EZCORP, Inc.

Good afternoon, ladies and gentlemen, and welcome to the EZCORP second quarter of fiscal 2020 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to turn the conference over to Michael Kim, Investor Relations. Please go ahead, Michael.

Thank you, and good morning, everyone. During our prepared remarks, we will be referring to slides which are available for viewing or download from our website at investors.dvcorp.com. Before we begin, I would like to remind everyone that this conference call, as well as the presentation slides, contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are disclosed in our annual, quarterly, and other reports filed with the Securities and Exchange Commission. And as noted in the presentation materials, and unless otherwise identified, results are presented on an unadjusted basis. to remove the effect of foreign currency fluctuations and other discrete items. Now I'd like to turn the call over to Mr. Stuart Grimshaw. Stuart?

Thanks, Michael, and good morning, everyone. As we do this presentation remotely, it reminds us that we are in unprecedented territory. I hope that all of you and your families are safe and healthy. These are difficult times for our people, our customers, the communities we are in, and for all of us as we try to understand and manage the impacts of the COVID-19 pandemic. I would like to express my deepest anticipation to the healthcare professionals, first responders and other essential workers who are doing their job every day to keep all of us safe. I would also like to thank the members of the EasyCorp family who have responded to this crisis with admirable professionalism and empathy, providing unbelievable service to our customers in the most trying of times. Since mid-March, the focus of the company has been on serving and supporting our people and customers as they try to make sense of this very unsettling period. We provide critical and unique services to our customers, and our operations are considered essential services in nearly all states. At this time, we have 99% of our stores open in the U.S. and Mexico, with many of our LATAM stores operating under reduced hours, restricted operating activities, or environments with no or limited public transportation. All stores are adhering to the CDC sanitary guidelines, including provision of gloves and masks, as well as all U.S. stores having thermal thermometers for the safety of our team members and customers. With an unemployment rate just sitting under 15%, something completely unimaginable some three months ago, we know that our customers are facing challenging times. It is through these challenging times that we are here to help them when other institutions will not. As shown on slide four, we're committed to maintaining the well-being of our workforce through this crisis, with no layoffs. Our store turnover is down 8% in the U.S. and 4% in Latin America. Additionally, we have implemented remote work options, social distancing measures, and stringent cleaning procedures in all of our stores. We're providing our customers with more choices by introducing innovative and flexible measures to support transactions, including curbside call capabilities, and accelerating the rollout of our LANA platform to provide remote loan management options for our customers. We now have LANA operational in 357 stores, which at the end of the March were 159. The addition of Curbside Porn and LANA have helped us maintain a high level of service and safety for our customers at a time when the ability to service them efficiently has been necessarily restricted. We entered the crisis in the position of financial stability. Thank you for joining us today. In addition, we continue to reduce steady free cash flow while also assisting customers who do need cash support through this period of time. We continually review all its features, including the identification of approximately $7 million in savings expected from CapEx this fiscal year, incorporating a slowing into NOBO openings from late May until 2025 from the original report we anticipated. We expect this to NOBO program to ramp up once the economies start reopening. Turning to our share repurchase program, We temporarily suspended buybacks in the quarter to maximize liquidity for anticipated future loan demand. Once the virus impact is completely neutralized, the board will reconsider the share repurchase program as part of our broader capital allocation strategy. Turning to slide five, we are pleased with our strong financial performance for the fiscal second quarter, even as our results and focus were impacted in the last few weeks of March as the COVID-19 crisis developed. One of the unintended consequences of operating in this pandemic-driven environment has been the impact of accounting standards in these unprecedented economic times. For the second fiscal quarter, we were required to record a non-cash asset impairment charge of $47.1 million, primarily related to the impairment of goodwill in both the U.S. and LATAM, reflecting the potential long-term financial impact of COVID-19-related store closures. Coupled with PLO balance reductions, as a result of excess cash in the hands of our customers being applied to early loan repayments. While the majority of our stores have remained open, a good portion of the stores at GP Next have been closed since March, which is where the bulk of the goodwill impairment is recognised. Once the noise of the non-cash and payment expenses are removed, our adjusted results for the fiscal second quarter reinforce the strength and resiliency of our business. Revenues in EBITDA were healthy, Lachlan Given. Retail sales demand has remained strong in the U.S. and Latin America, and it continues to drive the business as stimulus deposits and checks have begun to be distributed. While retail sales demand has increased, the offsetting impact has been around diminished pawn loan demand exacerbated by accelerated pawn loan repayments. Turning to page six, I won't spend too much time on the slides. I'm sure you're well aware of the macroeconomic backdrop, but the key message here is that Thank you for joining us today. with the majority of our stores open and a conservative and liquid balance sheet to serve our customers as loan demand increases. Flexibility across platforms, products and payment options remains another key differentiating factor as we'll discuss next. But turning to how we continue to expand our presence, we remain committed to opening new stores and are well positioned to capitalise on opportunistic acquisitions to complement organic revenue growth and Accelerating Demand for Loans Post-Stimulus with an ongoing focus on driving higher returns on earning assets over time. Next on slide 8, we want to provide some additional context on how to increase the leverage of innovative systems, platforms and approaches to enhance customer choice and growth. Starting with LANA, you may recall that we expected to roll out the LANA platform to 140 stores by the end of Q2. We've accelerated the rollout with 357 stores currently on the platform. and over 8,000 customers signed up at the end of Q2. As of the end of April, that number has moved to over 14,000 customers. Also in April we processed over 4,600 porn loan extensions on the system, around 2.8 times the number of March. LANA further enhances the customer experience by delivering greater flexibility in communications and we plan to increasingly leverage our differentiated Thank you very much. From our first pilot store on April 1st, we launched curbside services in over 60 stores in April to maintain store operations and improve customer convenience, which we believe will deliver longer-term benefits around customer loyalty and retention. Lastly, we remain focused on a multi-channel approach to payments spanning LANA, Curbside Pawn, Cross-Store Payment Capabilities, and debit by phone options for the convenience of our customers, which should support redemption rates and P&C yields going forward. So in summary, our business remains well-positioned to navigate through this crisis. While the future remains difficult to predict, we believe that a more challenging economic backdrop will accelerate demand for pawn lines over time. Furthermore, we are increasingly leveraging our differentiated point-of-sale system to drive optimised lending decisions and margin improvement in newer inventory buckets, and to give us the flexibility to introduce new products and services. However, in the immediate term, we will continue to focus on the health and safety of both our employees and our customers, and develop new and innovative ways to satisfy our customers' needs. Finally, we are very excited to bring on board Jason Koulis as President and Chief Financial Officer. Jason was a member of the EasyCorp board since April 2019 and brings with him a deep background in customer finance. With that, I'll now pass it to Jason for further comments.