Yahoo Finance EZCORP Inc (EZPW) Q2 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Total Revenue: $280 million, up 8% year-over-year.
Adjusted Net Income: Increased by 21%.
Store Locations: 1,246 stores, with 9 new stores added this quarter.
PLO (Pawn Loan Originations): $232 million, up 13%.
Merchandise Sales: $161.1 million, up 6%.
Gross Profit: Increased by 10%.
Adjusted EBITDA: $36.2 million, up 7%.
US Segment Revenue: $207.6 million, up 10%.
Latin American Segment Revenue: $72.6 million, up 4%.
Inventory Turnover: Strong at 2.9 times.
Online Payments: Grew to $21.8 million in the US.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
EZCORP Inc (NASDAQ:EZPW) reported a record-setting Q2 with total revenue of $280 million, up 8%, and PLO of $232 million, up 13%, marking the highest for the second quarter in the company's history.
Adjusted net income increased by 21%, reflecting strong bottom-line growth.
The company expanded its store network, adding nine new stores in Latin America and acquiring six in the US, enhancing its market presence.
Continuous improvement in financial metrics was noted with merchandise sales up 6%, gross profit up 10%, and adjusted EBITDA up 7%.
EZCORP Inc (NASDAQ:EZPW) is focusing on innovation and customer engagement, evidenced by the growth of EZ+ Rewards members to 4.6 million globally and the expansion of online payment solutions and e-commerce initiatives.
Negative Points
The macroeconomic environment remains challenging for EZCORP Inc (NASDAQ:EZPW)'s customer base, with rising living costs and economic uncertainty impacting consumer behavior.
Despite overall growth, there was a 10% increase in expenses which could impact future profitability if not managed effectively.
The company faces ongoing inflationary pressures which are expected to cause expenses to increase sequentially in the upcoming quarters.
While the company is expanding and innovating, the buy online, pickup-in-store initiative is still in the pilot phase and its long-term success is yet to be determined.
The competitive landscape in both the US and Latin America remains intense, with the need for disciplined investment and strategic acquisitions to maintain market position.
Q & A Highlights
Q: You've added a few stores each quarter in the Lat-Am and in the US, and it sounds like there's been small acquisitions and then some organic build out too. Can you give us some characteristics of the pipeline? Are there any consolidation opportunities that are worth noting? What geographies would those be? And then where are you focused on organic expansion? A: Lachlan Given, CEO of EZCORP, noted that the pipeline for store additions remains strong, particularly in Latin America, with potential for significant acquisitions. In the US, the focus is more on small, consistent acquisitions rather than large ones. The company is disciplined in its approach, ensuring value in its expansion efforts.
Q: The US margin, gross margin on retail has been very consistent. There's been an increase in Lat-Am over the past couple of quarters, is that tied to mix or just different buying patterns? A: Timothy Jugmans, CFO of EZCORP, explained that the improvement in margins in Latin America is partly due to a better mix and improved pricing, particularly in Mexico. Enhanced execution of the business model in these regions has also contributed to these positive results.
Q: I'm interested in customer trends. Is there a way to think about new customers versus recurring customers and any kind of changing behavior in that front? A: Lachlan Given mentioned that customer growth has been consistent across all regions, with increases in both loan customers and those purchasing second-hand goods. The company is also seeing growth in luxury goods like handbags, watches, and jewelry.
Q: PLO was really strong again, despite more normal tax refunds coming through driving loan paydowns. Is that just timing? Are you still running record PLO in there? Or have you seen that typical seasonal paydown of loans? A: Timothy Jugmans clarified that while there is a typical seasonal paydown of loans, the company has seen a more normal pattern this year, with a gradual build in loan balances. The rewards program and excellent customer service are believed to be factors in gaining market share.
Q: I'm assuming the buy online, pickup-in-store test is going well, as you're expanding it to 100 stores in Texas and Florida. What did you see out of that test or pilot that gave you confidence to roll this out to more stores? A: Lachlan Given shared that the pilot is now fully operational with trained teams and proper setup, and early customer responses have been positive. The company will evaluate the success of this initiative by the end of the quarter to decide on further expansion.
Q: Costs are a bit higher than expected. What's driving that? And how should we think about costs in Q3 and the back half of the year? A: Timothy Jugmans attributed the increase in costs to investments in teams, minimum wage increases in Latin America, and successful advertising. He noted that costs are expected to rise sequentially through Q3 and Q4 due to ongoing inflationary pressures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
