Prepared remarks
Good morning, ladies and gentlemen. Welcome to the EZCORP Third Quarter Fiscal 2026 Earnings Call. Operator provided instructions. As a reminder, this call may be recorded. I'd now like to turn the conference over to Sean Mansouri, the company's Investor Relations Adviser with Elevate IR. Please go ahead, Sean.
Thank you, and good morning, everyone. During our prepared remarks, we will refer to slides, which are available for viewing or download from our website at investors.ezcorp.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 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. As noted in our presentation materials and unless otherwise identified, results are presented on an adjusted basis to remove the effects of foreign currency fluctuations and other discrete items. Joining us on the call today are EZCORP's Chief Executive Officer, Lachie Given; and Tim Jugmans, Chief Financial Officer. Now I'll turn the call over to Lachie.
Thank you, Sean, and good morning, everyone. EZCORP delivered another outstanding quarter, one of the strongest quarters in our history. Adjusted EBITDA was up 48% to $65.6 million, and adjusted diluted EPS was up 47% to $0.47. The key highlight for the quarter was the exceptionally strong core pawn operating metrics, which normalize out global scrap across all of the markets in which we operate. Core pawn revenues grew 24%, core pawn gross profit rose 28%, and same-store core pawn gross profit increased 13%. As anticipated, gold prices stabilized, and scrap sales and margin declined sequentially, while our earnings momentum and growth continued to build in a meaningful way for all of our shareholders. Core demand for our product remains strong across all of the markets in which we serve. PLO finished the quarter at a record $382 million, up 31%, driven by higher average loan sizes and the addition of new stores. More consumers are also choosing affordable, high-quality pre-owned goods, so sales and turns remain robust. Latin America was a standout again this quarter. In constant currency, PLO grew 33%. Core pawn gross profit rose 31%, and segment EBITDA increased 40%, with margins expanding on both the merchandise and EBITDA lines. We continue to grow our scale in this region during the quarter, extending our market leadership position in Guatemala, where we acquired 33 stores. We also opened 9 de novo stores across the region, which represents a very exciting element of our short- and long-term growth story as our de novos are consistently performing above expectations. We also reached an important milestone with SMG. During the quarter, we acquired the remaining interest in founders and increased our ownership of SMG to 97.4%. In July, shortly after quarter end, we purchased the remaining shares and now own 100% of SMG. Our view on SMG has strengthened as we see considerable opportunity in introducing EZ systems, operating disciplines, culture, and capital across the platform. I'll now hand it over to Tim to take you through the financials before returning for closing remarks. Tim?
Thanks, Lachie. Turning to Slide 5 for the consolidated financial highlights. Adjusted EBITDA rose 48% to $65.6 million, and EBITDA margin expanded 190 basis points to 16%, driven by merchandise margin expansion, expense discipline, and higher scrap gross profit. Adjusted diluted EPS improved 47% to $0.47. Earnings grew well ahead of the revenue, demonstrating the operating leverage in our model. Total revenues grew 31% to $408.4 million on higher merchandise sales, PSC, and scrap, along with new stores, including SMG. Gross profit also increased 31% to $240.3 million. PLO ended the quarter at $382 million, up 31%. That PLO strength flowed through to PSC, which rose 29% to $149.1 million, with same-store PSC up 13%. On the retail side, merchandise sales grew 21% to $203.5 million, with same-store sales up 6%. Merchandise margin expanded 190 basis points to 38% on pricing execution and inventory quality. On Slide 6, we have provided the consolidated revenue and EBITDA bridges, which show the composition and quality of this quarter's growth. On revenues, SMG contributed $43.1 million in the second quarter of consolidation, and same-store core pawn revenues added $24.5 million. Scrap sales on a same-store basis added $15.9 million, and other new stores contributed $13.9 million. Same-store core pawn revenues grew 9%, and same-store core pawn gross profit grew 13%. As a reminder, core pawn excludes scrap entirely, giving the cleanest read on underlying business performance. The EBITDA bridge provides a clear view of earnings drivers. Same-store EBITDA, excluding scrap gross profit, contributed $12.9 million of the year-over-year increase, the largest single driver of the bridge. SMG added $6.6 million, and same-store scrap gross profit added $3.5 million. Core operations and new stores, not scrap, drove the majority of our earnings growth this quarter. Scrap sales of $55.7 million increased $28.8 million year-over-year on higher gold prices. Sequentially, scrap sales and margin declined from the second quarter's unusually elevated levels as gold stabilized, consistent with the outlook we provided on last quarter's call. Scrap gross margin was 26%, compared to 38% in the second quarter and 29% in the prior year quarter. Scrap gross profit of $14.5 million remained well above the $7.9 million we generated a year ago. Scrap remains a valuable contributor to earnings and cash. As a reminder, we lend against longer-term gold values, not daily price movements, and use scrap to manage inventory, not speculate on gold. Consolidated net inventory ended at $312.5 million, up 39%, reflecting higher PLO purchases and layaways. Turnover was 2.3x, compared with 2.4x a year ago, and aged general merchandise declined 132 basis points to 1.3% of total general merchandise inventory. Inventory growth was driven by jewelry, which is scrapped if it doesn't sell within approximately 12 months. Moving to the U.S. Pawn segment on Slide 7 and 8. We ended the quarter with 560 stores across 19 states, including 1 store acquired during the period. Total revenues increased 14% to $251.2 million, with more than half of the improvement attributed to core pawn. Core pawn revenue grew 9%, and core pawn gross profit grew 12%, supported by healthy pawn activity and further merchandise margin expansion. PLO grew 15% to $254.5 million, with same-store PLO up 13%, driven by increased average loan size and continued strong pawn demand. Average loan size rose 16% to $240 on higher jewelry composition and gold prices. Jewelry represents 69% of U.S. PLO. PSC increased 13%, primarily driven by same-store PLO growth. On the retail side, merchandise sales increased 6%, with same-store sales up 3%, and merchandise margin expanded 130 basis points to 40%. Inventory quality remains excellent. Inventory grew 28% to $212.2 million on higher PLO purchases and layaways, while turnover came in at 2x. Aged general merchandise declined to 1.9% of total general merchandise inventory or just $0.7 million. Segment EBITDA improved 23% to $64.5 million, and core pawn accounted for 83% of the gross profit growth. Store expenses rose 8% in total and 6% on a same-store basis, well below revenue growth, lifting EBITDA margin 200 basis points to 26%. This reflects the durable demand, disciplined lending, and operating execution in our U.S. stores. Turning to Latin America on Slide 9 and 10, where the team delivered another excellent quarter. We ended the period with 881 stores across 4 countries. During the quarter, we opened 9 de novo stores, including 5 in Mexico, 3 in Guatemala, and 1 in Honduras, and consolidated 1 location. In April, we also completed the acquisition of 33 stores in Guatemala, extending our leadership in that market. As a reminder, our Latin American results are presented on a constant currency basis, unless otherwise noted. Revenues reached a record $114.1 million, up 25%, with about half of the improvement from merchandise sales. Core pawn revenues grew 22%, and core pawn gross profit grew 31%. So the growth here is broad-based and high quality. PLO increased 33% to $93.7 million, with same-store PLO up 28% on sustained pawn demand and improved operational performance. On a GAAP reported basis, average loan size rose 28% to $112, or 18% in constant currency. Jewelry now represents 49% of PLO. PSC rose 26%, supported by same-store PLO growth and new stores. Merchandise sales climbed 20%, with same-store sales up 11%. Merchandise margin expanded 490 basis points to 36%, reflecting stronger pricing execution and product mix. Inventory finished at $71.4 million, up 21% on PLO growth, with turnover of 3.1x. Aged general merchandise remained below 1% of total general merchandise inventory. Segment EBITDA grew 40% to $25.4 million, with 95% of the gross profit growth driven by core pawn. Store expenses increased 27% in total and 17% on a same-store basis, primarily reflecting labor costs, including minimum wage increases. Gross profit growth more than offset those higher costs, and EBITDA margin expanded 240 basis points to 22%. Moving to SMG on Slide 11. As Lachie mentioned, SMG is now wholly owned, effective in the fourth quarter. Because we did not own SMG in the prior year period, results are presented on an absolute basis without year-over-year comparisons. SMG ended the quarter with 108 stores across 12 countries under the La Familia and CashWiz banners, including 1 de novo opened during the quarter in Puerto Rico. PLO at the end of the quarter was $33.8 million, and total revenues were $43.1 million, comprised of $17.1 million of merchandise sales, $14.3 million of PSC, and $11.7 million of jewelry scrap sales. Core pawn revenues were $31.4 million, and core pawn gross profit was $19.7 million out of a total gross profit of $22.4 million. From a balance sheet perspective, we remain highly liquid and conservatively positioned. We ended the quarter with $311 million in cash. Our first debt maturity is in December 2029, when our convertible notes of $230 million are due, followed by our $300 million senior notes in April 2032. The year-over-year decline in cash primarily reflects the retirement of SMG third-party debt of $134.2 million in cash deployed into acquisitions. During the quarter, under the $50 million repurchase program authorized by our Board in November 2025, we repurchased and retired approximately 132,000 shares of our Class A common stock with $4 million. We have used $8 million of the program to date. Our capital allocation priorities are unchanged: existing store PLO and other earning asset growth, de novos, disciplined M&A, and opportunistic returns to shareholders, all within a fiscally conservative balance sheet. Looking ahead, our operating priorities are consistent: grow PLO, improve inventory efficiency, build de novos, integrate our recent acquisitions, and manage expenses carefully. As discussed in the last few quarters, scrap margin is mostly driven by year-over-year change in gold price. As anticipated, consolidated scrap margin came down sequentially year-over-year to 26%. If gold price does not increase, we'd expect continued normalization towards long-term historical levels of scrap margin between 15% and 20%. On seasonality, a few reminders. For our fiscal fourth quarter, in Latin America, customers receive a midyear bonus payment in July, which typically drives higher redemptions and seasonal step-down in PLO, while the U.S. book usually continues to build. As seen over the recent quarters, PLO yield also compresses gradually as average loan sizes rise since larger loans carry lower monthly rates in states such as Texas. And as scrap normalizes, historical sequential bottom line patterns will be less useful. Core pawn revenue and core pawn gross profit remain the cleanest read on the underlying business. On expenses, we will continue to see sequential increase as we continue to grow existing stores, add de novos, and integrate acquisitions, including SMG. Our M&A pipeline remains active in both the U.S. and Latin America, focused primarily on markets we have trusted local management teams and deep operating knowledge. We continue to evaluate every opportunity against strategic fit, integration complexity, and return on invested capital. Now I'd like to turn it back to Lachie for closing remarks.
Thanks, Tim. This was clearly an outstanding operating and financial quarter for our company. Most pleasingly, the results were driven mostly by our core pawn operating performance rather than by gold scrap activities. All regions are performing exceptionally well, and we are very excited about the opportunity for additional growth in SMG. We have a strong, liquid balance sheet, and no near-term debt maturities. The M&A pipeline remains robust, particularly in Latin America, and we're excited about the large-scale de novo opportunity in that region as well. Finally, a genuine thank you to our 9,700 team members for the passion and professionalism you deliver to our customers every day. I look forward to together closing out what has been an exceptionally strong fiscal year for our company and for our shareholders. With that, operator, we'll open the line for questions.
Questions and answers
Operator provided instructions. Our first question comes from the line of Brian McNamara of Canaccord Genuity.
I was hoping you guys could opine on gold prices. I hate to beat the dead horse here, but obviously, it's a concern we hear from investors that gold sits at $4,300 today versus $5,400 at the peak in January. How does that impact your day-to-day operations? And could you give some color on how you price loans and that process? I think it would be really helpful.
Sure. Thank you, Brian, for the question. On setting gold prices, we look at gold prices on a rolling basis, roughly a three-month rolling basis. So if gold spikes like it did in January and then comes back down, we are not changing what we do on a day-to-day basis. We're looking at more medium-term gold prices to price loans. The biggest effect that we do see on the business is scrap. What we saw in quarter 2 with the rise of the gold prices is that the scrap margin was significantly higher than normal. This quarter, with gold prices coming down, the change year-over-year in gold price is declining. So we've seen sequentially that scrap margin decreased, and year-over-year scrap margin decreased as well. If gold prices remain relatively consistent—in the just over $4,000 to $4,300 range for a number of months, excluding the January spike—we would expect scrap margins to return toward normal levels.
I think to add to that, Brian, as I know you know, we're in the business of satisfying a customer's need for cash. As you can see from our loan growth, that demand has been phenomenal and very consistent. We're seeing extremely strong lending trends, which is the most important metric in our business—PLO growth. Across the U.S. and Latin America, especially, the demand for cash in our stores is exceptionally strong. Clearly, gold is the largest piece of collateral our customers use, but when thinking about the future of this business, it is incredibly robust from a growth perspective because we satisfy customers' need for cash. The macro environment—high gas prices, interest rates, inflation, cost of living—continues to challenge our customers. From a micro perspective, we still have work to do to improve store performance organically. From both perspectives, I'm very excited about the growth potential of our business. Gold is important, and it's a good question, but what really underlines this business's quality is our ability to service that need for cash.
That's helpful. Just a follow-up. I've been of the view that a person comes in for a dollar amount—they need $200 to satisfy a short-term cash need. If gold drops 25%, for example, something they brought in three months ago that would get $200 might get $160 today. Would they then pull another item to make up that $40? Or are there folks who, because gold prices are higher earlier, got a higher loan than the cash they actually needed? I know that's a loaded question, but I'm curious.
Yes. Look, are there certain customers that take more because gold is up? Of course. They may take more money because the gold price is higher. But my anecdotal view is that people come in with a need for cash—medical bills, filling up their car—that does not depend on the gold price. That need for cash is what we're there to satisfy. So while some customers may take more when the gold price is up, fundamentally they need cash, and we use various items—general merchandise, gold, jewelry, diamonds—to satisfy that need.
We know that to satisfy the need for cash, customers are bringing in fewer grams than they used to, to satisfy the same cash amount. There is a group of customers that is not taking the full amount we're offering; they take below what we're offering. So it isn't true that average loan size moves directly with the gold price. The main area where gold price matters more is when customers are selling their gold to us; they try to maximize what they get, especially for items not sellable in stores, such as broken necklaces, which we then scrap quickly. For loan products, it's a different dynamic.
Right. That's very helpful. I appreciate the detail. On the areas where your execution matters—like merchandise margin—I think it was your highest U.S. merchandise margin since 2022, and blended ex-SMG looks north of the targeted 35% to 38% range. Lachie, I know you've been working to get that margin up. Any color on what's driving the progress there?
Tim, do you want to take a crack at the margin?
Yes. Margin has crept up, which is nice to see. We've improved execution in stores and pricing, and there's also some effect from gold price changes. On a consolidated basis, we still expect margins to be in or around that range, but we've been pleased with the recent improvement.
Great. And if I could squeeze one last one on M&A: how is the pipeline looking today? How is the SMG integration going? How did the deal come together to get you to 100% ownership?
There's been a huge couple of quarters on the M&A front. We've done SMG, we acquired 33 stores in Guatemala, we've done several in Mexico, and a few in the U.S. We've been very active over the last two quarters on execution. M&A for me now has two focuses: integrating these businesses robustly, and continuing to pursue additional opportunities. For SMG, we're excited. It will take about a year to complete the major integration steps—getting them onto our point-of-sale system and onto Workday are significant efforts underway. Operationally, SMG was capital-constrained and is no longer capital-constrained. We're implementing EZCORP operating disciplines: managing inventory with scrap but focusing on having jewelry cases full and making strong margins on jewelry sales. There's cultural change happening and we expect this first year to be about systems and culture. Once on our systems and processes, we expect the business to perform ahead of our initial expectations. The leadership there has been open and collaborative. As for how the deals come together, these transactions take time: you need a willing seller, a willing buyer, and a price, and sometimes they come together unexpectedly. And this is where a technical difficulty occurred.
Operator provided instructions. Our next question comes from the line of David Scharf of Citizens Capital Markets.
Tell you what, I'm going to follow up and pile on the...
Sorry, did you guys lose me then? I had a broker that called my line, sorry. I was just ending. So we're very happy on the SMG side. In the pipeline, as Tim said in his remarks, it's very robust in Latin America, particularly. In the U.S., we're now in the smaller acquisition zone—one- and two-store deals. Latin America is very interesting with large independent chains, and our de novo program is a strong growth platform that investors should remember. We have great opportunity across Latin America for de novos as well.
David, do you want to go ahead with your question?
Okay. Just quickly, maybe framing the prior questions a little differently: when we think about cash needs versus collateral value, do you think PLO growth would be the same same-store PLO growth if gold prices were at last year's levels? In other words, is the growth demand-led regardless of gold price?
Our customers are very smart. The majority are only taking what they need because if you're taking a loan on something you want back, you're only going to take what you feel comfortable repaying. That's very different from selling an item where customers try to maximize margin. If customers were always maximizing loan amounts based on gold, we'd see average loan size move much more directly with gold price. The counter evidence—customers not taking the maximum—shows demand is the primary driver, not gold price.
Got it. No, that's very helpful. I think it helps investors sort it out.
Understood.
Yes. One follow-up: regarding PLO growth in Mexico, we are about nine to ten months into the worker stoppage at the large Nacional Monte operation. Has there been any direct relationship between that work stoppage and your foot traffic?
I think there has to have been some effect. Comparatively, we don't have a lot of stores very close to theirs, but there is certainly an element of demand—customers who used to go there coming to other pawn shops across the country.
Our next question comes from the line of John Hecht of Jefferies.
First, getting more on SMG: what are the characteristics of the stores and metrics—store PLO size versus other geographies, inventory turns, average loan size and terms? Are they consistent, or are there differences? Do you have objectives to change those metrics over time?
It's region by region. The two biggest markets for SMG are Florida and Puerto Rico; the other countries across the Caribbean are much smaller. Generally, the metrics we aim for are similar to what we do, but each market differs. In Puerto Rico, metrics are similar to Mexico because of auto lending under pawn regulation; Puerto Rico stores do particularly well. In Florida, the metrics are similar to our U.S. stores. As I mentioned, SMG was capital-constrained. Adding our capital, operating disciplines, and culture should bring the business more in line with EZCORP metrics over time. It will take time, but across markets and countries the customer base and metrics are similar, so we can manage the business in a focused way. I'm excited about the potential once it's on our systems and processes.
John, on Slide 11 in the investor deck, we show some of those metrics. You'll see average loan size for SMG is higher than in the U.S., and much of that is due to Puerto Rico and vehicle lending, which pushes average loan size up compared to the U.S.
Second question: the PLO growth has been strong and translates into strong revenue growth. Is the mix of revenue in the U.S. and Latin America consistent with a year ago, or are you observing changes in the types of inventory as things expand?
On types of inventory, over the last several years we've seen jewelry continue to increase. From a general merchandise perspective, luxury items and shoes have increased in stores, while TVs and other large electronics are declining. Mix varies by neighborhood as customers bring different items.
John, the biggest change in inventory is in Latin America. We're now at about 50% jewelry of PLO. Historically we were known as primarily a general merchandise lender, but over the last two years our training and leadership in Latin America have turned us into a strong jewelry lender. I would guess jewelry was 30% to 35% three years ago, now closer to 50%. Luxury items are growing and laptops are down. The jewelry shift is the biggest change.
Our next question comes from the line of Kyle Joseph of Stephens.
On gas prices, which have been volatile, how much of an impact are you seeing these days from fluctuations in gas prices in the U.S.?
Thanks, Kyle. We don't have a precise number—this is anecdotal—but higher and volatile gas prices put pressure on our customers and increase the demand for cash. I can't give a specific impact number, but it does affect customer behavior and demand.
On SMG, you're at 108 stores. Within those markets, do you have a sense for how many stores that could eventually be? There's some overlap, obviously.
It's an interesting question given overlap. We're currently focusing on leadership and how to run the business—what to integrate and who runs what. Step one is getting them onto our systems. Then we'll assess which markets have expansion opportunities. Puerto Rico looks attractive, and there are opportunities in the Caribbean. Now that SMG is 100% owned, it will just be part of our de novo program going forward.
On Latin American PLO growth, what's driving that and how sustainable is it? Is it primarily higher inflation there or influenced by inventory mix?
I want to give the Latin America team credit. Execution there has been phenomenal. The jewelry mix has been a major driver—teaching teams to be better lenders on jewelry. Historically customers brought phones, electronics, and tools; we ran a deliberate program to increase jewelry lending. The macro environment has been supportive, but the Latin America story is much more about execution and leadership than just macro factors.
Our next question comes from the line of Vincent Caintic of BTIG.
Two quick follow-ups. First, Tim, you provided commentary on seasonality. If we put together seasonality, Latin America timing, and jewelry scrap normalization, should we be thinking about EBITDA or EPS slowing on a quarter-over-quarter basis? The U.S. and LatAm look strong, but how should we think about near-term consolidation of these effects?
We don't provide quarter-level guidance, but as we've said, scrap gross profit had a big effect in quarter 2 and less so in quarter 3. Assuming gold prices remain stable, scrap margin should normalize toward the 15% to 20% historical range. That normalization means less year-over-year growth when including scrap, so excluding scrap is a better way to view underlying performance.
Vince, thanks. The key point is to look at the core business. We don't get market credit for scrapping, but the core operating metrics—lending, sales, margins, M&A, de novos, balance sheet—are very strong. Scrapping goes up and down by quarter; while it provides cash flow, it is volatile. To assess the real value of the platform, look at core operating metrics, which are performing very well.
Follow-up: a lot of questions have been about gold prices. Your underwriting and pricing evaluate customers' propensity to pay back and resale value, and you manage risk via discounting and turns. Aged inventory has been doing well. So regardless of gold or inflation, as long as you can turn inventory quickly, is that the main focus?
Yes. Turns are critical. I try not to lead with aged inventory because it can encourage poor practice, and our aged inventory dollar amount is very small—less than $5 million. You could write it off today with little impact. Turns are important, and we work on incentives, training, and operating discipline to keep turns robust. You can increase turns by scrapping, but we prefer to keep jewelry cases full and sell jewelry at high margin. So turns and inventory management are central to the story.
To add context, AGM in the U.S. at 1.9% is $0.7 million of inventory. These dollars are not large. Jewelry is different because it can be scrapped, and aged general merchandise is the primary area of concern.
So we shouldn't be taking a view on gold prices from a year ago because that inventory would generally have been gone by now, correct?
Correct. Jewelry is generally scrapped at around the 12-month mark.
Our next question comes from the line of Eric Wold of Texas Capital Securities.
A couple of follow-ups on consumer dynamics. Could you dive into the micro-level behavior—repeat visitation trends, payoff behavior, forfeiture—anything that gives a view of consumer health now versus a few quarters ago?
Thank you. PLO growth is very strong, indicating increased demand for our core loan products. Our customer is under pressure and needs cash across merchandise types. Forfeiture rates have been stable over a long period; we haven't seen big changes. We've seen increased activity in customers selling gold, but forfeiture metrics remain consistent. Sales are robust, particularly in Latin America. So it's a mixed bag, but both sides of the business are performing well. More importantly, we're improving lending, pricing, digital initiatives, marketing, and using AI to enhance operations and serve customers' cash needs.
It's important to note that we generally lend at 40% to 65% of our assessed value, and we regularly reassess that. If we see declines in resale values for categories like laptops, we lend at the low end of loan-to-values to ensure we can sell the inventory. Forfeitures remain in line with our pricing, which keeps them consistent through cycles.
A follow-up on the pipeline: what's the current pipeline composition, any completed deals or those in discussion, and how are valuation expectations from sellers versus what you expect at this point in the cycle?
M&A cycles in this industry can be long and variable. Some deals take years, others months. Many sellers are family-owned businesses, and personalities and generational considerations affect timelines. From a multiples perspective, things are fairly consistent. Be mindful of what scrap activity has done to some sellers' performance. The pipeline is strong in Latin America where very large independent chains exist. In the U.S., opportunities are more targeted and smaller, focused on markets where we have strong teams.
Thank you. This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.