EZCORP, Inc.

Good morning, ladies and gentlemen. Welcome to the EZ Corp third quarter fiscal 2021 earnings call. At this time, all participants are on a listen-only mode. Later, we'll conduct a questions and answers session, and instructions will follow at that time. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Mr. 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 our 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 EZ Corp's Chief Executive Officer, Mr. Jason Koulis. Jason?

Thanks, Michael, and good morning, everyone. We thought it'd be appropriate to start this morning's call by stating our EZ Corp purpose. We exist to serve our customers' short-term cash needs, helping them to live and enjoy their lives. We are driven by a diverse team with a passion for PON who are motivated to be their best because our customers, families, stakeholders, and the community's environment in which we live deserve it. We talk a lot internally about the importance of having one message, one message that ties to our strategy and communicates our purpose both internally and externally, and one message that resonates with team members, customers, investors, and all of our constituents. The third quarter marked another period of meaningful progress against the key strategic initiatives that we have laid out to position our core pond business for durable growth coming out of the pandemic. PLO, the key driver to our revenue and earnings power, is up 25% on a sequential basis and 35% compared to a year ago. At north of $150 million, PLO at the end of June reached the highest quarter-ending balance since the beginning of the pandemic. The growth began in mid April and continued through the quarter, and we saw further growth in July. Looking ahead, the higher starting point for PLO bodes well for growth in pond service charges revenue in the coming quarters, given the natural lag that exists in the business between pond originations and related fees. Merchandise sales volumes are below peak pandemic levels from last year due to the positive impact of stimulus payments on sales last year. However, Our merchandise sales gross profit was essentially flat versus the year-ago quarter, reflecting sharply improved inventory management metrics, including continued strength in inventory turnover rates, declining aged inventory levels, and expanding gross profit margins. We remain on track to realize meaningful cost savings this fiscal year and are focused on optimizing operating cost ratios as expense levels rebuild in conjunction with accelerating transaction volumes at the store level. Furthermore, we are increasingly leveraging our strong and liquid balance sheet. Beyond funding accelerating upon demand, we completed the acquisition of 128 stores in Mexico, our largest acquisition to date in terms of store count, and acquired 11 stores in the Houston, Texas market, and opened four de novo stores in Latin America during the quarter. We now operate 1,143 stores with 55% of those locations across Latin America. We also recently finalized our decision to close our Peru operations in Latin America, consisting of 11 stores, reflecting our ongoing efforts to focus the business on areas where we can drive profitable growth. While there is still much work to be done, we remain confident in the differentiated platform we have built and are encouraged by the progress we've made in further strengthening our core pond business, particularly through the pandemic. We remain focused on meeting our customers' needs for cash and affordable pre-owned and recycled merchandise across the US and Latin America. And our ongoing strategic initiatives will enhance the pace and trajectory of our growth going forward. As shown in our prior quarter presentations, slide four is a graphical representation of our strategic roadmap. And Tim and I will go into greater detail on some of our more recent milestones over the next few slides. At a high level, all of the underlying components or pieces of the puzzle work together to enhance relationships with our team members and customers, deliver sustainable growth and strong financial performance, and drive long-term shareholder value. You may have noticed in our social media posts that we are highlighting our role in the circular economy and the natural resources that can be saved when you buy an item in a pawn shop instead of buying it new. This component of our business which is core to who we are, is something we will continue to highlight along with the rest of our customer value proposition and our financial metrics. Turning to slide five, key financial themes for the quarter included modestly negative EPS consistent with the prior year quarter. On an adjusted basis, we reported a loss of 3 cents per share compared to a loss of 2 cents for the third quarter of fiscal 2020, as improved profit before taxes was offset by higher income taxes. Net revenue was up 1% year-over-year, driven by higher on-service charges and strong sales margins making up for lower sales, while adjusted EBITDA totaled $12 million for the quarter, up 126% from $5.3 million due to higher PSC. PLO ended the quarter at $153 million, up 35% on a year-over-year basis and within 17% of fiscal 2019. with further growth in July despite the transitory step-up in liquidity for customers as a result of the pull-forward and expansion of child tax credit payments. Turning to the retail side of the business, while sales volumes were down from prior year levels that were temporarily propped up by stimulus payments and high inventories, merchandise sales gross profit was essentially flat on a year-over-year basis. For the quarter, merchandise sales margins reached 44%, reflecting continued inventory management efforts. Inventory turnover continues to trend higher, and age-general merchandise ratios are now negligible compared to double-digit rates just 12 months ago. On expenses, we remain on track to realize more than $14 million of expense reductions for fiscal 2021, mostly related to lower G&A spend. And we remain focused on optimizing store operating cost ratios as transaction activity rebuilds. And finally, our balance sheet remains a key differentiating factor. As mentioned earlier, we closed two acquisitions during the quarter, and we continue to fund accelerating PLO growth and de novo store openings. And with over 280 million of cash on hand at quarter end and no near-term debt maturities, we still maintain ample liquidity and flexibility to further enhance growth. Slide six focuses on our ongoing cost optimization and productivity efforts. G&A costs declined by 10% for the fiscal third quarter compared to the prior year quarter, resulting in 19% savings on a year-to-date basis. Store expenses decreased by 3% for the quarter on a year-over-year basis and 7% when looking at year-to-date costs. On a sequential basis, store operating costs were down $1.8 million, or 2%, though we do anticipate related expenses to trend higher starting in our fiscal fourth quarter as transactional demand continues to rebound. Next on slide seven, team member highlights for the quarter included introducing benchmarking surveys, launching talent and succession plans, enhancing recruitment campaigns, and a continued focus on improving inclusion initiatives. And under technology and process efficiency, we walked through specific IT modernization initiatives recently implemented to enhance operations and productivity. Turning to slide eight, Innovation is a key driver of our sustainable growth initiatives and our efforts to do more for customers. Online extensions through our LANA digital pawn channel accounted for 9% of total extension payments, with more than 130,000 payments made online in the quarter. In addition, over 5,000 layaway payments were processed online last quarter, and we are in the early stages of bringing online payment capabilities to Mexico. We also remain focused on our customer service retention and acquisition initiatives, including launching a loyalty program in the next several quarters and adding searchable online inventories and select stores. And finally, we grew our store footprint by 13% for the quarter, driven by two acquisitions and the opening of four new locations, as previously mentioned. With that, I'd like to turn the call over to Tim Jugmans, our Chief Financial Officer. Tim?