NASDAQ:EZPW EZCORP Q4 2023 Earnings Report $14.66 -0.08 (-0.54%) Closing price 04:00 PM EasternExtended Trading$14.70 +0.04 (+0.28%) As of 07:56 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast EZCORP EPS ResultsActual EPS$0.23Consensus EPS $0.21Beat/MissBeat by +$0.02One Year Ago EPSN/AEZCORP Revenue ResultsActual Revenue$270.48 millionExpected Revenue$273.27 millionBeat/MissMissed by -$2.79 millionYoY Revenue GrowthN/AEZCORP Announcement DetailsQuarterQ4 2023Date11/15/2023TimeN/AConference Call DateThursday, November 16, 2023Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by EZCORP Q4 2023 Earnings Call TranscriptProvided by QuartrNovember 16, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Morning, ladies and gentlemen, and welcome to EZCORP's 4th Quarter and Full Year Fiscal 2023 Earnings 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'd now like to turn the call Over to Jean Marie Young, Investor Relations with 3 Part Advisors. Operator00:00:17Please go ahead, Jean. Speaker 100:00:23Thank you, and good morning, everyone. During our prepared remarks, we will be referring to slides, which are available for viewing or download from our Web site at investors. Ezcorp.com. Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides contains 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. Speaker 100:00:50Actual 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, And 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 Givens and Tim Judmans, Chief Financial Officer. Now, I'd like to turn the call over to Lachky Gibbons. Lachky? Speaker 200:01:28Thanks, Gene, and good morning, everyone. Our team's consistent execution on our strategic plan has again yielded very strong operating and financial results for our stakeholders. As we conclude the current fiscal year and 3 year strategic plan announced in November 2020, we will today begin with a review of our 4th quarter performance and then we'll move to an overview of the strategic goals we set 3 years ago and the associated accomplishments that have been achieved in that time. At the end of Q4, Formlanes Outstanding, the key driver of our business, hit a record $250,000,000 the highest level in EZCORP history. Total Q4 revenue hit a record $261,400,000 driven by higher PSC and sales volumes across all of our regions. Speaker 200:02:16Merchandise sales gross margins remained within our targeted range of 36% with strong inventory turns of 2.7 times. Beginning on slide 3, we are a global leader in pawn broking and pre owned and recycled retail. We operate 1231 stores in the U. S. And Latin America, having added another 21 stores this quarter. Speaker 200:02:37The macroeconomic environment continues to be a challenge for our customer base with inflationary pressure, increasing interest rate, Our gas prices and the timing of credit from alternative lenders increasing the demand for pawn as consumers seek cash to satisfy their short term needs. In addition, consumers seek value for money households and other consumer goods by purchasing pre owned products, which also represents a more environmentally responsible way to shop. We strive to provide the best, most convenient experience for our customers through continuous innovation, while positively impacting the environment and the communities in which we serve. Moving on to Slide 4. People, Pawn and Passion is our core operating theme. Speaker 200:03:20Our engaged team drives our success, so we are committed to investing in recruitment, retention and incentivization to ensure our team members are highly engaged. We provide access to critical financial services in the hundreds of local communities in which we operate, offering customers instant cash for any type of value. And we promote the circular economy with a more affordable and sustainable shopping experience with outstanding customer service, an attractive and well positioned store footprint, differentiated digital platform, proprietary POS system and an innovative loyalty program for our customers. Our balance sheet is very strong and liquid, enabling us to fund significant growth in our earning assets, build out of new de novo stores, Opportunistic acquisitions from what continues to be a robust pipeline and our share repurchase program. Slide 5 shows our progression this quarter on our 3 year strategic goals. Speaker 200:04:17We believe we have the most passionate, productive, tenured and committed team in the industry and continue to find new ways to engage, motivate and retain them. The implementation of the Workday human capital management system globally during the quarter We'll further improve access to human capital data and enhance training, career development and recruitment processes. Our points based loyalty program continues to be highly popular with our customers, growing 15% this quarter to 3,800,000 members. We are now working on delivering a superior experience to these customers, including offering tailored products and services to help drive our growth. Turning to our key financial themes for Q4 on Slide 6. Speaker 200:05:03As mentioned, PLO, the most significant driver of revenue and earnings, hit an all time high of $240,400,000 up 14% with an associated 15% increase in PSC. Merchandise sales were up 9%, resulting in total revenue for the quarter of 200 and $1,400,000 up 12 percent, which was a record for Q4. Adjusted EBITDA was $31,200,000 for the quarter, up 26%. Inventory turnover remains strong with aged inventory increasing slightly year over year, but improved sequentially by 30 basis points. Cash on the balance sheet came down slightly on a sequential basis, primarily due to increases in PLO and inventory. Speaker 200:05:49On Slide 7, we show year over year EBITDA growth of 14%, while keeping EBITDA margin flat at 13% in a highly inflationary environment. Slide 8 focuses on our progress in strengthening our core pawn operations during the quarter, investing in people and technology In addition to launching the Workday human capital management system globally, we continue to upgrade pricing, Point of sale system and e commerce capabilities to drive faster transaction times and deliver better customer experience. On Slide 9, in the area of innovation and growth, as I've said, our EZ Plus loyalty program now has over 3,800,000 members Enrolled versus over $3,300,000 last quarter. In the U. S, we collected $18,000,000 in online payments, which was up $8,400,000 and we revamped the core Mexico website to improve customer experience and grow traffic materially as we've done in the U. Speaker 200:06:50S. Over the last 12 months. Improving customer experience and growing the customer base remain key to our strategy. We increased global transacting customers by 5% this quarter and grew visits to porn websites by 16% over Q3. We opened 19 de novo stores in Latin America, With 10 in Mexico, 7 in Guatemala and 2 in Honduras. Speaker 200:07:14And in the U. S, we acquired 2 stores this quarter. Slide 10 and 11 outline our ESG highlights for the 2023 fiscal year. We are a neighborhood recycler and a compelling component of the local circular economy and have resold over 5,400,000 pre owned jewelry and general merchandise items this year. Importantly, we provide an essential, simple, regulated and transparent financial resource for those who are underserved by traditional sources. Speaker 200:07:47During the year, we recycled over £1,200,000 of paper in the U. S. And have responsibly disposed end of life services, Hard drives, computers, electronics and accessories through sound recycling and e waste processing practices in the U. S. And Latin America. Speaker 200:08:03We successfully completed full migration of our data center physical services to cloud services through a multiyear effort, reducing our environmental footprint and greenhouse gas emissions and ensuring high quality services and availability for our customers. We have upgraded the lighting to LEDs in 78% of our U. S. Stores, an increase of 8% from the previous year. Additionally, 60% of our Latin America stores now have LED lighting, a 21% increase from the prior year. Speaker 200:08:34We are committed to continuing this initiative to enhance We have revamped the mission of the EZCORP Foundation in the U. S. And have launched local giving strategies aimed at improving quality of life in the communities where we live and operate through supporting financial literacy, Food Security and Financial Stability. Diversity and inclusion are a significant focus with several affinity groups and programs operating in the U. S. Speaker 200:09:03And Latin American segments. 66% of U. S. Employees and 58% of U. S. Speaker 200:09:09Management identify as an underrepresented minority, 52% of global employees and 49% of global management are female. We strive to continually improve the team member experience and engagement by enhancing store based communication, scheduling and recognition programs. I would now like to turn the call over to Tim Judman, our CFO, to provide more details on our financial results. Tim? Speaker 300:09:36Thanks, Lachie. Slide 12 details our consolidated financial results for the Q4. HALO ended the period at $240,400,000 up 14% on a year over year basis, which is the highest in EZCORP history. PC revenue was up 15% over last year with growth driven by both increased same store PLO growth and new stores. Merchandise sales was up 9% to $145,300,000 Our highest 4th quarter sales results. Speaker 300:10:05Merchandise sales gross profit was up 5% due to increased sales offset by an expected 100 basis point margin decrease. Inventory turnover was strong at 2.7 times with HGM inventory at 1.3%, a 30 basis point improvement over the 3rd quarter. We have been successfully working on improvements in the U. S. And LatAm to drive aged GM lower. Speaker 300:10:30It was another solid quarter with consolidated EBITDA of $31,200,000 up 26%. Turning to our U. S. Pawn operations on Slide 13. Halo rose 17% due to improved customer service and higher Pawn demand. Speaker 300:10:48PSC was up 17% year over year, driven by higher average PLO and yields. On the retail side of the business, Merchandise sales were up 8% with the merchandise sales gross profit up 3% with an expected 200 basis point drop in sales margin. Store expenses increased by 11%, primarily due to labor in line with store activity, higher store count and to a lesser extent expenses related to our loyalty program. U. S. Speaker 300:11:17Pawn EBITDA for the quarter was $39,700,000 up 18% on prior year to higher PSC, partially offset by increased expenses. Slide 14 focuses on our Latin American Pawn Operations. Segment PLO grew 7% for the 4th quarter with same store PLO up 4% as consumer demand increased. PSC was up 9% due to higher average PLO and PLO years. Merchandise sales were up 12%, 7% on a same store basis. Speaker 300:11:52Merchandise sales gross profit up 11% Due to increased sales offset by a margin decrease of 100 basis points. Store expenses were up 18% 14% on a same store basis, mainly due to increases in minimum wage and headcount, higher store count and to a lesser extent expenses related to our loyalty program. Inventory turnover remains strong at 3.6 times with HGM at 2%, showing a 40 basis point improvement over Q3 due to improving execution in LatAm. For the Q4, Latin American foreign EBITDA decreased by 11% to $7,600,000 primarily due to losses from de novo stores opening during the year. As we conclude our current 3 year strategy period, we would like to provide an overview of our team's performance and progress we've made towards our long term objectives. Speaker 300:12:49Waki? Speaker 200:12:51Thanks, Ted. Slide 16 shows our 3 year plan strategy pillars. We transitioned in fiscal year 2020 to a senior management team who were mostly promoted from within and with many years of experience in the pawn business. And we performed a comprehensive strategic review of all areas of the company. We launched a new 3 year plan focused on significantly improving our culture and the bench strength of our store teams, enhancing our core Pawn operating model with more robust lending and higher inventory terms, reduced costs An expanding customer base and store footprint and an extreme focus on customer service and engagement, all of this to materially increase operational efficiency, Bottom line growth and return on capital for all of our shareholders. Speaker 200:13:37On Slide 17, our commitment to our internal operating has led to growing PLO and revenue to record levels, coupled with a sustainable improvement in ROEI. We introduced a cultural transformation in the U. S. In financial year 2020 and Latin America in financial year 2022. The results of this work is demonstrated both in our significantly improved financial and operating results over the last 3 years, as well as our most recent annual company wide engagement survey in which we scored 84 points, well above all global benchmarks. Speaker 200:14:13Tim will walk through the significant financial improvements we've seen over the last 3 years. Speaker 300:14:18Thanks, Lachie. We have seen a substantial improvement in our financial results over the last 3 years. This improvement starts with PLO, which you can see on Slide 18. PLO reached a low point in Q3 fiscal year 2020 due to the pay down during COVID, but since then has continued to increase significantly, reaching an all time record this quarter. The macroeconomic environment remains attractive for pawn broking as customer demand continues to grow and the internal initiatives that we have executed has driven PLO and PSC into more record territory. Speaker 300:14:56As you can see in the PLO competition chart, jewelry porn demand has been growing at a faster pace than general merchandise, contributing to a high average pawn loan size across all geographies. And we believe that there should be more growth going forward in this critical category. On Slide 19, you can see how improvements to the PON operating model and team member incentive programs have driven stronger inventory turnover with low aged inventory. Similar to the PLO composition, we have seen an uptick in jewelry during FY 'twenty three and that tends to turn at a slower rate than general merchandise. Slide 20 shows a significant improvements to merchandise sales and sales gross profit, which were driven by enhanced operating model changes implemented during this period. Speaker 300:15:46The strategy focused on quicker inventory turns and lower aged with new incentive programs designed to drive execution. Merchandise margin in fiscal 2021 was unnaturally high pandemic and has returned to our normal range of 35% to 38%. Merchandise sales profit growth has been outpacing the margin decrease. Slide 21 looks at the many metrics showing sustained growth in customer engagement. All of these have been critical in our sustained improvements in our operating and financial results. Speaker 300:16:21The EZ Plus Rewards program has been a resounding success. We believe that there are winning market share in the local nobles in which we operate as a direct result of this program. EZ Plus payments has grown quickly, giving our store teams more time to directly serve customers. Our website has been redesigned and optimized Search and we are now real drivers of our traffic to our stores. Google reviews have also been very successful and we have an average rating of 4.8. Speaker 300:16:53On Slide 22, we show the growth in store count from fiscal 2020. In the last 3 years, we have increased store count by 220 2 stores. We have acquired 154 stores with 128 in Latin America and 26 in the U. S. We opened 91 de novo stores with 80 of them in Latin America, while consolidating 23 stores. Speaker 300:17:18We also expanded our luxury offering with acquisition and build out of MaxxPawn in the exciting Las Vegas market. Our balance sheet is very strong and has significant strength as it provides a stable long term funding base from which to execute upon our substantial Growth opportunities ahead. In the last 3 years, we have invested $176,000,000 in growing our earning asset base, $55,700,000 in the exciting strategic assets of SMG through Founders and CTV. We have also repurchased $19,000,000 of our shares since August 2022. We have maintained our average borrowing cost below 3.3% and extended over 60% of debt maturities until fiscal 2029. Speaker 300:18:07Looking at U. S. Poolhorn on Slide 23, PLO is up 80% compared to fiscal 2020. Elo per store is up 71%, which is a new record. Net revenue is up 26% and EBITDA is up 57%. Speaker 300:18:24REEA in fiscal 2019 was 133% and is now 157%, driven by significant operational and model improvements. Merchandise margin has normalized at 38%. Looking at LatAm Pawn on Slide 24, PLO has doubled since fiscal 2020, while PLO per store is up 43%, net revenue is up 63% and EBITDA is up 80%. ROEI in fiscal 2020 was 127% and is now 175%, driven by our team's focus on customer and operational improvements. I'll hand it back to Lachie to discuss the strategic investments on Slide 25. Speaker 200:19:09Thanks, Tim. We view our investments in Cash Converters International and SMG through Founders as an important strategic and geographic extension of our core pawn operation. Through Founders, we have enhanced our exposure to the strategically important Caribbean and Central America regions, as well as the Florida market. And CCB, listed on the Stock Exchange in Australia, increases our exposure in 14 countries, including Australia, New Zealand and the United Kingdom. We are extremely excited about the growth prospects ahead for these 2 very well run businesses. Speaker 200:19:44All this results in our 3 year earnings performance on Slide 26. While obviously COVID impacted, Since we embarked on this 3 year strategy in fiscal 2020, net income has more than tripled and EBITDA has almost doubled, with the share price increasing 64%. Investing $100 in our Class A common stock at the end of fiscal year end 2020 would be worth $164 at the end of fiscal 2023 compared to $118 invested in the NASDAQ Composite Index and $102 invested in the Nasdaq Other Finance Index. Looking forward on a consolidated basis, We should see PLO continue to grow on a seasonal basis with PSC following suit. As communicated in prior quarters, We are likely to continue to see gross margin remain at the lower end of our target range of 35% to 38% as we remain focused on strong inventory turns and limited age general merchandise. Speaker 200:20:43As we adjust salaries and wages during our Q1, we will see store expenses increase on a sequential basis as inflationary pressures continue to affect the business. In closing, I want to thank our EZCORP team for yet another outstanding quarter and successful completion of our 3 year strategic plan. We are consistently delivering strong operating and financial results to our stakeholders. Our balance sheet is robust. We grew PLO to the highest level in our history and added 21 exciting new stores this quarter. Speaker 200:21:15We continue to invest in our team and technology, while buying back shares. We are committed to improving the experience for our employees and our customers in an environmentally responsible way. Our 3 year plan and the team that executed it have produced a very significant financial and operating turnaround for our And we are very much looking forward to producing even better results for our shareholders over the next 3 years and beyond. And with that, we will open the call up to questions. Operator? Operator00:21:47Thank Speaker 400:22:10One moment for our first question. Operator00:22:18Our first question comes from Brian McNamara with Canaccord Genuity. Your line is open. Speaker 500:22:23Hey, good morning, guys. Congrats on the strong results. Thanks for taking the questions. First, a Big value retailer this morning, that we all know said it saw a sharp fall off in sales during the last 2 weeks of October and and are basically more cautious on the consumer than they were 90 days ago with consumers holding out for lower prices. My question as it relates to you, I'm curious What you're seeing in your stores today, particularly as it relates to new customers, are you seeing new customers? Speaker 200:22:53Good morning, Brian, and thanks for the question. Yes, we are seeing new customers. It's region dependent. And as you know, we've got 2 sides of our business. We've got lending on one side and we've got retail on the other. Speaker 200:23:05I think on the demand side, lending continues to be very strong. I think that's reflective of the economy we're in, the macro environment. And I think that sales is for us a critical part of the business. I think As the economy gets more challenging, I think it will also be challenging. But people are seeing value for money in secondhand goods. Speaker 200:23:30I think there's a few forces at play here. Do I think it's going to be a challenge in the future if the macroeconomic environment continues to deteriorate? Yes, I do. But in balancing that, we are still seeing strong demand for secondhand goods just because it represents value for money and it also is an environmentally responsible way to shop. Speaker 500:23:54Great. And then secondly, I mean EZ Plus Recruitment continues to be incredibly impressive. I think by our math, you have roughly 3,100 members per store. Obviously, the key delta here is improving engagement and all that stuff. And I appreciate the color in the deck. Speaker 500:24:12I think 73% I think your transacting customers are rewards members. How should we think about that moving forward, particularly as the customers that use multiple pawn shops, How do you keep those customers captive and kind of any color you can provide on your progress there? Speaker 200:24:29Yes. No, that's Exactly what we're trying to do. I think the pure growth in the number of rewards customers continues to be incredibly strong. It's got to come at a time or a quarter where that starts to slow, but we're very, very happy with the amount of customers that have signed The rewards program and as you say, it's all now about engagement. So I think I mentioned to you last quarter, we've got an outsourced firm that's helping us To really maximize the value of that customer base, we're coming up with tailored marketing programs to that customer base to provide them with deals and discounts to get them back into the store. Speaker 200:25:05But look, I personally think it's an important part of the consumer story here where we think we're winning market share. We think it's part of growing PLO and sales. And I think it will continue if we get this engagement piece right, I think it's going to be really important in driving revenue and earnings. Great. And Speaker 500:25:23I'll just ask a third one and then I'll hop back in the queue. Maybe this one's for Tim. I'm curious how we should think about expenses for Fiscal 'twenty four, just given the catch up you experienced on some inflationary line items last year, will this year be more of a normal year? Speaker 300:25:40Definitely still experiencing a little bit of debt inflation, obviously a little bit less than we saw this year. But salary growth remains strong. Keeping our tenured employees is a number one thing that we are trying to do. You also do have some pressure That is mounting in especially in Mexico with likely minimum wage increases yet again and There's definitely a push to go to a 40 hour work week, instead of 48 in Mexico. So we're waiting to hear from that government down there on what's going to change. Speaker 200:26:25So there are a number Speaker 300:26:26of things outside our control there, but Do see it a little bit less Speaker 200:26:33than we've experienced this year. Speaker 500:26:36Great. Thanks, guys. Operator00:26:56Our next question is going to be a follow-up from Brian McNamara. One moment. And Brian, your line is open. Speaker 500:27:06Great. Can you guys give an update on your progress in LatAm? It Seems like there's a lot of low hanging fruit there given the leadership changes implemented over the last year and the progress particularly on some of the acquired stores But you kind of mentioned headwinds on over the last couple of quarters. Speaker 200:27:23Sure. Look, I think it's probably our biggest strategic opportunity Is the not only the organic improvement in Latin America, particularly in Mexico, but also the inorganic opportunity. You can see that we're opening new stores. They're doing quite well and there's a pretty robust acquisition pipeline down there. So I think you're right in pointing it out. Speaker 200:27:44I think it is our biggest Strategic opportunity, and it starts with the people. Blair, our COO, has done a magnificent job across all of the regions, but he started in the U. S. And you started with the people, the bench strength, and that's what we're doing in Mexico now. We are revitalizing that culture, Changing incentive programs to match our enhanced business model. Speaker 200:28:06So we're seeing we're a few quarters into that now and we're definitely seeing Strong signs of growth down there, of improvement in the business, certainly in the bench strength of the people. Look, we expect that business to be a really big part of our story over the next 1, 2, 3 years. Speaker 500:28:26Great. And then last one for me. I'm just curious what your plans are for capital allocation this year. You Have some investments, you have a convert maturing. Investors we talked to say your stock Speaker 200:28:39is very cheap. They want repurchases to be Obviously, a higher priority. I'm just curious kind of how investors should think about share repurchases this year. Okay. Another good point. Speaker 200:28:51We are trying to balance here the growth opportunity, so capital required to grow our earning assets as well as to build new stores as well as to acquire new stores. So that's priority 1 is really scaling this business up and capitalizing upon the growth. We also, as you know, we like to maintain a liquid balance sheet to do those things. But we are obviously buying back shares. We have $35,000,000 ish coming due in May. Speaker 200:29:22Clearly, we've got the cash to close that out, then we have another $100,000,000 coming a year after that. So Look, I think the liquidity that we've got is a really strong story for us. And I think given where the stock is at the moment, You've seen that we've been pretty active in buying back shares. I think we've done US19 $1,000,000 now, clearly a high return on capital But we will assess that each quarter to try and balance that with our growth opportunities and debt maturities. Speaker 500:29:57Thanks very much, guys. Speaker 200:29:59Thanks, Brian. Operator00:30:01And I'm not showing any further questions at this time. I'd like to turn the call back over to Lucky for any closing remarks. Speaker 200:30:06Thank you, operator, and thank you, everyone, for joining today. We will speak to most of you over the course of the day today. Thank you. Operator00:30:13Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallEZCORP Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) EZCORP Earnings Headlines3EZPW : Analyst Expectations For EZCORP's FutureMay 6 at 7:35 PM | benzinga.comRoth Capital Analysts Reduce Earnings Estimates for EZCORPMay 6 at 2:27 AM | americanbankingnews.comWatch This Robotics Demo Before July 23rdJeff Brown, the tech legend who picked shares of Nvidia in 2016 before they jumped by more than 22,000%... Just did a demo of what Nvidia’s CEO said will be "the first multitrillion-dollar robotics industry."May 7, 2025 | Brownstone Research (Ad)EZCORP Announces Retirement of $103.4 Million Convertible NotesMay 1, 2025 | globenewswire.comEZCORP Inc (EZPW) Q2 2025 Earnings Call Highlights: Record Revenue and Strategic ExpansionApril 30, 2025 | finance.yahoo.comEZCORP, Inc. (EZPW) Q2 2025 Earnings Call TranscriptApril 29, 2025 | seekingalpha.comSee More EZCORP Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like EZCORP? Sign up for Earnings360's daily newsletter to receive timely earnings updates on EZCORP and other key companies, straight to your email. Email Address About EZCORPEZCORP (NASDAQ:EZPW) provides pawn services in the United States and Latin America. The company operates through three segments: U.S. Pawn, Latin America Pawn, and Other Investments. The company offers pawn loans collateralized by tangible personal property, jewelry, consumer electronics, tools, sporting goods, and musical instruments. It also retails merchandise, primarily collateral forfeited from pawn lending operations and pre-owned merchandise purchased from customers. In addition, the company provides EZ+, a web-based application that allow customers to manage their pawn transactions, layaways, and loyalty rewards online. Further, it operates under the EZPAWN, Value Pawn & Jewelry, Empeño Fácil, Cash Apoyo Efectivo, GuatePrenda, and MaxiEfectivo brands. EZCORP, Inc. was incorporated in 1989 and is headquartered in Austin, Texas.View EZCORP ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 6 speakers on the call. Operator00:00:00Morning, ladies and gentlemen, and welcome to EZCORP's 4th Quarter and Full Year Fiscal 2023 Earnings 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'd now like to turn the call Over to Jean Marie Young, Investor Relations with 3 Part Advisors. Operator00:00:17Please go ahead, Jean. Speaker 100:00:23Thank you, and good morning, everyone. During our prepared remarks, we will be referring to slides, which are available for viewing or download from our Web site at investors. Ezcorp.com. Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides contains 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. Speaker 100:00:50Actual 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, And 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 Givens and Tim Judmans, Chief Financial Officer. Now, I'd like to turn the call over to Lachky Gibbons. Lachky? Speaker 200:01:28Thanks, Gene, and good morning, everyone. Our team's consistent execution on our strategic plan has again yielded very strong operating and financial results for our stakeholders. As we conclude the current fiscal year and 3 year strategic plan announced in November 2020, we will today begin with a review of our 4th quarter performance and then we'll move to an overview of the strategic goals we set 3 years ago and the associated accomplishments that have been achieved in that time. At the end of Q4, Formlanes Outstanding, the key driver of our business, hit a record $250,000,000 the highest level in EZCORP history. Total Q4 revenue hit a record $261,400,000 driven by higher PSC and sales volumes across all of our regions. Speaker 200:02:16Merchandise sales gross margins remained within our targeted range of 36% with strong inventory turns of 2.7 times. Beginning on slide 3, we are a global leader in pawn broking and pre owned and recycled retail. We operate 1231 stores in the U. S. And Latin America, having added another 21 stores this quarter. Speaker 200:02:37The macroeconomic environment continues to be a challenge for our customer base with inflationary pressure, increasing interest rate, Our gas prices and the timing of credit from alternative lenders increasing the demand for pawn as consumers seek cash to satisfy their short term needs. In addition, consumers seek value for money households and other consumer goods by purchasing pre owned products, which also represents a more environmentally responsible way to shop. We strive to provide the best, most convenient experience for our customers through continuous innovation, while positively impacting the environment and the communities in which we serve. Moving on to Slide 4. People, Pawn and Passion is our core operating theme. Speaker 200:03:20Our engaged team drives our success, so we are committed to investing in recruitment, retention and incentivization to ensure our team members are highly engaged. We provide access to critical financial services in the hundreds of local communities in which we operate, offering customers instant cash for any type of value. And we promote the circular economy with a more affordable and sustainable shopping experience with outstanding customer service, an attractive and well positioned store footprint, differentiated digital platform, proprietary POS system and an innovative loyalty program for our customers. Our balance sheet is very strong and liquid, enabling us to fund significant growth in our earning assets, build out of new de novo stores, Opportunistic acquisitions from what continues to be a robust pipeline and our share repurchase program. Slide 5 shows our progression this quarter on our 3 year strategic goals. Speaker 200:04:17We believe we have the most passionate, productive, tenured and committed team in the industry and continue to find new ways to engage, motivate and retain them. The implementation of the Workday human capital management system globally during the quarter We'll further improve access to human capital data and enhance training, career development and recruitment processes. Our points based loyalty program continues to be highly popular with our customers, growing 15% this quarter to 3,800,000 members. We are now working on delivering a superior experience to these customers, including offering tailored products and services to help drive our growth. Turning to our key financial themes for Q4 on Slide 6. Speaker 200:05:03As mentioned, PLO, the most significant driver of revenue and earnings, hit an all time high of $240,400,000 up 14% with an associated 15% increase in PSC. Merchandise sales were up 9%, resulting in total revenue for the quarter of 200 and $1,400,000 up 12 percent, which was a record for Q4. Adjusted EBITDA was $31,200,000 for the quarter, up 26%. Inventory turnover remains strong with aged inventory increasing slightly year over year, but improved sequentially by 30 basis points. Cash on the balance sheet came down slightly on a sequential basis, primarily due to increases in PLO and inventory. Speaker 200:05:49On Slide 7, we show year over year EBITDA growth of 14%, while keeping EBITDA margin flat at 13% in a highly inflationary environment. Slide 8 focuses on our progress in strengthening our core pawn operations during the quarter, investing in people and technology In addition to launching the Workday human capital management system globally, we continue to upgrade pricing, Point of sale system and e commerce capabilities to drive faster transaction times and deliver better customer experience. On Slide 9, in the area of innovation and growth, as I've said, our EZ Plus loyalty program now has over 3,800,000 members Enrolled versus over $3,300,000 last quarter. In the U. S, we collected $18,000,000 in online payments, which was up $8,400,000 and we revamped the core Mexico website to improve customer experience and grow traffic materially as we've done in the U. Speaker 200:06:50S. Over the last 12 months. Improving customer experience and growing the customer base remain key to our strategy. We increased global transacting customers by 5% this quarter and grew visits to porn websites by 16% over Q3. We opened 19 de novo stores in Latin America, With 10 in Mexico, 7 in Guatemala and 2 in Honduras. Speaker 200:07:14And in the U. S, we acquired 2 stores this quarter. Slide 10 and 11 outline our ESG highlights for the 2023 fiscal year. We are a neighborhood recycler and a compelling component of the local circular economy and have resold over 5,400,000 pre owned jewelry and general merchandise items this year. Importantly, we provide an essential, simple, regulated and transparent financial resource for those who are underserved by traditional sources. Speaker 200:07:47During the year, we recycled over £1,200,000 of paper in the U. S. And have responsibly disposed end of life services, Hard drives, computers, electronics and accessories through sound recycling and e waste processing practices in the U. S. And Latin America. Speaker 200:08:03We successfully completed full migration of our data center physical services to cloud services through a multiyear effort, reducing our environmental footprint and greenhouse gas emissions and ensuring high quality services and availability for our customers. We have upgraded the lighting to LEDs in 78% of our U. S. Stores, an increase of 8% from the previous year. Additionally, 60% of our Latin America stores now have LED lighting, a 21% increase from the prior year. Speaker 200:08:34We are committed to continuing this initiative to enhance We have revamped the mission of the EZCORP Foundation in the U. S. And have launched local giving strategies aimed at improving quality of life in the communities where we live and operate through supporting financial literacy, Food Security and Financial Stability. Diversity and inclusion are a significant focus with several affinity groups and programs operating in the U. S. Speaker 200:09:03And Latin American segments. 66% of U. S. Employees and 58% of U. S. Speaker 200:09:09Management identify as an underrepresented minority, 52% of global employees and 49% of global management are female. We strive to continually improve the team member experience and engagement by enhancing store based communication, scheduling and recognition programs. I would now like to turn the call over to Tim Judman, our CFO, to provide more details on our financial results. Tim? Speaker 300:09:36Thanks, Lachie. Slide 12 details our consolidated financial results for the Q4. HALO ended the period at $240,400,000 up 14% on a year over year basis, which is the highest in EZCORP history. PC revenue was up 15% over last year with growth driven by both increased same store PLO growth and new stores. Merchandise sales was up 9% to $145,300,000 Our highest 4th quarter sales results. Speaker 300:10:05Merchandise sales gross profit was up 5% due to increased sales offset by an expected 100 basis point margin decrease. Inventory turnover was strong at 2.7 times with HGM inventory at 1.3%, a 30 basis point improvement over the 3rd quarter. We have been successfully working on improvements in the U. S. And LatAm to drive aged GM lower. Speaker 300:10:30It was another solid quarter with consolidated EBITDA of $31,200,000 up 26%. Turning to our U. S. Pawn operations on Slide 13. Halo rose 17% due to improved customer service and higher Pawn demand. Speaker 300:10:48PSC was up 17% year over year, driven by higher average PLO and yields. On the retail side of the business, Merchandise sales were up 8% with the merchandise sales gross profit up 3% with an expected 200 basis point drop in sales margin. Store expenses increased by 11%, primarily due to labor in line with store activity, higher store count and to a lesser extent expenses related to our loyalty program. U. S. Speaker 300:11:17Pawn EBITDA for the quarter was $39,700,000 up 18% on prior year to higher PSC, partially offset by increased expenses. Slide 14 focuses on our Latin American Pawn Operations. Segment PLO grew 7% for the 4th quarter with same store PLO up 4% as consumer demand increased. PSC was up 9% due to higher average PLO and PLO years. Merchandise sales were up 12%, 7% on a same store basis. Speaker 300:11:52Merchandise sales gross profit up 11% Due to increased sales offset by a margin decrease of 100 basis points. Store expenses were up 18% 14% on a same store basis, mainly due to increases in minimum wage and headcount, higher store count and to a lesser extent expenses related to our loyalty program. Inventory turnover remains strong at 3.6 times with HGM at 2%, showing a 40 basis point improvement over Q3 due to improving execution in LatAm. For the Q4, Latin American foreign EBITDA decreased by 11% to $7,600,000 primarily due to losses from de novo stores opening during the year. As we conclude our current 3 year strategy period, we would like to provide an overview of our team's performance and progress we've made towards our long term objectives. Speaker 300:12:49Waki? Speaker 200:12:51Thanks, Ted. Slide 16 shows our 3 year plan strategy pillars. We transitioned in fiscal year 2020 to a senior management team who were mostly promoted from within and with many years of experience in the pawn business. And we performed a comprehensive strategic review of all areas of the company. We launched a new 3 year plan focused on significantly improving our culture and the bench strength of our store teams, enhancing our core Pawn operating model with more robust lending and higher inventory terms, reduced costs An expanding customer base and store footprint and an extreme focus on customer service and engagement, all of this to materially increase operational efficiency, Bottom line growth and return on capital for all of our shareholders. Speaker 200:13:37On Slide 17, our commitment to our internal operating has led to growing PLO and revenue to record levels, coupled with a sustainable improvement in ROEI. We introduced a cultural transformation in the U. S. In financial year 2020 and Latin America in financial year 2022. The results of this work is demonstrated both in our significantly improved financial and operating results over the last 3 years, as well as our most recent annual company wide engagement survey in which we scored 84 points, well above all global benchmarks. Speaker 200:14:13Tim will walk through the significant financial improvements we've seen over the last 3 years. Speaker 300:14:18Thanks, Lachie. We have seen a substantial improvement in our financial results over the last 3 years. This improvement starts with PLO, which you can see on Slide 18. PLO reached a low point in Q3 fiscal year 2020 due to the pay down during COVID, but since then has continued to increase significantly, reaching an all time record this quarter. The macroeconomic environment remains attractive for pawn broking as customer demand continues to grow and the internal initiatives that we have executed has driven PLO and PSC into more record territory. Speaker 300:14:56As you can see in the PLO competition chart, jewelry porn demand has been growing at a faster pace than general merchandise, contributing to a high average pawn loan size across all geographies. And we believe that there should be more growth going forward in this critical category. On Slide 19, you can see how improvements to the PON operating model and team member incentive programs have driven stronger inventory turnover with low aged inventory. Similar to the PLO composition, we have seen an uptick in jewelry during FY 'twenty three and that tends to turn at a slower rate than general merchandise. Slide 20 shows a significant improvements to merchandise sales and sales gross profit, which were driven by enhanced operating model changes implemented during this period. Speaker 300:15:46The strategy focused on quicker inventory turns and lower aged with new incentive programs designed to drive execution. Merchandise margin in fiscal 2021 was unnaturally high pandemic and has returned to our normal range of 35% to 38%. Merchandise sales profit growth has been outpacing the margin decrease. Slide 21 looks at the many metrics showing sustained growth in customer engagement. All of these have been critical in our sustained improvements in our operating and financial results. Speaker 300:16:21The EZ Plus Rewards program has been a resounding success. We believe that there are winning market share in the local nobles in which we operate as a direct result of this program. EZ Plus payments has grown quickly, giving our store teams more time to directly serve customers. Our website has been redesigned and optimized Search and we are now real drivers of our traffic to our stores. Google reviews have also been very successful and we have an average rating of 4.8. Speaker 300:16:53On Slide 22, we show the growth in store count from fiscal 2020. In the last 3 years, we have increased store count by 220 2 stores. We have acquired 154 stores with 128 in Latin America and 26 in the U. S. We opened 91 de novo stores with 80 of them in Latin America, while consolidating 23 stores. Speaker 300:17:18We also expanded our luxury offering with acquisition and build out of MaxxPawn in the exciting Las Vegas market. Our balance sheet is very strong and has significant strength as it provides a stable long term funding base from which to execute upon our substantial Growth opportunities ahead. In the last 3 years, we have invested $176,000,000 in growing our earning asset base, $55,700,000 in the exciting strategic assets of SMG through Founders and CTV. We have also repurchased $19,000,000 of our shares since August 2022. We have maintained our average borrowing cost below 3.3% and extended over 60% of debt maturities until fiscal 2029. Speaker 300:18:07Looking at U. S. Poolhorn on Slide 23, PLO is up 80% compared to fiscal 2020. Elo per store is up 71%, which is a new record. Net revenue is up 26% and EBITDA is up 57%. Speaker 300:18:24REEA in fiscal 2019 was 133% and is now 157%, driven by significant operational and model improvements. Merchandise margin has normalized at 38%. Looking at LatAm Pawn on Slide 24, PLO has doubled since fiscal 2020, while PLO per store is up 43%, net revenue is up 63% and EBITDA is up 80%. ROEI in fiscal 2020 was 127% and is now 175%, driven by our team's focus on customer and operational improvements. I'll hand it back to Lachie to discuss the strategic investments on Slide 25. Speaker 200:19:09Thanks, Tim. We view our investments in Cash Converters International and SMG through Founders as an important strategic and geographic extension of our core pawn operation. Through Founders, we have enhanced our exposure to the strategically important Caribbean and Central America regions, as well as the Florida market. And CCB, listed on the Stock Exchange in Australia, increases our exposure in 14 countries, including Australia, New Zealand and the United Kingdom. We are extremely excited about the growth prospects ahead for these 2 very well run businesses. Speaker 200:19:44All this results in our 3 year earnings performance on Slide 26. While obviously COVID impacted, Since we embarked on this 3 year strategy in fiscal 2020, net income has more than tripled and EBITDA has almost doubled, with the share price increasing 64%. Investing $100 in our Class A common stock at the end of fiscal year end 2020 would be worth $164 at the end of fiscal 2023 compared to $118 invested in the NASDAQ Composite Index and $102 invested in the Nasdaq Other Finance Index. Looking forward on a consolidated basis, We should see PLO continue to grow on a seasonal basis with PSC following suit. As communicated in prior quarters, We are likely to continue to see gross margin remain at the lower end of our target range of 35% to 38% as we remain focused on strong inventory turns and limited age general merchandise. Speaker 200:20:43As we adjust salaries and wages during our Q1, we will see store expenses increase on a sequential basis as inflationary pressures continue to affect the business. In closing, I want to thank our EZCORP team for yet another outstanding quarter and successful completion of our 3 year strategic plan. We are consistently delivering strong operating and financial results to our stakeholders. Our balance sheet is robust. We grew PLO to the highest level in our history and added 21 exciting new stores this quarter. Speaker 200:21:15We continue to invest in our team and technology, while buying back shares. We are committed to improving the experience for our employees and our customers in an environmentally responsible way. Our 3 year plan and the team that executed it have produced a very significant financial and operating turnaround for our And we are very much looking forward to producing even better results for our shareholders over the next 3 years and beyond. And with that, we will open the call up to questions. Operator? Operator00:21:47Thank Speaker 400:22:10One moment for our first question. Operator00:22:18Our first question comes from Brian McNamara with Canaccord Genuity. Your line is open. Speaker 500:22:23Hey, good morning, guys. Congrats on the strong results. Thanks for taking the questions. First, a Big value retailer this morning, that we all know said it saw a sharp fall off in sales during the last 2 weeks of October and and are basically more cautious on the consumer than they were 90 days ago with consumers holding out for lower prices. My question as it relates to you, I'm curious What you're seeing in your stores today, particularly as it relates to new customers, are you seeing new customers? Speaker 200:22:53Good morning, Brian, and thanks for the question. Yes, we are seeing new customers. It's region dependent. And as you know, we've got 2 sides of our business. We've got lending on one side and we've got retail on the other. Speaker 200:23:05I think on the demand side, lending continues to be very strong. I think that's reflective of the economy we're in, the macro environment. And I think that sales is for us a critical part of the business. I think As the economy gets more challenging, I think it will also be challenging. But people are seeing value for money in secondhand goods. Speaker 200:23:30I think there's a few forces at play here. Do I think it's going to be a challenge in the future if the macroeconomic environment continues to deteriorate? Yes, I do. But in balancing that, we are still seeing strong demand for secondhand goods just because it represents value for money and it also is an environmentally responsible way to shop. Speaker 500:23:54Great. And then secondly, I mean EZ Plus Recruitment continues to be incredibly impressive. I think by our math, you have roughly 3,100 members per store. Obviously, the key delta here is improving engagement and all that stuff. And I appreciate the color in the deck. Speaker 500:24:12I think 73% I think your transacting customers are rewards members. How should we think about that moving forward, particularly as the customers that use multiple pawn shops, How do you keep those customers captive and kind of any color you can provide on your progress there? Speaker 200:24:29Yes. No, that's Exactly what we're trying to do. I think the pure growth in the number of rewards customers continues to be incredibly strong. It's got to come at a time or a quarter where that starts to slow, but we're very, very happy with the amount of customers that have signed The rewards program and as you say, it's all now about engagement. So I think I mentioned to you last quarter, we've got an outsourced firm that's helping us To really maximize the value of that customer base, we're coming up with tailored marketing programs to that customer base to provide them with deals and discounts to get them back into the store. Speaker 200:25:05But look, I personally think it's an important part of the consumer story here where we think we're winning market share. We think it's part of growing PLO and sales. And I think it will continue if we get this engagement piece right, I think it's going to be really important in driving revenue and earnings. Great. And Speaker 500:25:23I'll just ask a third one and then I'll hop back in the queue. Maybe this one's for Tim. I'm curious how we should think about expenses for Fiscal 'twenty four, just given the catch up you experienced on some inflationary line items last year, will this year be more of a normal year? Speaker 300:25:40Definitely still experiencing a little bit of debt inflation, obviously a little bit less than we saw this year. But salary growth remains strong. Keeping our tenured employees is a number one thing that we are trying to do. You also do have some pressure That is mounting in especially in Mexico with likely minimum wage increases yet again and There's definitely a push to go to a 40 hour work week, instead of 48 in Mexico. So we're waiting to hear from that government down there on what's going to change. Speaker 200:26:25So there are a number Speaker 300:26:26of things outside our control there, but Do see it a little bit less Speaker 200:26:33than we've experienced this year. Speaker 500:26:36Great. Thanks, guys. Operator00:26:56Our next question is going to be a follow-up from Brian McNamara. One moment. And Brian, your line is open. Speaker 500:27:06Great. Can you guys give an update on your progress in LatAm? It Seems like there's a lot of low hanging fruit there given the leadership changes implemented over the last year and the progress particularly on some of the acquired stores But you kind of mentioned headwinds on over the last couple of quarters. Speaker 200:27:23Sure. Look, I think it's probably our biggest strategic opportunity Is the not only the organic improvement in Latin America, particularly in Mexico, but also the inorganic opportunity. You can see that we're opening new stores. They're doing quite well and there's a pretty robust acquisition pipeline down there. So I think you're right in pointing it out. Speaker 200:27:44I think it is our biggest Strategic opportunity, and it starts with the people. Blair, our COO, has done a magnificent job across all of the regions, but he started in the U. S. And you started with the people, the bench strength, and that's what we're doing in Mexico now. We are revitalizing that culture, Changing incentive programs to match our enhanced business model. Speaker 200:28:06So we're seeing we're a few quarters into that now and we're definitely seeing Strong signs of growth down there, of improvement in the business, certainly in the bench strength of the people. Look, we expect that business to be a really big part of our story over the next 1, 2, 3 years. Speaker 500:28:26Great. And then last one for me. I'm just curious what your plans are for capital allocation this year. You Have some investments, you have a convert maturing. Investors we talked to say your stock Speaker 200:28:39is very cheap. They want repurchases to be Obviously, a higher priority. I'm just curious kind of how investors should think about share repurchases this year. Okay. Another good point. Speaker 200:28:51We are trying to balance here the growth opportunity, so capital required to grow our earning assets as well as to build new stores as well as to acquire new stores. So that's priority 1 is really scaling this business up and capitalizing upon the growth. We also, as you know, we like to maintain a liquid balance sheet to do those things. But we are obviously buying back shares. We have $35,000,000 ish coming due in May. Speaker 200:29:22Clearly, we've got the cash to close that out, then we have another $100,000,000 coming a year after that. So Look, I think the liquidity that we've got is a really strong story for us. And I think given where the stock is at the moment, You've seen that we've been pretty active in buying back shares. I think we've done US19 $1,000,000 now, clearly a high return on capital But we will assess that each quarter to try and balance that with our growth opportunities and debt maturities. Speaker 500:29:57Thanks very much, guys. Speaker 200:29:59Thanks, Brian. Operator00:30:01And I'm not showing any further questions at this time. I'd like to turn the call back over to Lucky for any closing remarks. Speaker 200:30:06Thank you, operator, and thank you, everyone, for joining today. We will speak to most of you over the course of the day today. Thank you. Operator00:30:13Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.Read morePowered by