EZCORP, Inc. (EZPW) Earnings

Management highlights

Overall Business Performance - The quarter delivered strong operating and financial results, with growth driven primarily by core pawn operations rather than volatile gold scrap activities, and all regions performed exceptionally well. - The company maintains a highly liquid, fiscally conservative balance sheet, with $311 million in cash at quarter end and no near-term debt maturities (first maturities are in December 2029). - Under the board-approved $50 million share repurchase program launched in November 2025, the company repurchased and retired ~132,000 Class A common shares for $4 million in the quarter, with $8 million total used from the program to date. Capital Allocation Priorities - Priorities remain unchanged: grow existing store PLO and other earning assets, open new de novo stores, pursue disciplined mergers and acquisitions, and return capital to shareholders, all while maintaining a conservative balance sheet. Operational Priorities - Key ongoing priorities: grow PLO, improve inventory efficiency, develop new de novo stores, integrate recent acquisitions (including SMG), and manage expenses carefully. - The M&A pipeline remains active in both the U.S. and Latin America, focused on markets where the company has established local management and deep operating expertise. All targets are evaluated based on strategic fit, integration complexity, and return on invested capital. Strategic Operational Shifts - In Latin America, the company has intentionally shifted its lending mix to increase jewelry lending: jewelry now represents 50% of total PLO, up from approximately 30-35% three years ago. This shift has been a core driver of regional PLO growth. - The company is implementing system integration and cultural change at newly acquired SMG, which was previously capital constrained. The shift focuses on growing lending and jewelry retail sales rather than relying excessively on scrap to generate cash.

Guidance

- Scrap margin is expected to continue normalizing to its long-term historical range of 15-20% if gold prices remain stable at current levels. - Sequential expense increases are expected in coming quarters as the company grows existing stores, opens new de novo locations, and completes integration of acquired businesses like SMG. - Historical sequential bottom-line seasonal patterns are expected to be less reliable as scrap margins normalize, so core pawn revenue and core pawn gross profit are the best indicators of underlying business performance. - Management confirmed that consolidated merchandise margins are expected to remain in the targeted 35-38% range over time, after recently creeping above this target due to improved execution and temporary gold price impacts. - No specific quarterly EBITDA or EPS guidance is provided, but management noted that scrap margin normalization will reduce year-over-year growth when including scrap activity, while core underlying business performance remains strong.

Segment performance

SMG (the newly acquired wholly-owned pawn business segment): In the reporting quarter, SMG generated total revenues of $43.1 million, consisting of $17.1 million in merchandise sales (39.7% of total revenue), $14.3 million in pawn service charges (33.2% of total revenue), and $11.7 million in jewelry scrap sales (27.1% of total revenue). Ending period Pawn Loan Outstanding (PLO) was $33.8 million. Core point revenues reached $31.4 million, total gross profit was $22.4 million, and core pawn gross profit was $19.7 million (87.9% of total gross profit). As of quarter end, SMG operated 108 stores across 12 markets under the La Familia and CashWiz brands. No year-over-year comparisons are available as SMG was not wholly owned in the prior year period. Consolidated company-wide EBITDA margin expanded 240 basis points to 22% for the quarter, with consolidated scrap margin declining to 26% sequentially and year-over-year.

Risks & headwinds

- Volatility in gold prices impacts scrap margins, with current price declines driving an expected normalization of margins from recent elevated levels to historical ranges. - Average PLO yield gradually compresses as average loan sizes increase, because larger loans carry lower monthly interest rates in key markets like Texas. - Seasonal PLO pressure is expected in the fiscal fourth quarter in Latin America, where mid-year customer bonus payments typically lead to higher redemptions and a seasonal reduction in PLO balances. - Consumer financial pressure from volatile costs (such as U.S. gas prices) increases customer demand for short-term cash, though underlying loan performance metrics have remained stable to date. - M&A transactions carry integration risk and extended negotiation timelines, particularly for family-owned target businesses where deals depend on generational transition and personal factors.

Analyst Q&A

• Q: Given the recent drop in gold prices from its January peak, how does this impact daily operations and loan pricing? Do customers adjust the amount of cash they seek based on changing collateral values? /

  A: The company prices pawn loans based on a 3-month rolling average of gold prices, so it does not adjust loan pricing daily in response to short-term gold volatility. Most customers only borrow the amount of cash they need for fixed expenses, not the maximum allowed by their collateral value, so average loan size does not move meaningfully with gold prices. Gold price changes primarily impact scrap margin, which is already normalizing toward historical levels. The core business of meeting customer cash demand remains strong regardless of gold price movements.

• Q: What has driven the recent improvement in merchandise margins, and how is SMG integration progressing? How active is the current M&A pipeline? /

  A: Higher merchandise margins stem from improved in-store execution and better pricing discipline, with a small temporary contribution from gold price changes; margins are expected to stay in the 35-38% target range long-term. SMG integration is proceeding ahead of internal expectations: the previously capital-constrained business is shifting to focus on full jewelry cases and higher-margin retail sales rather than excess scrapping, with system integration and cultural change expected to take one year. The M&A pipeline remains very robust, especially in Latin America, with a steady flow of smaller targets in the U.S.

• Q: The strike at a major Mexican pawn competitor has been ongoing for ~10 months. Has this impacted the company's foot traffic or PLO growth in Mexico? /

  A: While EZCORP does not have many stores located directly near the competitor's locations, management confirmed that some customer demand from the striking competitor locations has shifted to other pawn shops across Mexico, providing a modest tailwind to the company's regional growth. Strong Mexican PLO growth is primarily driven by internal execution, specifically the successful shift to expanding jewelry lending from 30-35% to 50% of regional PLO, rather than just the strike or macroeconomic conditions.

• Q: What is driving strong Latin American PLO growth, and how sustainable is it? /

  A: Regional PLO growth is mostly attributable to intentional, multi-year execution by local leadership that has trained teams to become much more effective jewelry lenders, expanding this higher-value lending segment significantly. While macroeconomic pressure on consumers has created modest tailwinds for demand, the growth story is overwhelmingly driven by internal operational improvement rather than just inflation or external conditions, making the growth trajectory sustainable. Inventory mix has also shifted: luxury goods and sneakers are growing, while demand for large electronics like TVs is declining.