EZCORP, Inc.

Good morning, ladies and gentlemen, and welcome to the EZCorp second quarter fiscal 2021 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.easycorp.com. Before we begin, I'd 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 discussed 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 adjusted basis to remove the effect of foreign currency fluctuations and other discrete items. Now, I'd like to turn the call over to Mr. Jason Koulis. Jason?

Thanks, Michael, and good morning, everyone. As always, I want to start by recognizing the continued hard work and dedication of all of our team members. We've made tremendous progress in positioning our core pond business for sustainable growth coming out of the pandemic. And none of that progress would have been possible without the enthusiasm, determination, and relentless efforts of all of our team members who are so passionate about serving our customers. I also want to specifically acknowledge Tim Jugmans. His insights and leadership have been instrumental in all that we have achieved over the last year or so and instrumental in our future. And the board and I are pleased to appoint him Chief Financial Officer, officially removing interim from his title. This move gives us great stability and continuity on the financial side of our business. I know Tim shares my excitement for the opportunities in front of us, and I look forward to carrying on our partnership as we continue to strengthen and grow our core fund business to address our customers' needs for cash and affordable pre-owned merchandise across the US and Latin America. So starting on slide four, the roadmap we lay out here hasn't changed and our strategy is intact. but we wanted to reinforce all of the progress we've made by highlighting some key accomplishments. First, continuously developing our team member base remains foundational for driving sustainable growth and profitability. We've implemented new diversity and inclusion initiatives, as well as enhanced recognition programs, and we're seeing the benefits of our efforts through rising productivity and declining attrition. On the customer side, we installed store traffic counters in our U.S. stores, allowing us to better understand customer behaviors to inform pawn and sales strategies. In terms of strengthening the core, merchandise sales gross profit was up strongly, with related margins up nearly 900 basis points year over year, reflecting higher inventory turns and declining age general merchandise inventory. Reducing costs and further streamlining the business remains a key strategic priority. We'll dig into this later in the discussion, but we continue to make progress on this front and have now increased our targeted annual cost savings to more than 14 million, after also increasing the number last quarter from our original projection. We also remain focused on strategically expanding our store footprint, and we have added 17 stores since the end of our fiscal first quarter in December. a 1.7% increase in our total store count. We opened four new stores in Latin America in the second quarter and an additional two stores since the end of Q2. And we recently acquired 11 stores in Houston, strengthening our presence in Texas. All of these pieces contributed to our strong financial performance for the second quarter and set us up well for a considerable step up in earnings power over time as our PLO rebuilt. Turning to slide five, key financial themes for the quarter included steady earnings on a year-over-year basis. Adjusted EPS for the quarter came in at 17 cents, consistent with the level in the second quarter of fiscal 2020, as the expected decline in net revenue was offset by reduced expenses. Net revenue was down 11% with a decline mostly a function of the decrease in pawn transactions outstanding and pawn service charges. PLO ended the quarter at $123 million, down 24% on a year-over-year basis, reflecting increased government stimulus in the quarter, in addition to typical seasonal headwinds related to tax refunds. Tim will discuss our forward outlook in more detail, but it's important to point out that stimulus payments and an extended tax season have remained in play here in the U.S. thus far this quarter. As a result, pond demand has softened, putting near-term pressure on pond service charges, which will take time to work through even as PLO rebuilds. Having said that, we've been very pleased to see pond balances begin to increase since mid-April. Turning to the retail side of the business, while lower inventory levels continued to pressure sales, merchandise sales gross profit was up strongly year over year, driven by higher margins. For the quarter, merchandise sales margins reached 43%, with ongoing improvements in inventory turnover and age general merchandise inventory levels, reflecting our focus on more effectively operating the business at the store level. Our cost optimization program continues to drive meaningful savings, and we remain diligent in uncovering and realizing further efficiencies as part of our culture. And finally, our balance sheet continued to strengthen, with just over $335 million of cash on hand at quarter end, and no near-term debt maturities, providing us with ample liquidity and flexibility to fund PLO growth, finance de novo store openings, and capitalize on M&A opportunities if and when they arise. Slide six highlights the progress we've made against our cost reduction and simplification efforts. When we implemented our expense reduction initiatives in the fourth quarter of fiscal 2020, we initially targeted realizing approximately 12 million of recurring annual savings mostly related to G&A. Over the last couple of quarters, we've identified incremental efficiencies and now expect to achieve more than $14 million of annual cost savings. G&A costs decreased by 11% for the second quarter compared to the prior year quarter, resulting in a 22% decline through the first two quarters of fiscal 2021. Store expenses decreased by 7% for the quarter on a year-over-year basis and 9% when looking at year-to-date costs. Going forward, we remain focused on extracting further operating efficiencies without sacrificing our potential for growth. In that regard, we expect store expense to gradually trend higher as transactional demand increases. On the left side of slide seven, we call out some of our team member initiatives. We continue to believe that reporting strong financial results is directly tied to our ability to attract and retain a well-trained, motivated, and diverse workforce. And then we concentrate on technology on the right side. Ongoing tech initiatives include expanding sales and payment options, further enhancing our digital pawn servicing platform to broaden customer engagement, and increasingly leveraging our data across geographies to inform more systematic lending and pricing decision. Turning to our innovation and growth initiatives on slide eight. We continue to build out the functionality of our LANA digital PON channel. Online extension transactions were up 70% on a sequential quarter basis, while related PSE collected was up two times compared to the first quarter of fiscal 2021. In addition, layaway payment options are now available for all of our U.S. stores, with more than 1,000 payments made during the quarter. Our customers continue to tell us that they want choices in how they interact with us. and we are pleased to provide these convenient options. Second, ongoing customer service initiatives include enhancing online account management and centralized support capabilities, which are driving real-time improvements in online reviews and customer retention. Our digital initiatives go beyond account management and customer support. We continue to make inroads on the digital marketing side by leveraging search engine optimization and social media to enhance customer acquisition. And as mentioned earlier, we deployed traffic count technology in all of our U.S. stores to track related campaign analytics. And finally, we remain focused on increasingly leveraging our strong and liquid balance sheet to fund de novo store openings and potentially capitalize on M&A opportunities to further enhance our footprint and growth profile. So with that, I'd like to turn the call over to Tim Jugmans, our Chief Financial Officer. Tim?