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What changed in EZCORP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EZCORP INC's 2022 and 2023 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 2023 report.

+184 added−178 removedSource: 10-K (2023-11-15) vs 10-K (2022-11-16)

Top changes in EZCORP INC's 2023 10-K

184 paragraphs added · 178 removed · 148 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+8 added−8 removed80 unchanged
Biggest changePawn Latin America Pawn Other Investments Consolidated As of September 30, 2019 512 480 22 1,014 New locations opened — 23 — 23 Locations acquired — — — — Locations sold, combined or closed (7) (3) (22) (32) 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 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.” 5 Table of Contents Pawn Activities At our pawn stores, we advance cash against the value of collateralized tangible personal property.
Biggest changePawn 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.
Various tools are used to globally demonstrate commitment to our principles, values, and positive culture, including a plain-language Code of Conduct and supporting policies, annual training on expectations and clear communications from executive management reinforcing ethical behavior and a positive culture.
Various tools are used globally to demonstrate commitment to our principles, values and positive culture, including a plain-language Code of Conduct and supporting policies, annual training on expectations and clear communications from executive management reinforcing ethical behavior and a positive culture.
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.
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.” 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.
The federal Gun Control Act of 1968 and regulations issued by the Bureau of Alcohol, Tobacco and Firearms also require each pawn store dealing in firearms to maintain a permanent written record of all receipts and dispositions of firearms.
The federal Gun Control Act of 1968 and regulations issued by the Bureau of Alcohol, Tobacco, Firearms and Explosives also require each pawn store dealing in firearms to maintain a permanent written record of all receipts and dispositions of firearms.
Additionally, on an annual basis (U.S.) gender and racial/ethnic analysis is performed to ensure pay equity. • We engage nationally recognized outside compensation and benefits consulting firms to independently evaluate the effectiveness of our executive compensation and to provide benchmarking against our selected peer group, which includes direct competitors in the pawn industry and similarly-sized companies from relevant industries that serve similar customer bases, operate in the retail or consumer finance industries and typically have similar operating dynamics. • We 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 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.
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 $170 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 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.
To ensure we address issues raised in the survey, all people leaders at the District Manager and above level will have Engagement Objectives for fiscal 2023, guided by actions that will yield the greatest business and Team Member impact.
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.
PROFECO regulates the form and terms of pawn loan contracts (but not interest or service charge rates) and defines certain operating standards and procedures for pawnshops, including retail 13 Table of Contents operations, and establishes registration, disclosure, bonding and reporting requirements. There are significant fines and sanctions, including operating suspensions, for failure to comply with PROFECO’s rules and regulations.
PROFECO regulates the form and terms of pawn loan contracts (but not interest or service charge rates) and defines certain operating standards and procedures for pawnshops, including retail operations, and establishes registration, disclosure, bonding and reporting requirements. There are significant fines and sanctions, including operating suspensions, for failure to comply with PROFECO’s rules and regulations.
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.
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.
Our risk management structure consists of asset protection, compliance and internal audit departments, which monitor the inventory system, lending practices, regulatory compliance and compliance with our policies and procedures. We perform full physical audits of inventory at 6 Table of Contents each store at least annually, and more often in higher risk stores or those experiencing higher shrinkage.
Our risk management structure consists of asset protection, compliance and internal audit departments, which monitor the inventory system, lending practices, regulatory compliance and compliance with our policies and procedures. We perform full physical audits of inventory at each store at least annually, and more often in higher risk stores or those experiencing higher shrinkage.
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). 11 Table of Contents 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 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.
(2) The term Management is used to describe Team Members with one or more direct reports. Total Rewards Our compensation programs are designed to align the compensation of Team Members with individual and Company performance and to provide the proper incentives to attract, retain and motivate Team Members to achieve results.
(2) The term Management is used to describe Team Members with one or more direct reports. 8 Table of Contents Total Rewards Our compensation programs are designed to align the compensation of Team Members with individual and Company performance and to provide the proper incentives to attract, retain and motivate Team Members to achieve results.
The industry consists of a few large operators (of which we are the second largest) and then independent operators who primarily own one to three locations . The pawn industry in Latin America is also fragmented, but less so than in the United States. The industry consists of pawn stores owned by independent operators and chains, including some not-for-profit organizations.
The industry consists of a few large operators (of which we are the second largest) and then independent operators who primarily own one-to-three locations . The pawn industry in Latin America is also fragmented, but less so than in the U.S. The industry consists of pawn stores owned by independent operators and chains, including some not-for-profit organizations.
Our engagement score is six points higher than the global benchmark, which contains data from over 900 companies of varying size across a variety of industries (Finance, Healthcare, Manufacturing, Professional Services, Retail, Technology and Utilities) and includes results from over eight million respondents located in over 150 countries. Our top strengths were Career, Customer Focus and Growth.
Our 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.
In addition, we must comply with the 12 Table of Contents Brady Handgun Violence Prevention Act, which requires us to conduct a background check before releasing, selling or otherwise disposing of firearms.
In addition, we must comply with the Brady Handgun Violence Prevention Act, which requires us to conduct a background check before releasing, selling or otherwise disposing of firearms.
In fiscal 2022, these stores represented 23% of our consolidated gross profit as the average scale of Latin America pawn stores is smaller than in the U.S. We see opportunity for further expansion in Latin America through both acquisitions and de novo openings.
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.
Competitive factors in our retail operations include the ability to provide customers with a variety of merchandise at an exceptional value coupled with exceptional customer service and convenient locations. The pawn industry in the United States is large, relatively mature and highly fragmented.
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.
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 improving capabilities to manage operational, financial, regulatory, compliance, information security and reputational risk. • Environment, Social and Governance (ESG) — We prioritize developing the foundational elements of a comprehensive and integrated sustainability program to make everyday living more affordable and sustainable.
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.
At our pawn stores, we advance cash against the value of collateralized tangible personal property and sell merchandise to customers looking for good value. The merchandise we sell primarily consists of second-hand collateral forfeited from our pawn activities or merchandise purchased from customers.
At our pawn stores, we advance cash against the value of collateralized tangible personal property and sell merchandise to customers looking for good value. The merchandise we sell primarily consists of pre-owned collateral forfeited from our pawn activities or merchandise purchased from customers.
In Mexico, PSC rates generally vary between 15% and 21% per month as permitted by applicable law, and the pawn primary term is 30 days. Individual pawn transactions typically average between 1,100 and 1,400 Mexican pesos, or approximately $60 to $70 on average using the average exchange rate for fiscal 2022.
In 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.
Our purpose statement: “We exist to serve our customers’ short-term cash needs, helping them to live and enjoy their lives.
Our purpose statement: “We exist to serve our customers’ short-term cash and pre-owned retail needs, helping them to live and enjoy their lives.
In GPMX, PSC rates generally vary between 12% and 18% per month as permitted by applicable law, and the pawn primary term is 30 days. Individual pawn transactions are made in the local currency of the country and typically average between $100 and $120 using the average exchange rates for fiscal 2022.
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.
(“SMG”), which owns and operates 21 pawn stores principally in the Caribbean, with plans to build and acquire more stores in that region. We generate revenues primarily from pawn service charges (“PSC”) on pawn loans outstanding (“PLO”), merchandise sales and jewelry scrapping. We remain focused on optimizing our balance of PLO and the resulting higher PSC.
(“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.
Our investment in store-level Team Members produced tangible results during fiscal 2022: • High scoring questions in our 2022 Global Employee Engagement Survey included “I know the career path(s) available to me at EZCORP” (with an 86% favorability rating) and “I have good opportunities to learn and develop at EZCORP” (with an 83% favorability rating). • Over 65% of managerial positions are filled via internal promotion.
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.
To capture direct customer feedback, we have enabled Google Reviews across all stores and have received over 125,000 Google Reviews with an average satisfaction rating of 4.8 out of 5 in the U.S. 10 Table of Contents • 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 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.
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, 2022, we had a closing PLO balance of $210.0 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, 2023, we had a closing PLO balance of $245.8 million.
Thus, we do not maintain or rely on mass supply, distribution or warehousing facilities. • Virtually all of the merchandise we sell is pre-owned, which contributes to second-hand goods recycling and the circular economy.
Thus, we do not maintain or rely on mass supply, distribution or warehousing facilities. 9 Table of Contents • Virtually all of the merchandise we sell is pre-owned, which contributes to pre-owned goods recycling and the circular economy.
Fiscal 2022 U.S. Race and Ethnicity Demographics (1) (2) 8 Table of Contents Fiscal 2022 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.
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.
The following chart presents sources of gross profit, including PSC, merchandise sales gross profit ("Merchandise sales GP") and jewelry scrapping gross profit ("Jewelry scrapping GP") for fiscal 2022, fiscal 2021 and fiscal 2020: 4 Table of Contents The following charts present sources of gross profit by geographic disbursement for fiscal 2022, fiscal 2021 and fiscal 2020: 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 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.
Overview of Our Business At September 30, 2022, we operated a total of 1,175 locations, consisting of: • 515 U.S. pawn stores (operating primarily as EZPAWN or Value Pawn & Jewelry); • 528 Mexico pawn stores (operating primarily as Empeño Fácil and Cash Apoyo Efectivo); and 3 Table of Contents • 132 pawn stores in Guatemala, El Salvador and Honduras (operating as GuatePrenda and MaxiEfectivo).
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).
Inventory counts are completed daily for jewelry and firearms, and other inventory categories more susceptible to theft are cycle counted multiple times annually. We record shrink adjustments for known losses at the conclusion of each inventory count. These adjustments are recorded as estimates during interim periods and as discovered during cycle counts.
Inventory counts are completed daily for jewelry and firearms, and other inventory categories more susceptible to theft are cycle counted multiple times annually. We record shrink adjustments for known losses at the conclusion of each inventory count.
In fiscal 2022, PSC accounted for approximately 36% of our total revenues and 61% of our gross profit. In the U.S., our PSC rates generally vary between 13% and 25% per month as permitted by applicable law, and the pawn term generally ranges between 30 and 90 days. Individual pawn transactions typically average between $140 and $170.
In 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.
To reduce energy consumption, we have installed energy-efficient LED lighting in 70% of our U.S. stores and are working to convert the remaining stores across all geographies. • In all of our facilities, including our corporate support offices, we promote environmental stewardship by reducing consumption, recycling paper products (approximately 1 million pounds across all U.S. locations during fiscal 2022) and responsibly disposing of end-of-life computers, electronics and related accessories through recycling or other sound e-waste processing.
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.
In fiscal 2022, we sold more than 5.6 million pre-owned items, including over 3.2 million items in the consumer electronics, camera and household goods categories, 1.5 million other general merchandise items (such as tools and musical instruments) and 775,000 jewelry items. In addition, through our jewelry scrapping activities, we recycle significant volumes of gold and diamonds.
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.
Talent Management and Development We employ approximately 7,000 Team Members across all our geographies, including over 3,300 in United States, just under 2,900 in Mexico and around 800 in Central America. We 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 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.
Relevant aspects of the law specifically affecting the pawn industry include monthly reporting on “vulnerable activities,” which include pawn transactions exceeding 154,433.10 Mexican pesos and retail transactions of precious metals exceeding 154,433.10 Mexican pesos. Retail transactions of precious metals in cash exceeding 308,866.20 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 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.
ITEM 1. BUSINESS Purpose, Vision and Strategy EZCORP, Inc. is a leading provider of pawn services in the United States and Latin America with over 1,175 locations and approximately 7,000 Team Members. 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 1,231 locations and more than 7,500 Team Members. We are a Delaware corporation headquartered in Austin, Texas.
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”); and • Other Investments, which includes our equity interest in Cash Converters and our investments in RDC and SMG.
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.
In fact, four of the seven members of our Board of Directors meet all of the “independence” requirements set forth in the Nasdaq Listing Rules, and none of the independent directors have any past or existing relationship with our controlling stockholder outside of their Board service. • All of our standing Board committees (Audit Committee, People and Compensation Committee and Nominating Committee) are comprised of solely independent directors. • We satisfy Nasdaq’s 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.
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.
Our focus areas for improvement included Team, Valued Teammate, and Work-Life Balance. Team Members provided over 9,200 comments with mixed sentiment, 26% positive, 39% neutral and 35% negative.
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.
For many of our customers, pawn transactions provide an essential and financially responsible lifeline for meeting their unexpected expenses. Our retail activities rely primarily on local sourcing of pre-owned merchandise and the recirculation of those items back into the neighborhoods we serve. In short, our business is unique, essential and sustainable.
Our retail activities rely primarily on local sourcing of pre-owned merchandise and the recirculation of those items back into the neighborhoods we serve. In short, our business is unique, essential and sustainable.
That strategy consists of three fundamental pillars: • Strengthen the Core — Renewed focus on the unique and essential elements of our pawn business. • Cost Management and Simplification — Management of cost base through ongoing simplification. • Innovate and Grow — Broaden customer engagement to serve more customers more frequently in more locations.
That strategy consists of three fundamental pillars: • Strengthen the Core — Relentless focus on superior execution and operational excellence in our pawn business. • Cost Efficiency and Simplification — Shape a culture of cost efficiency through ongoing focus on simplification and optimization. • Innovate and Grow — Broaden customer engagement to serve more customers more frequently in more locations.
During fiscal 2022, we continued our expansion in Latin America with the opening of 28 de novo stores (20 in Mexico and 8 in Guatemala). We now own a total of 660 stores in Latin America, representing 56% of our total pawn stores.
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.
In our 2022 Global Employee Engagement Survey, 81% of participants responded positively to the question, “I feel a sense of belonging at EZCORP.” In fiscal 2022, we completed the actions of our two-year Diversity and Inclusion Strategic Plan with four goals: • Commitment and Accountability — Demonstrate commitment and accountability through corporate policy, communications and actions that advance the goals of the plan. • 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. • Sustainability — Identify and eliminate systemic barriers by embedding diversity and inclusion in all human capital life cycle policies and practices.
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.
Pawn 84% 86% 88% Latin America Pawn 79% 80% 78% Our ability to offer quality second-hand goods at prices significantly lower than original retail prices attracts value-conscious customers.
Our ability to offer quality pre-owned goods at prices significantly lower than original retail prices attracts value-conscious customers.
Health and Safety Our commitment to our Team Members is to provide a safe and injury-free workplace. We continue to invest in programs designed to improve physical, mental, and social well-being. Throughout our response to COVID-19, our priority has remained protecting the health and safety of our Team Members and customers.
Health and Safety Our commitment to our Team Members is to provide a safe and injury-free workplace. We continue to invest in programs designed to improve physical, mental and social well-being. Management and Oversight The People and Compensation Committee of the Board of Directors has primary responsibility for analyzing, advising and (as appropriate) approving executive compensation.
Our pawnbroking and related retail sales activities inherently contribute to the “circular economy” and promote environmental sustainability. We provide unique options for our customers to satisfy their needs for cash — options that are not offered by traditional lenders such as banks and credit unions, credit card providers or installment and short-term lenders.
We provide unique options for our customers to satisfy their needs for cash — options that are not offered by traditional lenders such as banks and credit unions, credit card providers, or installment and short-term lenders. For many of our customers, pawn transactions provide an essential and financially responsible lifeline for meeting their unexpected expenses.
Other Regulations — Our pawn business in Mexico is subject to the General Law of Administrative Responsibility (“GLAR”), effective July 2017, which requires us to implement an integrity policy that contains mechanisms to ensure integrity standards throughout the organization.
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.
All Executive Officers have a minimum of one objective related to People, generally broken into the areas of Employee Engagement Scores, Voluntary Attrition and Inclusion. 9 Table of Contents Environmental, Social and Governance (ESG) EZCORP is committed to meeting our customers’ needs in a responsible manner, and in that regard, we have aligned purpose, vision, values, guiding principles and business strategy with environmental, social and governance sustainability factors.
Environmental, Social and Governance (ESG) EZCORP is committed to meeting our customers’ needs in a responsible manner, and in that regard, we have aligned purpose, vision, values, guiding principles and business strategy with environmental, social and governance sustainability factors. Our pawnbroking and related retail sales activities inherently contribute to the “circular economy” and promote environmental sustainability.
Committee members are instrumental in the executive talent management and succession processes, including the review and attainment of annual objectives for our executive officers.
Committee members are instrumental in the executive talent management and succession processes, including the review and attainment of annual objectives for our executive officers. All Executive Officers have a minimum of one objective related to People, generally broken into the areas of Employee Engagement Scores, Voluntary Attrition and Inclusion.
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 700 stores across 14 countries. • We own approximately 14.6% of Rich Data Corporation (“RDC”), a Singapore-based software-as-a-service company that utilizes global financial services expertise, advanced artificial intelligence and non-traditional data to deliver a next-generation credit scoring and decisioning platform. • We own a preferred interest in a private company that has majority ownership in Simple Management Group, Inc.
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.
Human Capital Management Engagement Survey We launched a Global Employee Engagement Survey, administered by Glint, in June 2022, and had an 81% participation rate with an overall engagement score of 81.
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.
Rather, the customer may choose to repay the amount advanced or forfeit the collateralized merchandise. • Our stores facilitate transactions in a safe and secure environment for Team Members and customers.
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.
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.
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.
Removed
The redemption rate represents the percentage of pawns made that are repaid, renewed or extended, including pawns that may be extended multiple times in a given time period. The following table presents our redemption rates by segment: Fiscal Year Ended September 30, Redemption Rate 2022 2021 2020 U.S.
Added
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.
Removed
Key changes include: • Analyzing Diversity and Inclusion results within the Engagement Survey; • Providing Diversity Dashboard reporting to the Board of Directors and executive management; • Implementing annual training and education on Diversity and Inclusion matters; • Implementing Women’s Empowerment (U.S. and Latin America) and Black Empowerment (U.S.) Affinity Groups; • Implementing required “blind” resume review process for all corporate office hiring; and • Implementing a requirement that, for all Store Manager and above positions, the interview and selection process must include one diverse Team Member.
Added
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.
Removed
In fiscal 2022, our leadership team regularly reviewed and adapted our policies and practices based on evolving information related to the COVID-19 pandemic. Our pawn locations are provided with personal protective equipment and enhanced cleaning supplies and are required to adhere to appropriate protocols for social distancing, limiting density, taking temperatures and reporting exposures.
Added
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.
Removed
Management and Oversight The People and Compensation Committee of the Board of Directors has primary responsibility for analyzing, advising and (as appropriate) approving executive compensation.
Added
Current initiatives include supporting financial literacy efforts, working to eradicate food insecurity, empowering young people to succeed and other poverty intervention activities. • For a discussion of our Diversity and Inclusion initiatives, see “Human Capital Management — Diversity and Inclusion” above.
Removed
During the COVID-19 pandemic, we implemented various safety protocols, including social distancing, mask wearing and enhanced cleaning and sanitation practices, for the health and safety of our Team Members and customers. • Customer satisfaction measurement and feedback are key factors in improving our customer service and Team Member engagement.
Added
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.
Removed
Online payments are accepted on layaway, pawn extension and bulk payments, with electronic payment receipts delivered on these transactions. • Through the EZCORP Foundation Scholarship Fund, we provided financial assistance to the dependents of our U.S.-based Team Members pursuing higher education, and have issued a total of $180,000 in scholarship awards towards college expenses for recipients with demonstrated financial need, academic merit and commitment to leadership. • For a discussion of our Diversity and Inclusion initiatives, see “Human Capital Management — Diversity and Inclusion” above.
Added
We are the second largest for-profit operator in Mexico and the largest operator in Guatemala.
Removed
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.
Added
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.
Removed
State and local agencies often have authority to suspend store operations pending resolution of actual or alleged regulatory, licensing and permitting issues.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

31 edited+5 added−6 removed88 unchanged
Biggest changeOur ability to recover our investments in Rich Data Corporation and Simple Management Group, Inc. is heavily dependent on the success and performance of those companies, including their respective ability to obtain further debt or equity financing. We have an investment in RDC and an indirect investment in SMG .
Biggest changeFurthermore, 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.
Such events could impair our customers' access to our business, impact our ability to expand or continue our operations or otherwise have an adverse effect on our financial condition. We face other risks discussed under "Part II, Item 7A — Quantitative and Qualitative Disclosures about Market Risk."
Such events could impair our customers' access to our business, impact our ability to expand or continue our operations or otherwise have an adverse effect on our financial condition. We face other risks discussed under “ Part II, Item 7A — Quantitative and Qualitative Disclosures about Market Risk. ”
To the extent that either 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 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.
Therefore, our ability to issue shares of Class A Common Stock (other than pursuant to the existing reserved-for commitments), or securities or instruments that are convertible into or exchangeable for shares of Class A Common Stock, may be limited until such time additional authorized, unissued and unreserved shares become available or unless we determine we are unlikely to issue all of the shares that are currently reserved.
There fore, our ability to issue shares of Class A Common Stock (other than pursuant to the existing reserved-for commitments), or securities or instruments that are convertible into or exchangeable for shares of Class A Common Stock, may be limited until such time additional authorized, unissued and unreserved shares become available or unless we determine we are unlikely to issue all of the shares that are currently reserved.
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.
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.
All of these matters are subject to inherent uncertainties, and unfavorable rulings could 19 Table of Contents 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. Any unfavorable ruling or outcome could have a material adverse effect on our results of operations or could negatively affect our reputation.
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 20 Table of Contents who have entrusted us with information.
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.
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 9.5 million shar es of authorized Class A Common Stock available for other uses as of September 30, 2022.
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.
Further, our ability to offer equity-based compensation to our management team may also be limited, which could adversely affect our ability to align management’s incentives with stockholders or attract and retain key management personnel. General Risks Public health issues, including the continuing COVID-19 pandemic, could adversely affect our financial condition, results of operations or liquidity.
Further, our ability to offer equity-based compensation to our management team may also be limited, which could adversely affect our ability to align management’s incentives with stockholders or attract and retain key management personnel. General Risks Public health issues could adversely affect our financial condition, results of operations or liquidity.
See Note 5: Strategic 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 either of 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 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.
Our business may be impacted by public health issues, including the continuing COVID-19 pandemic, other pandemics and the spread of contagious diseases.
Our business may be impacted by public health issues, such as COVID-19, other pandemics and the spread of contagious diseases.
If that bill becomes law, then our business in Illinois could be adversely affected. Negative characterizations of the pawn industry by consumer advocates, media or others could result in increased legislative or regulatory activity, could adversely affect the market value of our publicly traded stock, or could make it harder to operate our business successfully.
Negative characterizations of the pawn industry by consumer advocates, media or others could result in increased legislative or regulatory activity, could adversely affect the market value of our publicly traded stock, or could make it harder to operate our business successfully.
A significant portion of our U.S. business is concentrated in Texas and Florida. As of September 30, 2022, more th an 62% of our U.S. pawn stores were located in Texas (44%) and Florida (18%), 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, 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.
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’s stock price performance and other factors, we determined the fair value of our investment in Cash Converters at September 30, 2022 was greater than its carrying value.
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.
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.
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.
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.
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.
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.
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.
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.
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.
The carrying value of our goo dwill was $286.8 million, or approximately 21% o f our total assets, as of September 30, 2022.
The carrying value of our goo dwill was $302.4 million, or approximately 21% of our total assets, as of September 30, 2023.
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.
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.
We are 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 are complicated by the fact that AlphaCredit is now involved in a concurso mercantil (insolvency) proceeding in Mexico.
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.
Further, our failure to comply with applicable laws and regulations could result in fines, penalties or orders to cease or suspend operations, which could have a material adverse effect on our results of operations. For example, a bill was recently introduced in the Illinois legislature proposing a 36% APR rate cap to pawn loans made in the state.
Further, our failure to comply with applicable laws and regulations could result in fines, penalties or orders to cease or suspend operations, which could have a material adverse effect on our results of operations.
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.
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.
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 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.
The policies are subject to deductibles and exclusions that result in our retention of a level of risk on a self-insurance basis.
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.
We have significant operations in Latin America, and changes in the business, regulatory, political or social climate could impact our operations there, which could adversely affect our results of operations and growth plans. We own and operate a significant number of pawn stores in Latin America (primarily Mexico, but also Guatemala, El Salvador and Honduras).
Any of these factors may adversely affect our financial condition, results of operations or liquidity. We have significant operations in Latin America, and changes in the business, regulatory, political or social climate could impact our operations there, which could adversely affect our results of operations and growth plans.
We may be required in future periods to impair our investment and recognize related investment losses, as we have done in the past, and we may not realize a positive return on the investment. We own 43.7% of the outstanding ordinary shares of Cash Converters, which is a publicly traded company based in Australia.
Further, if that operating performance, or other factors, adversely impact the value of Cash Converters’ publicly traded stock, then we may be required to impair our investment, as we have done in the past. We own 43.7% of the outstanding ordinary shares of Cash Converters, which is a publicly traded company based in Australia.
Further, our growth plans include potential expansion in some of those countries as well as potentially other countries in Latin America.
We own and operate a significant number of pawn stores in Latin America (primarily Mexico, but also Guatemala, El Salvador and Honduras). Further, our growth plans include potential expansion in some of those countries as well as potentially other countries in Latin America.
Losses 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).
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). Certain areas of our operations are also susceptible to other types of natural disasters such as earthquakes, volcanoes and tornadoes.
Our certificate of incorporation currently authorizes us to issue up to 100 million shares of Class A Common Stock.
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.
The conversion feature of our convertible notes, if triggered, may adversely affect our financial condition and operating results. We have outstanding a total of $316.3 mill ion of convertible notes.
We have outstanding a total of $367.8 mill ion of convertible notes.
Removed
AlphaCredit is currently in the conciliation phase of the proceeding and management remains in day-to-day control of the business. In the event that the proceedings move to the bankruptcy or liquidation phase, then we will have to continue our discussions with the liquidation trustee.
Added
Law or regulatory changes in Australia or other jurisdictions in which Cash Converters operates, or other factors, could adversely affect Cash Converters’ operating performance, our share of which would be reflected in our own financial statements due to the equity method of accounting.
Removed
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.
Added
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.
Removed
Any of these factors may adversely affect our financial condition, results of operations or liquidity. The COVID-19 pandemic adversely affected our gross profit and earnings during the latter half of fiscal 2020 and into fiscal 2021. During the latter part of fiscal 2021, we saw pawn transaction activity start to rebuild.
Added
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.
Removed
That has continued to date, and our pawn loans outstanding ("PLO") balances now exceed pre-pandemic levels, which will drive accelerating pawn service charges ("PSC") revenue in the coming quarters given the natural lag between pawn originations and related fees.
Added
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
Despite the recovery in pawn transaction activity, new COVID-19 variants could affect portions of our business, such as managing appropriate staffing at the store level.
Added
We expect that number will be reduced to 2.1 million following the issuance of currently approved Long-Term Incentive awards in November 2023 .
Removed
Our estimates, judgments and assumptions related to COVID-19 could vary over time, and there can be no assurance that the continuing pandemic will not have an adverse effect on our results of operations, financial position and cash flows in future periods.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of September 30, 2022, we had a total of 1,175 stores, 515 of which are located in the U.S., with 44% located in Texas, 18% in Florida and the remainder spread across 18 other states. We also have 528 locations in Mexico, 98 in Guatemala, 18 in El Salvador, and 16 in Honduras.
Biggest changeAs 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.
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 has been subleased 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 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).

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed3 unchanged
Biggest changeCompany Index 2017 2018 2019 2020 2021 2022 EZCORP, INC. $100.00 $112.63 $68.00 $52.95 $79.68 $81.16 NASDAQ Composite Index $100.00 $123.87 $123.14 $171.91 $222.42 $162.80 NASDAQ Other Finance Index $100.00 $108.83 $121.13 $126.80 $154.33 $106.34 22 Table of Contents 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, 2022.
Biggest changeHistorical 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.
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, 2022, 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, 2023, there were approximately 71 stockholders of record of our Class A Common Stock.
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, 2017.
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.
All repurchases to date were made in open market transactions at prevailing market prices and were executed pursuant to a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934.
All repurchases during the quarter were made in open market transactions at prevailing market prices and were executed pursuant to a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934.
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 9, 2022 . As of September 30, 2022, the closing sales price of our Class A Common Stock, as reported by the NASDAQ Stock Market, was $7.71 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, 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.
The graph depicts the change in the value of our Class A Common Stock relative to the indices at the end of each fiscal year and not for any interim period. Historical stock price performance is not necessarily indicative of future stock price performance.
The graph depicts the change in the value of our Class A Common Stock relative to the indices at the end of each fiscal year and not for any interim period.
Share 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, 2022 through July 31, 2022 — $ — — $ 50,000 August 1, 2022 through August 31, 2022 79,749 $ 9.22 79,749 $ 49,265 September 1, 2022 through September 30, 2022 158,194 $ 8.22 158,194 $ 47,965 Quarter ended September 30, 2022 237,943 $ 8.55 237,943 $ 47,965 (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.
Share 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFiscal Year Ended September 30, Change (in thousands) 2022 2021 Gross profit: Pawn service charges $ 320,865 $ 260,196 23% Merchandise sales 532,886 442,798 20% Merchandise sales gross profit 203,504 185,580 10% Gross margin on merchandise sales 38 % 42 % (400) bps Jewelry scrapping sales 32,033 26,025 23% Jewelry scrapping gross profit 3,337 3,177 5% Gross margin on jewelry scrapping sales 10 % 12 % (200) bps Other revenues, net 441 532 (17)% Gross profit 528,147 449,485 18% Store expenses 357,417 330,837 8% General and administrative 64,342 56,495 14% Depreciation and Amortization 32,140 30,672 5% (Gain) loss on sale or disposal of assets and other (674) 83 * Other charges — 229 * Total operating expenses 453,225 418,316 8% Interest expense 9,972 22,177 (55)% Interest income (817) (2,477) (67)% Equity in net income of unconsolidated affiliates (1,779) (3,803) (53)% Other income (167) (790) (79)% Total non-operating expenses 7,209 15,107 (52)% Income before income taxes 67,713 16,062 322% Income tax expense 17,553 7,450 136% Net income $ 50,160 $ 8,612 482% Net pawn earning assets: Pawn loans $ 210,009 $ 175,901 19% Inventory, net 151,615 110,989 37% Total net pawn earning assets $ 361,624 $ 286,890 26% * Represents a percentage computation that is not mathematically meaningful.
Biggest changeFiscal 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.
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 • 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; • 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.
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 $6.7 million has been included as the timing of such payments are uncertain.
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.
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 and 2025, 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 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.
The results of the impairment analyses for fiscal year 2022 and fiscal year 2021 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 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.
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. 26 Table of Contents U.S. Pawn The following table presents selected summary financial data from our U.S.
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.
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, 2022.
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.
We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States 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 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 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.
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.
For a discussion of these important risk factors, see "Part I, Item 1A — Risk Factors." In addition, we cannot predict all of the risks and uncertainties that could cause our actual results to differ from those expressed in the forward-looking statements. You should not place undue reliance on our forward-looking statements.
For a discussion of these important risk factors, see “Part I, Item 1A — Risk Factors.” In addition, we cannot predict all of the risks and uncertainties that could cause our actual results to differ from those expressed in the forward-looking statements. You should not place undue reliance on our forward-looking statements.
Accordingly, you should not regard any forward-looking statements as a representation that the expected results will be achieved. 34 Table of Contents We specifically disclaim any responsibility to publicly update any information contained in a forward-looking statement except as required by law. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.
Accordingly, you should not regard any forward-looking statements as a representation that the expected results will be achieved. We specifically disclaim any responsibility to publicly update any information contained in a forward-looking statement except as required by law. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.
Fiscal 2021 These tables, as well as the discussion that follows, should be read in conjunction with the accompanying condensed consolidated financial statements and related notes. Summary Financial Data The following table presents selected summary consolidated financial data for fiscal 2022 and fiscal 2021.
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.
(b) Excludes $12.4 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 $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.
We anticipate that cash flows from operations and cash on hand will be adequate to fund any future stock repurchases, our contractual obligations, tax payments, planned de novo store growth, capital expenditures and working capital requirements through fiscal 2023.
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.
In addition to the lease obligations in the table above, we are responsible for the ma intenance, property taxes and insurance at most of our locations. During the fiscal year ended September 30, 2022, these collectively amounted to $15.2 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, 2023, these collectively amounted to $16.3 million.
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.
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 end-of-period and approximate average 23 Table of Contents exchange rates for each applicable currency as compared to U.S. dollars as of and for the twelve months ended September 30, 2022 and 2021 were as follows: September 30, Twelve Months Ended September 30, 2022 2021 2022 2021 Mexican peso 20.1 20.5 20.4 20.2 Guatemalan quetzal 7.6 7.6 7.5 7.6 Honduran lempira 24.1 23.9 24.1 23.8 Peruvian sol 3.9 4.1 3.8 3.7 24 Table of Contents Operating Results Fiscal 2022 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, 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.
We believe adequate provisions for income taxes have been made for all periods. 33 Table of Contents Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We believe adequate provisions for income taxes have been made for all periods.
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.
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.
Assuming the reserve rates were increased or decreased by 10%, our inventory reserve balance as of September 30, 2022 would have increased or decreased by approximately $0.2 million. 32 Table of Contents Goodwill and Indefinite-Lived Intangible Assets When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount.
Goodwill and Indefinite-Lived Intangible Assets When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount.
The Board of Directors has reserved the right to modify, suspend or terminate the program at any time. Through September 30, 2022, the Company has repurchased and retired 237,943 shares of our Class A Common Stock for $2.0 million, which amount was allocated between "Additional paid-in capital" and "Retained earnings" in our Consolidated Balance Sheets.
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.
These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations. 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 2021 vs.
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.
Fiscal 2020 The Results of Operations discussion for fiscal 2021 vs. fiscal 2020 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, 2021.
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.
Results of Operations Non-GAAP Financial Information To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide certain other non-GAAP financial information on a constant currency basis ("constant currency") and “same store” basis.
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.
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.” 31 Table of Contents Contractual Obligations Below is a summary of our cash needs to meet future aggregate contractual obligations as of September 30, 2022: Payments due by Period (in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations (a) $ 316,250 $ — $ 316,250 $ — $ — Interest on long-term debt obligations 17,816 8,230 9,586 — — Lease obligations (b) 273,983 66,039 105,821 63,558 38,565 Total (c) (d) $ 608,049 $ 74,269 $ 431,657 $ 63,558 $ 38,565 (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 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.
Other Investments The following table presents selected summary financial data for our Other Investment segment after translation to U.S. dollars from its functional currency of primarily Australian dollars: Fiscal Year Ended September 30, Change (in thousands) 2022 2021 Gross profit: Consumer loan fees and interest $ 111 $ 420 (74)% Gross profit 111 420 (74)% Segment operating expenses: Equity in net income of unconsolidated affiliates (1,779) (3,803) (53)% Segment operating contribution 1,890 4,223 (55)% Other segment loss (income) 52 (173) (130)% Segment contribution $ 1,838 $ 4,396 (58)% Segment contribution was $1.8 million, a decrease of $2.6 million, due to a decrease in equity income for our unconsolidated affiliates.
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.
(a) Fiscal 2022 and 2021 constant currency amounts exclude net GAAP basis foreign currency transaction minimal loss and a gain of $0.1 million, respectively, resulting from movement in exchange rates. (b) Balance is calculated based on the average of the monthly ending balance averages during the applicable period.
(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.
Our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments. 30 Table of Contents 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) 2022 2021 Cash flows provided by operating activities $ 66,535 $ 46,438 43% Cash flows used in investing activities (113,283) (84,611) 34% Cash flows used in financing activities (2,832) (16,253) (83)% Effect of exchange rate changes on cash and cash equivalents and restricted cash 325 5,497 (94)% Net decrease in cash and cash equivalents and restricted cash $ (49,255) $ (48,929) 1% * 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) 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.
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 estimates pertaining to jewelry inventory depending on the current price of gold and resulting trends in margins.
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.
PLO continued to increase, ending the year at $163.5 million, up 20% in total and on a same store basis, due to increased loan demand reflecting a recovery above pre-COVID levels. Total revenues increased 19% and gross profit increased 16%, reflecting higher average PLO for the year driving higher PSC.
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.
The policy change eliminates the non-cash interest amortization of the debt discount. See 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” for further discussion of this recently adopted accounting policy.
See Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for further discussion.
During fiscal 2022, we acquired three stores in the U.S. 27 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. See “Results of Operations — Non-GAAP Financial Information” above.
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.
The decrease is primarily due to Cash Converters’ net results, which included an impairment, primarily of its ROU lease assets, that was attributed to COVID-19. 29 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) 2022 2021 Segment contribution $ 154,943 $ 107,209 45% Corporate expenses (income): General and administrative 64,342 56,495 14% Depreciation and amortization 13,675 12,651 8% (Gain) Loss on sale or disposal of assets and other (688) 62 (1,210)% Interest expense 9,972 22,177 (55)% Interest income — (461) (100)% Other (income) expense (71) 223 (132)% Income before income taxes 67,713 16,062 (322)% Income tax expense 17,553 7,450 (136)% Net income $ 50,160 $ 8,612 (482)% Segment contribution increased $47.7 million (45%), primarily due to the improved operating results of the segments, as discussed above.
Segment 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.
Pawn segment: Fiscal Year Ended September 30, Change (in thousands) 2022 2021 Gross profit: Pawn service charges $ 240,982 $ 196,721 22% Merchandise sales 391,958 341,495 15% Merchandise sales gross profit 161,717 150,456 7% Gross margin on merchandise sales 41 % 44 % (300) bps Jewelry scrapping sales 25,739 15,260 69% Jewelry scrapping sales gross profit 2,984 2,259 32% Gross margin on jewelry scrapping sales 12 % 15 % (300) bps Other revenues 83 105 (21)% Gross profit 405,766 349,541 16% Segment contribution: Store expenses 266,114 253,344 5% Depreciation and amortization 10,552 10,650 (1)% Segment operating contribution 129,100 85,547 51% Other segment expenses 49 27 81% Segment contribution $ 129,051 $ 85,520 51% Other data: Average monthly ending pawn loan balance per store (a) $ 287 $ 227 26% Monthly average yield on pawn loans outstanding 13 % 14 % (100) bps Pawn loan redemption rate 84 % 86 % (200) bps (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) 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.
The increase in cash flows from operating activities was primarily due to a $41.5 million increase in net income, partially offset by cash flows used to purchase inventory and other changes to working capital primarily related to the timing of collections in pawn service charges receivable and the timing of payments of accounts payable and prepaid expenses.
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.
Assuming the average forfeiture rate increased or decreased by 10%, our pawn service charges receivable balance as of September 30, 2022 would have increased or decreased by approximately $1.1 million. Inventory and Cost of Goods Sold We consider our estimates of obsolete or slow-moving inventory and shrinkage estimates in determining the appropriate overall valuation allowance for inventory.
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.
Of the $16.5 million used to fund other investments, $15.0 million was invested in Founders, as discussed in Note 5: Strategic Investments of Notes to Consolidated Financial Statements included in in “Part II, Item 8 — Notes to the Condensed Consolidated Financial Statements.” The decrease in cash flows used in financing activities was primarily due to the prior-year payment of assumed debt of $14.9 million from the CAE acquisition, offset by a $2.0 million current year increase in cash used to repurchase and retire common stock.
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 net effect of these changes was a $49.3 million decrease in cash on hand during the current year, resulting in a $214.4 million ending cash and restricted cash balance.
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.
(c) Rate is solely inclusive of results from Mexico. 2022 Change (GAAP) 2022 Change (Constant Currency) Same Store data: (a) PLO 15% 13% PSC 17% 17% Merchandise Sales 23% 24% Merchandise Sales Gross Profit 13% 14% Store Expenses 5% 5% (a) Stores open at the end of the period included in the same store calculation were 631.
(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.
Income tax expense increased $10.1 million primarily due to an increase in income before income taxes of $51.7 million. Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate.
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.
Fiscal Year Ended September 30, (in thousands) 2022 (GAAP) 2021 (GAAP) Change (GAAP) 2022 (Constant Currency) Change (Constant Currency) Gross profit: Pawn service charges $ 79,883 $ 63,475 26% $ 80,199 26% Merchandise sales 140,928 101,303 39% 141,823 40% Merchandise sales gross profit 41,787 35,124 19% 42,055 20% Gross margin on merchandise sales 30 % 35 % (500) bps 30 % (500) bps Jewelry scrapping sales 6,294 10,765 (42)% 6,304 (41)% Jewelry scrapping sales gross profit 353 918 (62)% 354 (61)% Gross margin on jewelry scrapping sales 6 % 9 % (300) bps 6 % (300) bps Other revenues, net 247 7 * 249 * Gross profit 122,270 99,524 23% 122,857 23% Segment contribution: Store expenses 91,303 77,493 18% 91,811 18% Depreciation and amortization 7,913 7,371 7% 7,955 8% Other charges — 229 * — * Segment operating contribution 23,054 14,431 60% 23,091 60% Other segment income (a) (1,000) (2,862) (65)% (1,059) (63)% Segment contribution $ 24,054 $ 17,293 39% $ 24,150 40% Other data: Average monthly ending pawn loan balance per store (b) $ 64 $ 59 8% $ 64 8% Monthly average yield on pawn loans outstanding 16 % 17 % (100) bps 16 % (100) bps Pawn loan redemption rate (c) 79 % 80 % (100) bps 79 % (100) bps * Represents a percentage computation that is not mathematically meaningful.
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.
The increase was attributable to increased loan demand reflecting a recovery above pre-COVID levels. 28 Table of Contents Total revenues were up 30% and on a constant currency basis, while gross profit increased by 23% and on a constant currency basis, reflecting higher average PLO for the year driving higher PSC PSC increased 26% on a GAAP and constant currency basis, as a result of higher average PLO during the year.
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.
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.
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.
Future declines in gold prices may cause an increase in reserve rates pertaining to jewelry inventory. As of September 30, 2022, the gross balance of our inventory was $153.7 million, for which we have included reserves of $2.1 million.
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.
Sources and Uses of Cash On May 3, 2022, the Company's Board of Directors (the "Board") authorized the repurchase of up to $50 million of our Class A Common Stock over 3 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.
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.
Segment contribution was up 39% to $24.1 million (40% increase to $24.2 million on a constant currency basis) primarily due to the changes described above.
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.
Store expenses increased $13.8 million, up 18% (18% on a constant currency basis), primarily due to increased labor in-line with store activity and rent associated with lease renewals and annual inflation adjustments. Same-store expenses increased 5% (5% on a constant currency basis).
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.
The policy change eliminates the non-cash interest amortization of the debt discount. See Note 1: Organization and Summary of Significant Accounting Policies included in “Part II, Item 8 — Financial Statements and Supplemental Data” for further discussion of this recently adopted accounting policy.
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.
Merchandise sales increased 39% (40% on a constant currency basis) due to our return to more normalized inventory levels and our improved core retail strategy of selling general merchandise inventory in the first 90 days. Offsetting the sales increase, merchandise sales gross margin decreased 500 bps to 30%, reflecting a return to more normalized margins.
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.
Removed
See “Part I, Item 1A — Risk Factors” and “Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results” below.
Added
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.
Removed
PLO increased $34.1 million (19%) to $210.0 million. This is the highest period-end PLO balance we have ever recorded. The increase was due to strong loan demand reflecting continued recovery above pre-COVID levels. Total revenues increased $156.7 million ( 21%), and gross profit increased 18%. PSC increased $60.7 million ( 23%) as a result of higher PLO.
Added
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%.
Removed
Merchandise sales increased $90.1 million (20%), and merchandise sales 25 Table of Contents gross profit increased $17.9 million (10%), due to a return to more normalized inventory levels and our improved core retail strategy of selling general merchandise inventory in the first 90 days.
Added
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.
Removed
Gross margin on merchandise sales declined 400 bps to 38%, reflecting a return to more normalized margins, but remained in our targeted range.
Added
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.
Removed
Operating expenses increased $34.9 million (8%) primarily due to (a) a $26.6 million increase in store expenses as a result of increased labor in-line with store activity and rent associated with lease renewals and (b) a $7.8 million increase in general and administrative expenses due to asset write-downs associated with IT infrastructure migration and corporate office sublease, a litigation accrual and increased labor and software licensing costs.
Added
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.
Removed
Interest expense decreased $12.2 million, driven by the Accounting Standards Update 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) , (“ASU 2020-06”) accounting policy change, which no longer requires debt discount be included on our balance sheet effective October 1, 2021.
Added
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.
Removed
The interest expense decrease was partially offset by a decrease in equity income for our unconsolidated affiliates primarily due to Cash Converters’ net results, which included an impairment, primarily of its ROU lease assets, that was attributed to COVID-19. Income tax expense increased $10.1 million primarily due to an increase in income before income taxes of $51.7 million.
Added
See “Results of Operations — Non-GAAP Financial Information” above.
Removed
PSC increased 22% primarily as a result of higher average PLO. Merchandise sales increased 15% due to our return to more normalized inventory levels and our improved core retail strategy of selling general merchandise inventory in the first 90 days.
Added
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.
Removed
Offsetting the sales increase, merchandise sales gross margin decreased 300 bps to 41%, reflecting a return to more normalized margins, but remained in our targeted range. Store expenses increased 5% primarily due to increased labor in-line with store activity and rent associated with lease renewals. Segment contribution increased $43.5 million due to the changes described above.
Added
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.
Removed
During fiscal 2022, we opened 28 de novo stores in Latin America. PLO improved to $46.6 million, up 17% (15% on constant currency basis). On a same store basis, PLO increased 15% (13% on a constant currency basis).
Added
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).
Removed
General and administrative expenses increased $7.8 million (14%), primarily due to a litigation accrual and increased salaries, including performance-based incentive compensation. Interest expense decreased $12.2 million (55%) primarily driven by the ASU 2020-06 accounting policy change, which no longer requires debt discount be included on our balance sheet effective October 1, 2021.
Added
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.
Removed
Liquidity and Capital Resources Cash and Cash Equivalents Our cash and equivalents balance was $206.0 million at September 30, 2022 compared to $253.7 million at September 30, 2021.
Added
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.
Removed
The $28.7 million increase in cash flows used in investing activities was primarily due to $16.5 million in outgoing cash used to fund other investments and $6.9 million investment in unconsolidated affiliate, offset by the prior-year increased acquisition activity, primarily attributable to CAE.
Added
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.
Removed
In the current year, there was an increase of $79.0 million in net pawn lending associated with PLO growth, partially offset by a $65.9 million increase in the sale of forfeited collateral in line with our growing merchandise sales.
Added
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.
Removed
Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition. As of September 30, 2022, the balance of our PSC receivable was $33.5 million.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDuring the fiscal year ended September 30, 2022, the Guatemalan quetzal weakened approximately 1.7% to Q1.00 Guatemalan to $0.1243 U.S. from $0.1264 U.S. as of September 30, 2021. We have currently assumed indefinite reinvestment of earnings and capital in Latin America.
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.
The translation adjustment from Latin America primarily representing the change of the Mexican peso during the fiscal year ended September 30, 2022 was a $2.6 million increase to stockholders’ equity. During the fiscal year ended September 30, 2022, the Mexican peso strengthened approximately 1.0% to $1.00 Mexican to $0.0495 U.S. from $0.0490 U.S. as of September 30, 2021.
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 Cash Converters through June 30, 2022 (included in our September 30, 2022 results on a three-month lag) was a $0.8 million increase to stockholders’ equity, excluding income tax impacts. During the fiscal year ended September 30, 2022, $1.00 Australian dollar weakened to $0.6480 U.S. as compared to $0.7215 in the prior year.
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.
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. 35 Table of Contents
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
Removed
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.

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