $87.79 $106.70 $128.75 Share Repurchase Activity The table below provides certain information about our repurchase of shares of Class A Non-voting Common Stock during the quarter ended September 30, 2024.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
55 edited+10 added−12 removed38 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
55 edited+10 added−12 removed38 unchanged
2023 filing
2024 filing
Biggest changeSegment loss was $26.9 million, a decrease of $28.8 million, primarily due to the net loss on our share of Cash Converters’ net results related to their non-cash goodwill impairment charge. 30 Table of Contents Other Items The following table reconciles our consolidated segment contribution discussed above to net income, including items that affect our consolidated financial results but are not allocated among segments: Fiscal Year Ended September 30, Change (in thousands) 2023 2022 Segment contribution $ 151,247 $ 154,943 (2)% Corporate expenses (income): General and administrative 67,532 64,342 5% Impairment of goodwill and intangibles 4,343 — * Depreciation and amortization 12,558 13,675 (8)% Loss (gain) on sale or disposal of assets and other 382 (688) (156)% Interest expense 16,456 9,972 65% Interest income (4,829) — * Other expense (income) 3,172 (71) * Income before income taxes 51,633 67,713 24% Income tax expense 13,170 17,553 25% Net income $ 38,463 $ 50,160 23% * Represents a percentage computation that is not mathematically meaningful.
Biggest changeOther Investments The following table presents selected summary financial data for our Other Investments segment after translation to U.S. dollars from its functional currency of primarily Australian dollars: Fiscal Year Ended September 30, Change (in thousands) 2024 2023 Gross profit: Consumer loan fees, interest and other $ 35 $ 55 (36)% Gross profit 35 55 (36)% Segment operating expenses: Interest income (2,422) (1,500) 61% Equity in net (income) loss of unconsolidated affiliates (4,993) 28,459 118% Segment operating contribution (loss) 7,450 (26,904) 128% Other segment (income) loss — 31 100% Segment contribution (loss) $ 7,450 $ (26,935) 128% Segment income was $7.5 million, an increase of $34.4 million, primarily due to the prior year net loss on our share of Cash Converters’ net results related to their non-cash goodwill impairment charge. 30 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: Fiscal Year Ended September 30, Change (in thousands) 2024 2023 Segment contribution $ 211,581 $ 151,247 40% Corporate expenses (income): General and administrative 75,557 67,532 12% Impairment of other assets 843 4,343 (81)% Depreciation and amortization 14,057 12,558 12% Loss on sale or disposal of assets and other 121 382 (68)% Other operating income (765) — 100% Interest expense 13,585 16,456 (17)% Interest income (6,541) (4,829) 35% Equity in net loss of unconsolidated affiliates 282 — * Other (income) expense (1,166) 3,172 137% Income before income taxes 115,608 51,633 124% Income tax expense 32,513 13,170 147% Net income $ 83,095 $ 38,463 116% * Represents a percentage computation that is not mathematically meaningful.
Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations.
Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations.
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.
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.
Such risks and uncertainties include, among other things: • Changes in laws and regulations; • Negative characterizations of our industry; • Concentration of business in Texas and Florida; • Changes in gold prices or volumes; • Changes in sales, pawn loan balances, sales margins, pawn redemption rates or other important operating metrics; • Our ability to continue growing our store count through acquisitions and de novo openings; • Continuing indemnification obligations for pre-closing taxes related to our sale of Grupo Finmart; • Our controlled ownership structure; • Potential regulatory fines and penalties, lawsuits and related liabilities related to firearms business; • Potential robberies, burglaries and other crimes at our stores; • Changes in the competitive landscape; • Our ability to design or acquire, deploy and maintain adequate information technology and other business systems; • Failure to achieve adequate return on investments; • Potential uninsured property, casualty or other losses; • Potential natural disasters; • Financial statement impact of potential impairment of goodwill or other intangible assets such as trade names; • Potential conversion of Convertible Notes into cash (which could adversely affect liquidity) or stock (which will cause dilution of existing stockholders); • Limited number of unreserved shares available for future issuance; • Public health issues that could adversely affect our financial condition or results of operations; • Changes in the business, regulatory, political or social climate in Latin America; • Changes in foreign currency exchange rates; • The outcome of future litigation and regulatory proceedings; • Potential disruptive effect of acquisitions, investments and new businesses; • Potential exposure under anti-corruption, anti-bribery, anti-money laundering and other general business laws and regulations; • Changes in liquidity, capital requirements or access to debt and capital markets; • Potential data security breaches or other cyber-attacks; and 35 Table of Contents • Potential civil unrest or government overthrow and other events beyond our control.
Such risks and uncertainties include, among other things: • Changes in laws and regulations; • Negative characterizations of our industry; • Concentration of business in Texas and Florida; • Changes in gold prices or volumes; • Changes in sales, pawn loan balances, sales margins, pawn redemption rates or other important operating metrics; • Our ability to continue growing our store count through acquisitions and de novo openings; • Continuing indemnification obligations for pre-closing taxes related to our sale of Grupo Finmart; • Our controlled ownership structure; • Potential regulatory fines and penalties, lawsuits and related liabilities related to firearms business; • Potential robberies, burglaries and other crimes at our stores; • Changes in the competitive landscape; • Our ability to design or acquire, deploy and maintain adequate information technology and other business systems; • Failure to achieve adequate return on investments; • Potential uninsured property, casualty or other losses; • Potential natural disasters; • Financial statement impact of potential impairment of goodwill or other intangible assets such as trade names; • Potential conversion of Convertible Notes into cash (which could adversely affect liquidity) or stock (which will cause dilution of existing stockholders); • Limited number of unreserved shares available for future issuance; • Public health issues that could adversely affect our financial condition or results of operations; • Changes in the business, regulatory, political or social climate in Latin America; • Changes in foreign currency exchange rates; • The outcome of future litigation and regulatory proceedings; • Potential disruptive effect of acquisitions, investments and new businesses; 35 Table of Contents • Potential exposure under anti-corruption, anti-bribery, anti-money laundering and other general business laws and regulations; • Changes in liquidity, capital requirements or access to debt and capital markets; • Potential data security breaches or other cyber-attacks; and • Potential civil unrest or government overthrow and other events beyond our control.
See 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. 27 Table of Contents U.S. Pawn The following table presents selected summary financial data from our U.S.
See Note 9: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items. 27 Table of Contents U.S. Pawn The following table presents selected summary financial data from our U.S.
Depending on the level of acquisition activity and other factors, our ability to repay our longer term debt obligations, including the convertible debt maturing in 2024, 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.
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 May 2025 and December 2029, may require us to refinance these obligations through the issuance of new debt securities, equity securities, convertible securities or through new credit facilities.
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” or the “Company”) for the two-year period ended September 30, 2023.
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” or the “Company”) for the two-year period ended September 30, 2024.
(d) Total excludes contractual obligations already recorded on our consolidated balance sheets as current liabilities, except for the accrued portions of interest and lease obligations which are included in interest on long-term debt obligations and lease obligations captions above.
(d) Total excludes contractual obligations already recorded on our consolidated balance sheets as current liabilities, except for current maturities of long-term debt, which are included in the debt obligations caption above and accrued portions of interest and lease obligations, which are included in the interest on long-term debt obligations and lease obligations captions above.
(b) Excludes $6.7 million in sublease payments expected to be received. (c) No provision for uncertain tax benefits has been reflected in the contractual obligations table as the timing of any such payment is uncertain.
(b) Excludes $5.6 million in sublease payments expected to be received. (c) No provision for uncertain tax benefits has been reflected in the contractual obligations table as the timing of any such payment is uncertain.
Fiscal 2022 These tables, as well as the discussion that follows, should be read in conjunction with the accompanying consolidated financial statements and related notes. Summary Financial Data The following table presents selected summary consolidated financial data for fiscal 2023 and fiscal 2022.
Fiscal 2023 These tables, as well as the discussion that follows, should be read in conjunction with the accompanying consolidated financial statements and related notes. Summary Financial Data The following table presents selected summary consolidated financial data for fiscal 2024 and fiscal 2023.
We have not recorded a deferred tax liability related to foreign withholding taxes of our undistributed earnings of foreign subsidiaries indefinitely invested outside the U.S. 34 Table of Contents We may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which we operate or have operated within a relevant period.
We have not recorded a deferred tax liability related to foreign withholding taxes of our undistributed earnings of foreign subsidiaries indefinitely invested outside the U.S. We may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which we operate or have operated within a relevant period.
The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the fiscal years ended September 30, 2023 and 2022 were as follows: September 30, Twelve Months Ended September 30, 2023 2022 2023 2022 Mexican peso 17.4 20.1 18.3 20.4 Guatemalan quetzal 7.7 7.6 7.6 7.5 Honduran lempira 24.5 24.1 24.3 24.1 Australian dollar 1.6 1.6 1.5 1.4 25 Table of Contents Operating Results Fiscal 2023 vs.
The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the fiscal years ended September 30, 2024 and 2023 were as follows: September 30, Twelve Months Ended September 30, 2024 2023 2024 2023 Mexican peso 19.7 17.4 17.7 18.3 Guatemalan quetzal 7.6 7.7 7.6 7.6 Honduran lempira 24.6 24.5 24.4 24.3 Australian dollar 1.4 1.6 1.5 1.5 25 Table of Contents Operating Results Fiscal 2024 vs.
The $26.5 million increase 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.
The $73.9 million increase in cash flows used in 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.
The results of the impairment analyses for fiscal year 2023 and fiscal year 2022 are discussed in Note 8: Goodwill and Intangible Assets of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Income Taxes Management believes that it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the net recorded deferred tax assets.
The results of the impairment analyses for fiscal 2024 and fiscal 2023 are discussed in Note 6: Goodwill And Intangible Assets of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” Income Taxes Management believes that it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the net recorded deferred tax assets.
The $35.3 million increase in cash flows provided by operating activities was primarily due to an increase in net income (when considering adjustments for non-cash items affecting net income) as well as changes in working capital primarily related to the timing of payments of income taxes, inventory, prepaid expenses and accounts payable.
The $11.8 million increase in cash flows provided by operating activities was primarily due to an increase in net income (when considering adjustments for non-cash items affecting net income) as well as changes in working capital primarily related to the timing of payments of income taxes, prepaid expenses, accounts payable and inventory.
See Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” 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.
See Note 7: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” 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.
We anticipate that cash flows from operations and cash on hand will be adequate to fund ongoing operations, deb 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 fiscal 2024.
We anticipate that cash flows from operations and cash on hand will be adequate to fund ongoing operations, 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 fiscal 2025.
Fiscal 2021 The Results of Operations discussion for fiscal 2022 vs. fiscal 2021 is located 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, 2022. 31 Table of Contents Liquidity and Capital Resources Cash and Cash Equivalents Our cash and equivalents balance was $220.6 million at September 30, 2023 compared to $206.0 million at September 30, 2022.
Fiscal 2022 The Results of Operations discussion for fiscal 2023 vs. fiscal 2022 is located 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. 31 Table of Contents Liquidity and Capital Resources Cash and Cash Equivalents Our cash and equivalents balance was $170.5 million at September 30, 2024 compared to $220.6 million at September 30, 2023.
See Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Additionally, no provision for insurance reserves, deferred compensation arrangements, or other liabilities totaling $6.6 million has been included as the timing of such payments are uncertain.
See Note 9: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” Additionally, no provision for insurance reserves, deferred compensation arrangements, or other liabilities totaling $8.5 million has been included as the timing of such payments are uncertain.
(a) Fiscal 2023 and 2022 constant currency amounts exclude net GAAP basis foreign currency transaction loss of $0.4 million and a minimal loss, respectively, resulting from movement in exchange rates.
(a) Fiscal 2024 and 2023 constant currency amounts exclude net GAAP basis foreign currency transaction loss of $0.1 million and $0.4 million, respectively, resulting from movement in exchange rates.
See 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. Fiscal 2022 vs.
See Note 9: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items. Fiscal 2023 vs.
In addition to the lease obligations in the table above, we are responsible for the maintenance, property taxes and insurance at most of our locations. During the fiscal year ended September 30, 2023, these collectively amounted to $16.3 million.
In addition to the lease obligations in the table above, we are responsible for the maintenance, property taxes and insurance at most of our locations. During the fiscal year ended September 30, 2024, these collectively amounted to $17.7 million.
During fiscal 2023, segment net store count in our U.S. pawn segment increased by 14 due to the acquisition of 12 stores, the opening of 3 de novo stores and the consolidation of 1 store. 28 Table of Contents Latin America Pawn The following table presents selected summary financial data from our Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from functional currencies.
During fiscal 2024, segment net store count in our U.S. pawn segment increased by 13 due to the acquisition of 13 stores, the addition of one de novo store and the consolidation of one store. 28 Table of Contents Latin America Pawn The following table presents selected summary financial data from our Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from functional currencies.
The net effect of these changes was a $14.6 million increase in cash on hand during the current year, resulting in a $229.0 million ending cash and restricted cash balance. Sources and Uses of Cash In December 2022, we issued $230.0 million aggregate principal amount of 2029 Convertible Notes.
The net effect of these changes was a $49.2 million decrease in cash on hand during the current year, resulting in a $179.8 million ending cash and restricted cash balance. Sources and Uses of Cash In December 2022, we issued $230.0 million aggregate principal amount of 2029 Convertible Notes.
In May 2022, our Board of Directors (the “Board”) authorized the repurchase of up to $50 million of our Class A Common Stock over 3 years.
On May 3, 2022, our Board authorized the repurchase of up to $50 million of our Class A Common Stock over 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. 32 Table of Contents 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 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.
Cash Flows The table and discussion below present a summary of the sources and uses of our cash: Fiscal Year Ended September 30, Change (in thousands) 2023 2022 Cash flows provided by operating activities $ 101,834 $ 66,535 53% Cash flows used in investing activities (110,886) (113,283) (2)% Cash flows provided by (used in) financing activities 23,692 (2,832) * Effect of exchange rate changes on cash and cash equivalents and restricted cash (41) 325 (113)% Net increase (decrease) in cash and cash equivalents and restricted cash $ 14,599 $ (49,255) 130% * Represents a percentage computation that is not mathematically meaningful.
Cash Flows The table and discussion below present a summary of the sources and uses of our cash: Fiscal Year Ended September 30, Change (in thousands) 2024 2023 Cash flows provided by operating activities $ 113,600 $ 101,834 12% Cash flows used in investing activities (111,853) (110,886) 1% Cash flows (used in) provided by financing activities (50,183) 23,692 (312)% Effect of exchange rate changes on cash and cash equivalents and restricted cash (725) (41) * Net (decrease) increase in cash and cash equivalents and restricted cash $ (49,161) $ 14,599 (437)% * Represents a percentage computation that is not mathematically meaningful.
(b) Balance is calculated based on the average of the monthly ending balance averages during the applicable period. 2023 Change (GAAP) 2023 Change (Constant Currency) Same Store data: (a) PLO 16% 4% PSC 20% 11% Merchandise Sales 24% 14% Merchandise Sales Gross Profit 45% 33% Store Expenses 26% 15% (a) Stores open at the end of the period included in the same store calculation were 651.
(b) Balance is calculated based on the average of the monthly ending balance averages during the applicable period. 2024 Change (GAAP) 2024 Change (Constant Currency) Same Store data: (a) PLO 7% 16% PSC 16% 14% Merchandise Sales 11% 8% Merchandise Sales Gross Profit 16% 13% Store Expenses 12% 9% (a) Stores open at the end of the period included in the same store calculation were 697.
We use this information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the estimates under different assumptions or conditions.
We use this information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
See “Part I, Item 1A — Risk Factors” and “Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results” below. Results of Operations Non-GAAP Financial Information To supplement our 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.
Results of Operations Non-GAAP Financial Information To supplement our 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.
As of September 30, 2023, the gross balance of our inventory was $169.1 million, for which we have included reserves of $2.7 million. Assuming the reserve rates were increased or decreased by 10%, our inventory reserve balance as of September 30, 2023 would have increased or decreased by approximately $0.3 million.
Assuming the reserve rates were increased or decreased by 10%, our inventory reserve balance as of September 30, 2024 would have increased or decreased by approximately $0.3 million.
The critical accounting policies and estimates that could have a significant impact on our results of operations, as well as relevant recent accounting pronouncements, are described in Note 1: Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Certain accounting policies regarding the quantification of the sensitivity of certain critical estimates are discussed further below. 33 Table of Contents Pawn Loan Revenue Recognition We record PSC using the effective interest method over the life of the loan for all pawn loans we believe to be collectible.
Actual results may differ from the estimates under different assumptions or conditions. 33 Table of Contents The critical accounting policies and estimates that could have a significant impact on our results of operations, as well as relevant recent accounting pronouncements, are described in Note 1: Organization And Summary Of Significant Accounting Policies of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” Certain accounting policies regarding the quantification of the sensitivity of certain critical estimates are discussed further below.
We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the U.S. on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings.
We have included valuation allowances against deferred tax assets for net operating losses and tax credits not expected to be utilized based on specific facts and estimates for each jurisdiction. 34 Table of Contents We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the U.S. on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings.
Total non-operating expenses increased $33.3 million (462%), primarily due to the net loss on our share of losses in Cash Converters’ net results related to their non-cash goodwill impairment charge and interest expense.
Total non-operating income increased $43.6 million (108%), primarily due to recognition in the prior year of our share of losses in Cash Converters’ net results related to their non-cash goodwill impairment charge, a reduction of interest expense and an increase in interest income.
Total revenues were up 26% (16% on a constant currency basis), while gross profit increased by 25% (16% on a constant currency basis), primarily due to increased PSC, higher merchandise sales and improved gross profit. 29 Table of Contents PSC increased 22% (13% on constant currency basis) as a result of higher average PLO and yields.
On a same store basis, PLO increased 7% (16% on a constant currency basis) due to improved operational performance and increased loan demand. 29 Table of Contents Total revenues were up 13% (11% on a constant currency basis), and gross profit increased by 18% (15% on a constant currency basis), reflecting increased PSC, higher merchandise sales and improved gross profit.
Convertible Notes For a description of the terms of our convertible notes, including the associated conversion and other related features and transactions, see Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Contractual Obligations Below is a summary of our cash needs to meet future aggregate contractual obligations as of September 30, 2023: Payments due by Period (in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations (a) $ 367,762 $ 34,389 $ 103,373 $ — $ 230,000 Interest on long-term debt obligations 58,535 11,822 18,682 17,250 10,781 Lease obligations (b) 310,275 76,290 124,035 69,358 40,592 Total (c) (d) $ 736,572 $ 122,501 $ 246,090 $ 86,608 $ 281,373 (a) Excludes debt discount and deferred financing costs as well as convertible features.
Convertible Notes For a description of the terms of our convertible notes, including the associated conversion and other related features and transactions, see Note 7: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplementary Data.” Contractual Obligations Below is a summary of our cash needs to meet future aggregate contractual obligations as of September 30, 2024: Payments due by Period (in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations (a) $ 333,373 $ 103,373 $ — $ — $ 230,000 Interest on long-term debt obligations 46,713 10,057 17,250 17,250 2,156 Lease obligations (b) 293,380 76,639 118,792 59,939 38,010 Total (c) (d) $ 673,466 $ 190,069 $ 136,042 $ 77,189 $ 270,166 (a) Excludes debt discount and deferred financing costs as well as convertible features.
Fiscal Year Ended September 30, Change (in thousands) 2023 2022 Gross profit: Pawn service charges $ 383,772 $ 320,865 20% Merchandise sales 615,446 532,886 15% Merchandise sales gross profit 220,667 203,504 8% Gross margin on merchandise sales 36 % 38 % (200) bps Jewelry scrapping sales 49,528 32,033 55% Jewelry scrapping gross profit 5,104 3,337 53% Gross margin on jewelry scrapping sales 10 % 10 % 0 bps Other revenues, net 295 441 (33)% Gross profit 609,838 528,147 15% Store expenses 418,574 357,417 17% General and administrative 67,529 64,342 5% Impairment of goodwill, intangible and other assets 4,343 — * Depreciation and Amortization 32,131 32,140 —% Loss (gain) on sale or disposal of assets and other 208 (674) (131)% Other income (5,097) — * Total operating expenses 517,688 453,225 14% Interest expense 16,456 9,972 65% Interest income (7,470) (817) * Equity in net loss (income) of unconsolidated affiliates 28,459 (1,779) * Other expense (income) 3,072 (167) * Total non-operating expenses 40,517 7,209 462% Income before income taxes 51,633 67,713 (24)% Income tax expense 13,170 17,553 (25)% Net income $ 38,463 $ 50,160 (23)% Net pawn earning assets: Pawn loans $ 245,766 $ 210,009 17% Inventory, net 166,477 151,615 10% Total net pawn earning assets $ 412,243 $ 361,624 14% * Represents a percentage computation that is not mathematically meaningful. 26 Table of Contents Pawn loans outstanding (“PLO”) increased $35.8 million (17%) to $245.8 million due to improved operational performance and continued strong pawn demand.
Fiscal Year Ended September 30, Change (in thousands) 2024 2023 Gross profit: Pawn service charges $ 436,545 $ 383,772 14% Merchandise sales 663,736 615,446 8% Merchandise sales gross profit 236,333 220,667 7% Gross margin on merchandise sales 36 % 36 % 0 bps Jewelry scrapping sales 61,082 49,528 23% Jewelry scrapping gross profit 9,156 5,104 79% Gross margin on jewelry scrapping sales 15 % 10 % 500 bps Other revenues 239 295 (19)% Gross profit 682,273 609,838 12% Operating expenses: Store expenses 461,055 418,574 10% General and administrative 75,557 67,529 12% Impairment of other assets 843 4,343 (81)% Depreciation and Amortization 33,069 32,131 3% (Gain) loss on sale or disposal of assets and other (16) 208 (108)% Other operating income (765) (5,097) (85)% Total operating expenses 569,743 517,688 10% Interest expense 13,585 16,456 (17)% Interest income (10,575) (7,470) 42% Equity in net (income) loss of unconsolidated affiliates (4,711) 28,459 117% Other (income) expense (1,377) 3,072 145% Total non-operating (income) expenses (3,078) 40,517 108% Income before income taxes 115,608 51,633 124% Income tax expense 32,513 13,170 147% Net income $ 83,095 $ 38,463 116% Net pawn earning assets: Pawn loans $ 274,084 $ 245,766 12% Inventory, net 191,923 166,477 15% Total net pawn earning assets $ 466,007 $ 412,243 13% 26 Table of Contents Pawn loans outstanding (“PLO”) increased $28.3 million (12%) to $274.1 million due to improved operational performance and continued strong pawn demand.
The Board has reserved the right to modify, suspend or terminate the program at any time. Through September 30, 2023, we have repurchased and retired 1,627,045 shares of our Class A Common Stock for $14.0 million, which amount was allocated between “Additional paid-in capital” and “Retained earnings” in our Consolidated Balance Sheets.
As of September 30, 2024, we have repurchased 2,845,548 shares of our Class A Common Stock under the program for $26.0 million which amount was allocated between “Additional paid-in capital” and “Retained earnings” in our Consolidated Balance Sheets.
Inventory and Cost of Goods Sold We consider our estimates of obsolete or slow-moving inventory and shrinkage in determining the appropriate overall valuation allowance for inventory. We monitor our sales margins for each type of inventory on an ongoing basis and compare to historical margins. Significant variances in those margins may require a revision to future inventory reserve estimates.
We monitor our sales margins for each type of inventory on an ongoing basis and compare to historical margins. Significant variances in those margins may require a revision to future inventory reserve estimates. We have historically revised our reserve pertaining to jewelry inventory depending on the current price of gold and resulting trends in margins.
Pawn segment: Fiscal Year Ended September 30, Change (in thousands) 2023 2022 Gross profit: Pawn service charges $ 285,919 $ 240,982 19% Merchandise sales 432,578 391,958 10% Merchandise sales gross profit 164,704 161,717 2% Gross margin on merchandise sales 38 % 41 % (300) bps Jewelry scrapping sales 43,305 25,739 68% Jewelry scrapping sales gross profit 5,596 2,984 88% Gross margin on jewelry scrapping sales 13 % 12 % 100 bps Other revenues 119 83 43% Gross profit 456,338 405,766 12% Segment operating expenses: Store expenses 299,319 266,114 12% Depreciation and amortization 10,382 10,552 (2)% Loss on sale or disposal of assets and other 115 51 125% Segment operating contribution 146,522 129,049 14% Other segment income (2) (2) —% Segment contribution $ 146,524 $ 129,051 14% Other data: Average monthly ending pawn loan balance per store (a) $ 327 $ 287 14% Monthly average yield on pawn loans outstanding 14 % 13 % 100 bps Pawn collateral - general merchandise 34 % 36 % (6)% Pawn collateral - jewelry 66 % 64 % 3% (a) Balance is calculated based on the average of the monthly ending balance averages during the applicable period.
Pawn segment: Fiscal Year Ended September 30, Change (in thousands) 2024 2023 Gross profit: Pawn service charges $ 322,362 $ 285,919 13% Merchandise sales 459,251 432,578 6% Merchandise sales gross profit 170,357 164,704 3% Gross margin on merchandise sales 37 % 38 % (100) bps Jewelry scrapping sales 54,344 43,305 25% Jewelry scrapping sales gross profit 8,418 5,596 50% Gross margin on jewelry scrapping sales 15 % 13 % 200 bps Other revenues 126 119 6% Gross profit 501,263 456,338 10% Segment operating expenses: Store expenses 325,816 299,319 9% Depreciation and amortization 10,147 10,382 (2)% Loss on sale or disposal of assets and other 3 115 (97)% Segment operating contribution 165,297 146,522 13% Other segment income 7 (2) * Segment contribution $ 165,290 $ 146,524 13% Other data: Average monthly ending pawn loan balance per store (a) $ 361 $ 327 10% Monthly average yield on pawn loans outstanding 14 % 14 % — bps Pawn collateral - general merchandise 34 % 34 % —% Pawn collateral - jewelry 66 % 66 % —% * Represents a percentage computation that is not mathematically meaningful.
Total revenues increased $162.8 million (18%) and gross profit increased 15%, reflecting improved pawn service charge (“PSC”) revenue, merchandise sales and merchandise sales gross profit. PSC increased $62.9 million (20%) as a result of higher average PLO and yields.
Total revenues increased $112.6 million (11%) and gross profit increased 12%, reflecting improved pawn service charge (“PSC”) revenue, merchandise sales and merchandise sales gross profit. PSC increased $52.8 million (14%) as a result of higher average PLO. Merchandise sales increased $48.3 million (8%). Merchandise sales gross margin remains within our targeted range at 36%.
Store expenses increased $28.0 million, up 31% (20% on a constant currency basis), primarily due to increases in minimum wage and headcount, higher store count and, to a lesser extent, expenses related to our loyalty program and rent. Same-store expenses increased 26% (15% on a constant currency basis).
Store expenses increased $16.0 million, up 13% (11% on a constant currency basis), primarily due to increased labor headcount, in line with store activity and minimum wage increases and, to a lesser extent, rent associated with lease renewals.. Same-store expenses increased 12% (9% on a constant currency basis).
Fiscal Year Ended September 30, (in thousands) 2023 (GAAP) 2022 (GAAP) Change (GAAP) 2023 (Constant Currency) Change (Constant Currency) Gross profit: Pawn service charges $ 97,853 $ 79,883 22% $ 90,605 13% Merchandise sales 182,868 140,928 30% 167,810 19% Merchandise sales gross profit 55,963 41,787 34% 51,368 23% Gross margin on merchandise sales 31 % 30 % 100 bps 31 % 100 bps Jewelry scrapping sales 6,223 6,294 (1)% 5,778 (8)% Jewelry scrapping sales gross profit (492) 353 (239)% (445) (226)% Gross margin on jewelry scrapping sales (8) % 6 % (1,400) bps (8) % (1,400) bps Other revenues, net 121 247 (51)% 113 (54)% Gross profit 153,445 122,270 25% 141,641 16% Segment operating expenses: Store expenses 119,255 91,303 31% 109,552 20% Depreciation and amortization 9,191 7,913 16% 8,412 6% Other income (5,097) — 100% (4,481) 100% Segment operating contribution 30,096 23,054 31% 28,158 22% Other segment income (a) (1,562) (1,000) 56% (1,723) 72% Segment contribution $ 31,658 $ 24,054 32% $ 29,881 24% Other data: Average monthly ending pawn loan balance per store (b) $ 73 $ 64 14% $ 67 5% Monthly average yield on pawn loans outstanding 17 % 16 % 100 bps 17 % 100 bps Pawn collateral - general merchandise 68 % 72 % (6)% 67 % (7)% Pawn collateral - jewelry 32 % 28 % 14% 33 % 18% * Represents a percentage computation that is not mathematically meaningful.
Fiscal Year Ended September 30, (in thousands) 2024 (GAAP) 2023 (GAAP) Change (GAAP) 2024 (Constant Currency) Change (Constant Currency) Gross profit: Pawn service charges $ 114,183 $ 97,853 17% $ 111,784 14% Merchandise sales 204,485 182,868 12% 199,012 9% Merchandise sales gross profit 65,976 55,963 18% 64,138 15% Gross margin on merchandise sales 32 % 31 % 100 bps 32 % 100 bps Jewelry scrapping sales 6,738 6,223 8% 6,779 9% Jewelry scrapping sales gross profit 738 (492) 250% 739 250% Gross margin on jewelry scrapping sales 11 % (8) % 238% 11 % 238% Other revenues, net 78 121 (36)% 76 (37)% Gross profit 180,975 153,445 18% 176,737 15% Segment operating expenses: Store expenses 135,239 119,255 13% 131,831 11% Depreciation and amortization 8,865 9,191 (4)% 8,599 (6)% Other operating income — (5,097) 100% — 100% Segment operating contribution 36,871 30,096 23% 36,307 21% Other segment income (a) (1,970) (1,562) 26% (1,846) 18% Segment contribution $ 38,841 $ 31,658 23% $ 38,153 21% Other data: Average monthly ending pawn loan balance per store (b) $ 83 $ 73 14% $ 82 12% Monthly average yield on pawn loans outstanding 16 % 17 % (100) bps 16 % (100) bps Pawn collateral - general merchandise 64 % 68 % (6)% 65 % (4)% Pawn collateral - jewelry 36 % 32 % 13% 35 % 9% * Represents a percentage computation that is not mathematically meaningful.
See Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for further discussion.
Interest expense decreased $2.9 million (17%), primarily driven by the prior year net loss recorded on the partial extinguishments of the 2024 convertible notes and 2025 convertible notes. See Note 7: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for further discussion.
The $2.4 million decrease in cash flows used in investing activities was primarily due to an increase of $33.4 million in net pawn lending outflows and a $29.8 million net increase in cash flows used to fund acquisitions, strategic investments and capital expenditures, the largest of which is $15.0 million related to a note receivable from Founders, as discussed in Note 5: Strategic Investments in Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” These were offset by a $61.9 million increase in cash inflows from the sale of forfeited collateral.
The $1.0 million increase in cash flows used in investing activities was primarily due to an increase of $51.7 million in net pawn lending outflows, offset by a $27.0 million increase in cash inflows from the sale of forfeited collateral and a $23.7 million net decrease in cash flows used to fund strategic investments, capital expenditures and acquisitions.
As of September 30, 2023, the balance of our PSC receivable was $38.9 million. Assuming the average forfeiture rate increased or decreased by 10%, our pawn service charges receivable balance as of September 30, 2023 would have increased or decreased by approximately $1.2 million.
Assuming the average forfeiture rate increased or decreased by 10%, our pawn service charges receivable balance as of September 30, 2024 would have increased or decreased by approximately $1.4 million. Inventory and Cost of Goods Sold We consider our estimates of obsolete or slow-moving inventory and shrinkage in determining the appropriate overall valuation allowance for inventory.
Segment contribution was up 32% to $31.7 million (24% on a constant currency basis). This increase was primarily due to the reversal of contingent consideration liability in connection with a previously completed acquisition, which was recorded to “Other income,” and the changes in revenue and store expenses described above.
Segment contribution was up 23% to $38.8 million (21% 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 operating income.” During fiscal 2024, net store count in our Latin America pawn segment increased by 35 due to the opening of 40 de novo stores and the consolidation of five stores.
See Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for further discussion. Interest income increased $4.8 million, due primarily to our treasury management with increased market interest rates.
Interest expense decreased $2.9 million, primarily driven by the prior year net loss recorded on the partial extinguishments of the 2024 convertible notes and 2025 convertible notes. See Note 7: Debt of Notes to Consolidated Financial Statements in “Part II, Item 8 — Financial Statements and Supplemental Data” for further discussion.
We base our estimate of collectible loans on several inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following months. Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition.
Pawn Loan Revenue Recognition We record PSC using the effective interest method over the life of the loan for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following months.
PLO continued to increase, ending the year at $190.6 million, up 17% in total and 13% on a same store basis due to improved customer service and increased pawn demand. Total revenues increased 16% and gross profit increased 12%, primarily due to increased PSC. PSC increased 19% as a result of higher average PLO and yields.
(a) Balance is calculated based on the average of the monthly ending balance averages during the applicable period. PLO ended the year at $214.3 million, up 12% on a total and same store basis. Total revenues increased 10% and gross profit increased 10%, primarily due to increased PSC and higher merchandise sales.
We have historically revised our reserve pertaining to jewelry inventory depending on the current price of gold and resulting trends in margins. Future declines in gold prices may cause an increase in reserve rates pertaining to jewelry inventory.
Future declines in gold prices may cause an increase in reserve rates pertaining to jewelry inventory. As of September 30, 2024, the gross balance of our inventory was $194.7 million, for which we have included reserves of $2.7 million.
Operating expenses increased $64.5 million (14%) primarily due to (a) a $61.2 million increase in store expenses as a result of increased labor in-line with store activity, higher store count and, to a lesser extent, expenses related to our loyalty program and (b) a $3.2 million increase in general and administrative expenses primarily due to an increase in costs related to incentive compensation, insurance and our Workday implementation, partially offset by the litigation accrual charge of $2.0 million recorded in the prior period.
Operating expenses increased $52.1 million (10%) primarily due to (a) a $42.5 million increase in store expenses as a result of increased labor driven by inflationary and minimum wage increases and, to a lesser extent, expenses related to rent and (b) a $8.0 million increase in general and administrative expenses, primarily due to labor, incentive compensation and to a lesser extent, cost related to the implementation and ongoing support for our Workday ERP system.
Further, the Company repurchased and retired 1,389,102 shares of our Class A Common Stock for $12.0 million under the Common Stock Repurchase Program during the fiscal year ended September 30, 2023.
Further, 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. During 2024, the Company repurchased and retired 1,218,503 shares of our Class A Common Stock for $12.0 million under the Common Stock Repurchase Program.
PLO improved to $55.1 million, up 19% (7% on constant currency basis). On a same store basis, PLO increased 16% (4% on a constant currency basis) as consumer demand increased.
PLO improved to $59.8 million, up 8% (18% on constant currency basis).
General and administrative expenses increased $3.2 million (5%), primarily due to the impact related to the reversal of incentive compensation for the departed CEO in the prior year and to a lesser extent, an overall increase in incentive-based compensation, and costs primarily related to our Workday implementation, partially offset by the litigation accrual charge of $2.0 million recorded in the prior period.
Segment contribution increased $60.3 million or 40%, primarily due to the improved operating results of the segments, as discussed above. General and administrative expenses increased $8.0 million (12%), primarily due to labor, incentive compensation and, to a lesser extent, costs related to the implementation and ongoing support of our Workday ERP system.
Removed
Merchandise sales increased $82.6 million (15%), driven primarily by our continued focus on customer engagement, pricing merchandise to maintain strong inventory turnover and an increase in stores. Merchandise sales gross margin remains within our targeted range at 36%.
Added
See “Part I, Item 1A — Risk Factors” and “Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results” below. Business Development On September 11, 2024, the Company announced entry into an acquisition agreement with Presta Dinero, S.A. de C.V. for the purchase of 53 pawn stores in Mexico.
Removed
Interest expense increased $6.5 million, primarily driven by the net loss recorded on the partial extinguishments of the 2024 convertible notes and 2025 convertible notes, and higher average total debt outstanding at overall higher average effective interest rates due to the issuance of the 2029 convertible notes in December 2022.
Added
While at the time we expected to complete the transaction by October 31, 2024, the transaction has not yet closed and the parties remain in discussion.
Removed
Income tax expense decreased $4.4 million primarily due to the decrease in income before income taxes of $16.1 million, offset by an increase in tax expense for the non-deductible loss realized on the refinancing of the convertible notes in the current year.
Added
The interest income increase is primarily due to our treasury management with increased market interest rates. Income tax expense increased $19.3 million, primarily due to the increase in income before income taxes of $64.0 million, an increase in non-deductible expense in Latin America and accrued withholding taxes on prior earnings that are no longer permanently reinvested.
Removed
Merchandise sales increased 10%, primarily driven by our continued focus on customer engagement and pricing merchandise to maintain strong inventory turnover. Offsetting the sales increase, merchandise sales gross margin decreased 300 bps to 38%, reflecting a return to normalized margins.
Added
PSC increased 13% as a result of higher average PLO. Merchandise sales increased 6%. Offsetting the sales increase, merchandise sales gross margin decreased 100 bps to 37%. Store expenses increased 9% (8% on a same store basis), primarily due to labor costs driven by inflation. Segment contribution increased $18.8 million due to the changes described above.
Removed
Store expenses increased 12% (10% on a same store basis), primarily due to increased labor in-line with store activity, higher store count and, to a lesser extent, expenses related to our loyalty program. Segment contribution increased $17.5 million due to the changes described above.
Added
PSC increased 17% (14% on constant currency basis) as a result of higher average PLO. Merchandise sales increased 12% (9% on a constant currency basis) and 11% on a same store basis (8% on a constant currency basis). Merchandise sales gross margin increased 100 bps to 32%.
Removed
Merchandise sales increased 30% (19% on a constant currency basis) and 24% on a same store basis (14% on a constant currency basis). Merchandise sales increase was driven primarily by our continued focus on customer engagement, pricing merchandise to maintain strong inventory turnover and increase in stores. Merchandise sales gross margin increased 100 bps to 31%, within our target range.
Added
Interest income increased $1.7 million, due primarily to our treasury management with increased market interest rates. Income tax expense increased $19.3 million primarily due to the increase in income before income taxes of $64.0 million, an increase in non-deductible expense in Latin America and accrued withholding taxes on prior earnings that are no longer permanently reinvested.
Removed
During fiscal 2023, net store count in our Latin America pawn segment increased by 42 due to the opening of 44 de novo stores and the consolidation of 2 stores.
Added
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. 32 Table of Contents 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.
Removed
Other Investments and Cash Converters The following table presents selected summary financial data for our Other Investments and Cash Converters segments after translation to U.S. dollars from its functional currency of primarily Australian dollars: Fiscal Year Ended September 30, Change (in thousands) 2023 2022 Gross profit: Consumer loan fees and interest $ 55 $ 111 (50)% Gross profit 55 111 (50)% Segment operating expenses: Interest income (1,500) — 100% Equity in net loss (income) of unconsolidated affiliates 28,459 (1,779) * Segment operating (loss) contribution (26,904) 1,890 * Other segment loss 31 52 (40)% Segment (loss) contribution $ (26,935) $ 1,838 * * Represents a percentage computation that is not mathematically meaningful.
Added
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.
Removed
Segment contribution decreased $3.7 million or 2%, primarily due to the net loss on our share of losses in Cash Converters’s net results related to their non-cash goodwill impairment charge, partially offset by the improved operating results of the segments above.
Added
The Board has reserved the right to modify, suspend or terminate the program at any time. 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.
Removed
Interest expense increased $6.5 million (65%), primarily driven by the net loss recorded on the partial extinguishments of the 2024 convertible notes and 2025 convertible notes, and higher average total debt outstanding at overall higher average effective interest rates due to the issuance of the 2029 convertible notes during December 2022.
Added
Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition. As of September 30, 2024, the balance of our PSC receivable was $44.0 million.
Removed
Income tax expense decreased $4.4 million primarily due to a decrease in income before income taxes of $16.1 million, offset by an increase in tax expense for the non-deductible loss realized on the refinancing of the convertible notes in the current year.
Removed
We have included valuation allowances against deferred tax assets for net operating losses and tax credits not expected to be utilized based on specific facts and estimates for each jurisdiction.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+1 added−0 removed4 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+1 added−0 removed4 unchanged
2023 filing
2024 filing
Biggest changeAs of September 30, 2023, the Guatemalan quetzal strengthened approximately 5% Q1.00 Guatemalan to $0.1302 U.S. from $0.1243 U.S. as of September 30, 2022. We have currently assumed indefinite reinvestment of earnings and capital in Latin America. Accumulated translation gains or losses related to any future repatriation of earnings or capital would impact our earnings in the period of repatriation.
Biggest changeAs of September 30, 2024, the Guatemalan quetzal strengthened approximately 2% Q1.00 Guatemalan to $0.1325 U.S. from $0.1302 U.S. as of September 30, 2023. We have currently assumed indefinite reinvestment of earnings and capital in Latin America in excess of the $20.0 million of prior earnings for which applicable withholding taxes have been accrued as of September 30, 2024.
The translation adjustment from Cash Converters through June 30, 2023 (included in our September 30, 2023 results on a three-month lag) was a $4.4 million increase to stockholders’ equity, excluding income tax impacts. As of September 30, 2023, $1.00 Australian dollar was essentially flat at $0.6452 U.S. as compared to $0.6480 in the prior year.
The translation adjustment from Cash Converters through June 30, 2024 (included in our September 30, 2024 results on a three-month lag) was a nominal increase to stockholders’ equity, excluding income tax impacts. As of September 30, 2024, $1.00 Australian dollar strengthened at $0.6944 U.S. as compared to $0.6452 in the prior year.
The translation adjustment from Latin America primarily representing the change of the Mexican peso during the fiscal year ended September 30, 2023 was a $20.9 million increase to stockholders’ equity. As of September 30, 2023, the Mexican peso strengthened approximately 16% to $1.00 Mexican to $0.0574 U.S. from $0.0495 U.S. as of September 30, 2022.
The translation adjustment from Latin America primarily representing the change of the Mexican peso during the fiscal year ended September 30, 2024 was a $20.5 million decrease to stockholders’ equity. As of September 30, 2024, the Mexican peso weakened approximately 11% to $1.00 Mexican to $0.0508 U.S. from $0.0574 U.S. as of September 30, 2023.
To a lesser degree, our operations are affected by fluctuations in the exchange rate of the Honduran lempira. We cannot predict the future valuation of foreign currencies or how further movements in exchange rates could affect our future earnings or financial position due to the interrelationship of operating results and exchange rates. 36 Table of Contents
We cannot predict the future valuation of foreign currencies or how further movements in exchange rates could affect our future earnings or financial position due to the interrelationship of operating results and exchange rates. 36 Table of Contents
Added
Accumulated translation gains or losses related to any future repatriation of earnings or capital would impact our earnings in the period of repatriation. To a lesser degree, our operations are affected by fluctuations in the exchange rate of the Honduran lempira.