EZCORP Q3 2026 Earnings Call Transcript

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Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Core pawn performance remained very strong: adjusted EBITDA rose 48% to $65.6 million and adjusted EPS increased 47% to $0.47, while same-store core pawn gross profit grew 13%. Record PLO of $382 million increased 31%, supported by strong demand and higher average loan sizes.
  • Positive Sentiment: Latin America was a standout, with constant-currency PLO up 33%, core pawn gross profit up 31%, and segment EBITDA up 40%. EZCORP expanded its footprint through 33 acquired stores in Guatemala and nine de novo locations, while improving jewelry lending and merchandise margins.
  • Positive Sentiment: EZCORP completed the purchase of the remaining SMG interest and now owns 100% of the 108-store platform. Management sees substantial upside from adding EZCORP’s systems, capital, operating disciplines, and culture, although integration work will continue over the next year.
  • Negative Sentiment: Scrap profitability is expected to normalize as gold prices stabilize; scrap gross margin fell sequentially to 26% from 38% and management expects a return toward the historical 15%–20% range if gold prices do not rise. This could reduce reported year-over-year earnings growth despite continued strength in core pawn operations.
  • Positive Sentiment: The company ended the quarter with $311 million in cash and no near-term debt maturities, while retaining capital for PLO growth, de novos, acquisitions, and share repurchases. Management said the M&A pipeline remains robust, particularly in Latin America.
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Earnings Conference Call
EZCORP Q3 2026
00:00 / 00:00

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Operator

Welcome to the EZCORP Third quarter Fiscal 2026 Earnings Call. At this time, all participants are in 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 conference over to Sean Mansouri, the company's investor relations advisor with Elevate IR. Please go ahead, Sean.

Sean Mansouri
Investor Relations Advisor at Elevate IR

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.

Lachie Given
Lachie Given
CEO at EZCORP

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.

Lachie Given
Lachie Given
CEO at EZCORP

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, sales and turns remain robust. Latin America Pawn 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 continued 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 nine 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.

Lachie Given
Lachie Given
CEO at EZCORP

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?

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Thanks, Lachie. Turning to slide five 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.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

On slide six, 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 a 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 earning 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.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

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 20.9% 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.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

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 seven and eight. We ended the quarter with 560 stores across 19 states, including one 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 a higher jewelry composition and gold prices. Jewelry represents 69% of U.S. PLO. PSC increased 13%, primarily driven by same-store PLO growth.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

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 two times. Aged general merchandise declines 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 nine and 10, where the team delivered another excellent quarter. We ended the period with 881 stores across four countries.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

During the quarter, we opened nine de novo stores, including five in Mexico, three in Guatemala, and one in Honduras, and consolidated one 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 the improvement from merchandise sales. Core pawn revenues grew 22% and core pawn gross profit grew 31%. 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.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

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 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 do not own SMG in the prior year period, results are presented on an absolute basis without year-over-year comparisons.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

SMG ended the quarter with 108 stores across 12 countries under the La Familia and CashWiz banners, including one 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.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

The year-over-year decline in cash primarily reflects the retirement of SMG's third-party debt of $134.2 million and 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%.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

If gold price does not increase, we'd expect continued normalization towards long-term historical levels of scrap margin between 15%-20%. On seasonality, a few reminders. For our fiscal fourth quarter, in Latin America, customers receive a mid-year 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. 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.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Our M&A pipeline remains active in both the U.S. and Latin America, focused primarily on markets where 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.

Lachie Given
Lachie Given
CEO at EZCORP

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.

Operator

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brian McNamara of Canaccord Genuity. Your line is now open.

Brian McNamara
Brian McNamara
Managing Director at Canaccord Genuity

Good morning, guys. Thanks for taking the question here. 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. Gold sits at $4,300 today, versus $5,400 at the peak in January. How does that impact your day-to-day operations and if you can give some color on how you price loans and all that good stuff, I think it would be really helpful. Thank you.

Lachie Given
Lachie Given
CEO at EZCORP

Thanks, Brian. Tim, do you want to have a first crack at that?

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Sure.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Thank you, Brian, for the question. On setting gold prices, we look at gold prices on a rolling basis, look at a three-month rolling basis. 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 two with the rise of the gold prices is that the scrap margin was significantly higher than normal. This quarter, what we've seen is that gold price is coming down and the change year-over-year in gold price is declining. Now we've seen sequentially that gold price margin decrease, but also year-over-year, that scrap margin decrease.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

What we would expect if gold prices remain pretty consistent where, obviously it's a little bit of a spike in the last few days, but it's been in that just over $4,000-$4,300 for a number of months if we exclude the spike in January. We would expect scrap margins to come back down to normal levels.

Lachie Given
Lachie Given
CEO at EZCORP

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 pretty phenomenal on a very consistent basis. We're seeing extremely strong lending trends, which is the most important metric in our business, is PLO growth. You can see across the U.S. and Latin America particularly, the demand for cash that we're seeing in our stores is exceptionally strong. Clearly gold is the largest piece of collateral that our customers use. I think, when you're thinking about the future of this business, it is incredibly robust from a growth perspective because what we really do is satisfy a customer's need for cash.

Lachie Given
Lachie Given
CEO at EZCORP

Both the macro situation with high gas prices, interest rates, inflation, the cost of living, all of those macro indicators continue to be a challenge for our customer. I think from a micro perspective is what we do in our own stores. We've still got a lot to do in our own performance to continue to improve these stores organically. From both perspectives, I'm very excited about the growth potential of our business. Gold, I know you've gone specifically to gold, which a lot of people are doing. It's a good question, but I think what really underlines the quality of this business is our ability to service that need for cash.

Brian McNamara
Brian McNamara
Managing Director at Canaccord Genuity

That's helpful. Just to follow on to that, I've been of the view that, correct me if I'm wrong, a person comes in for a dollar amount, they need $200 to satisfy a short-term cash need. To your point, if gold drops 25% per se, something they got three months ago, they get for $160 today, for argument's sake. Would they then pawn another item to kind of make up that $40? Do you think there are some folks that just because gold prices are higher, they're getting a higher loan in excess of what the cash they need? I know it's a pretty loaded question there.

Lachie Given
Lachie Given
CEO at EZCORP

Look. Are there certain customers that do the second one? Of course. They take more money because gold's up. My own anecdotal view here is that back to what I said, people have a demand for cash, whether it's to pay a medical bill, to fill up their car. That does not depend on the gold price. That is just a fundamental need for cash, and that's what we're there to service. Look, I know it's a loaded question, and I am sure there are people who are taking more because the gold price is up. Fundamentally speaking, this customer needs cash, and that's what we're using all sorts of things, whether it's general merchandise, whether it's gold, whether it's jewelry, diamonds, to satisfy that need.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

We know that to satisfy the need for cash, customers are bringing in less grams than they used to satisfy the same amount of cash. We know there is a group of customers that is not taking what we're offering. There's definitely a whole group of customers, they're taking below what we're offering, and not taking any higher. Just what we would say is that the effect on the gold price doesn't affect the average loan size, right? If the average loan size was moving with the gold price, it would move very differently. I think that's an important part. The only part where the gold price has the big effect and trying to people maximize what they're getting is when they're selling their gold to us. That is where the gold price matters much more.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

A lot of that gold that we're buying is stuff that is not really sellable in our stores, so like a broken necklace. We're scrapping that pretty quickly. That's where the customer is trying to maximize. It's quite different when it's a loan product.

Brian McNamara
Brian McNamara
Managing Director at Canaccord Genuity

Right. That's very helpful. I appreciate the detail there, guys. On the stuff where your execution matters here, like merchandise margin, I think it was your highest U.S. merchandise margin since 2022, and I think some of that was stimulus-aided kind of thing. It looks like a really good result. Blended SMG looks north of your targeted 35%-38% range. Lachie, I know you guys have been working to get that margin up. Any color on what's driving the progress there?

Lachie Given
Lachie Given
CEO at EZCORP

Tim, you want to take a crack at that margin?

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Yeah. Now, margin, we still expect to be still on a consolidated basis going in that kind of range. It's definitely crept up, which is really nice to see. We got better at execution in the store, better at pricing are two things. Obviously there's a little bit of gold and the change in gold price affecting that. We're still very happy of where it is, but it will continue to move in that range.

Brian McNamara
Brian McNamara
Managing Director at Canaccord Genuity

Just if I could squeeze one last one on M&A. How is the pipeline looking today? How is the SMG integration going? How did it come together in terms of getting that asset wholly owned?

Lachie Given
Lachie Given
CEO at EZCORP

There's three more questions, Brian, but no problem. There's no worries.

Brian McNamara
Brian McNamara
Managing Director at Canaccord Genuity

Sure.

Lachie Given
Lachie Given
CEO at EZCORP

You're good at this. I want to start with SMG. SMG, well, it's been a huge couple of quarters, obviously on the general M&A front. We've done SMG, we've done 33 stores in Guatemala. We've done a bunch in Mexico. We've done a few little ones in the U.S. We've been incredibly active these last two quarters on execution. M&A for me now has two sort of heads. One head is integrating these businesses in a really strong, robust way, and the other side of it is we need to do more. On the ones we've just done, I think SMG we're very excited about. I think it's going to take a year to get them, the big things we need to do is get them onto our point of sale. We need to get them onto Workday.

Lachie Given
Lachie Given
CEO at EZCORP

Those two things are significant pieces of work, and are going on as we speak. I think from an operational perspective, this was a business that was capital constrained, and is no longer capital constrained. We are going through a cultural change now where we don't need to rely on scrapping as much to create cash. We are now doing what EZCORP does, which is to manage inventory with scrap, but to really concentrate on having our jewelry cases full and making strong margins on selling our jewelry. There's cultural change going on. I would say this first year is all about getting on our system, getting onto Workday, and some cultural change, but we're incredibly excited. Once those things are done and they're on our system, we're probably feeling we're going to be ahead of our own expectations as to what this business can do.

Lachie Given
Lachie Given
CEO at EZCORP

We're very happy with the leadership there. They've been very open, transparent. We're working really well together. I think SMG, to your question about how it came together, look, these deals, as I always say to the market, they take time. You've got to have a willing seller, a willing buyer. You've got to have a price. Sometimes they just come together, and this is.

Brian McNamara
Brian McNamara
Managing Director at Canaccord Genuity

Excellent. Thank you very much, guys.

Operator

Thank you. As a reminder, we kindly ask you to limit to one question and one follow-up question. Our next question comes from the line of David Scharf of Citizens Capital Markets. Your line is now open.

David Scharf
Managing Director at Citizens Capital Markets

Hi. Yeah.

Lachie Given
Lachie Given
CEO at EZCORP

Go for it, David.

David Scharf
Managing Director at Citizens Capital Markets

Good morning, everyone. Thanks for taking my questions. Hey tell you what, I'm going to follow up and pile on the.

Lachie Given
Lachie Given
CEO at EZCORP

Sorry, did you guys lose me then?

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Yeah. You did cut at the end.

Lachie Given
Lachie Given
CEO at EZCORP

I had a broker that just called my line. I'm sorry. What I was just ending, let me just end that. We're very happy on the SMG side. In the pipeline, to Brian's last question, I think the pipeline, as Tim said in his remarks, remains very robust, in Latin America particularly. I think in the U.S., as I've said before, we're kind of in the smaller acquisition zone now. You're going to see ones and twos. I think Latin America is super interesting, big independent chains. On top of that, I think what I said in my remarks was that the de novos, they sort of get a little forgotten often because it's just sort of what we do every day. I think it's a really strong growth platform for us that investors and analysts should remember.

Lachie Given
Lachie Given
CEO at EZCORP

We've got great opportunity across Latin America for de novos as well. I think those inorganic opportunities, Brian, are really exciting.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

David, do you want to go ahead with your question?

David Scharf
Managing Director at Citizens Capital Markets

Okay. Yeah, I wasn't sure if I was live or not. Sure. Hey, just real quickly, maybe just kind of framing the prior questions a little bit differently. When we think about the cash needs versus the collateral value debate on what a consumer's actually going to do when they walk through your door, maybe more directly, do you think PLO growth would be the same store PLO growth with gold prices at last year's levels? Maybe that's a more direct way of just framing the question.

Lachie Given
Lachie Given
CEO at EZCORP

Go for it, Tim. You mean literally this time last year?

David Scharf
Managing Director at Citizens Capital Markets

Well, just thinking about gold being up 20% or so in a year.

Lachie Given
Lachie Given
CEO at EZCORP

Yep.

David Scharf
Managing Director at Citizens Capital Markets

Just trying to get a sense for, once again, this debate about your serving cash needs. When somebody walks through the door, are they just going to ultimately act on what they need, or are they going to assess the collateral value in the potential to borrow more in our slide presentations?

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Yeah. We know our customers are very smart. They are, for the majority, only taking what they need, because if you're taking a loan, why are you going to take more than you feel comfortable paying back if you want that item back? That would not make any sense, right? If you're coming in with something that you want back, you're only going to take what you need and that you feel comfortable repaying. It's very different to selling your item, where you're trying to maximize it. Obviously, I'd have to really speculate on what customers would do. From what we can see at the counter, that's how customers act.

Lachie Given
Lachie Given
CEO at EZCORP

We would say, if we thought that they were always maximizing, we wouldn't have the amount of customers that don't take the maximum, and the average loan size would have increased much more based on the gold price. Those two things tell you that this is a demand-led item, not a gold price-led increase in average loan size.

David Scharf
Managing Director at Citizens Capital Markets

Got it. That's very helpful. I think it helps investors sort of altogether.

Lachie Given
Lachie Given
CEO at EZCORP

As a very important part of the business.

David Scharf
Managing Director at Citizens Capital Markets

Sort of normalize growth rate. Yeah. Good. Hey, just one follow-up. In terms of the PLO growth in Mexico specifically, I know we're about a good nine, 10 months into this, I think, worker stoppage, the strike at the big Nacional Monte operation. Has there been any direct relationship between the work stoppages there and your foot traffic?

Lachie Given
Lachie Given
CEO at EZCORP

I think there has to have been, right? Comparatively speaking, we haven't got a whole lot of stores that are very close to theirs. I think there is certainly an element of the demand that was in those stores that's come to other pawn shops across the country.

David Scharf
Managing Director at Citizens Capital Markets

Got it. Great. Thank you very much.

Lachie Given
Lachie Given
CEO at EZCORP

Thanks, David.

Operator

Thank you. Our next question comes from the line of John Hecht of Jefferies. Your line is now open.

John Hecht
John Hecht
Managing Director at Jefferies

Morning, guys. Thanks for taking my questions. Just first one is getting a little bit more on SMG. Just wondering, the characteristics of the stores and the metrics like store PLO size versus other geographies, inventory turns, the standard loan size and term. Is it consistent there, or are there differences? Do you guys have objectives to, call it, change the metrics over time?

Lachie Given
Lachie Given
CEO at EZCORP

Morning, John. Thanks for the question, mate. Yeah. Look, it's region by region. The biggest two markets for SMG are Florida and Puerto Rico. There is a bunch of other countries across the Caribbean where it's much smaller. I would say, generally speaking, the metrics we are certainly aiming for are similar to what we do. I think each market is different. In Puerto Rico, for example, it's similar to Mexico, where they have the auto business under the pawn regulation there. Those stores do particularly well. In Florida, it's very similar metrics to what we are certainly looking to do. I think, as I said earlier, before SMG was capital constrained, before we bought it. I think adding our capital, our operating disciplines, our culture, I think will bring that business much more into line with EZCORP's metrics.

Lachie Given
Lachie Given
CEO at EZCORP

As I said, it's going to take some time. The great thing about this business is that across markets and across countries, the metrics are similar, the customer base is similar, our teams are similar. We can manage this business in quite a focused way. As I said earlier, I'm pretty excited about what SMG can do, particularly once it's on our system and once we've got this culture sort of rolled out.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

John, on slide 11 in the investor deck, we do have some of those metrics that we go through. You'll see that average loan size for SMG is higher than in the U.S. Most of that is because of the Puerto Rico and the lending on the vehicles, which does push that average loan size up compared to the U.S.

John Hecht
John Hecht
Managing Director at Jefferies

Thank you for pointing that out. The second question is, the PLO obviously has been very strong, the growth in PLO, and that obviously translates into obviously strong revenue growth too. Is the mixer revenue in the U.S. and LATAM, is it consistent? What it was a year ago when it was 30% less, or are you observing any changes in the types of inventory as things expand?

Tim Jugmans
Tim Jugmans
CFO at EZCORP

On the types of inventory? In the last number of years, we've definitely seen jewelry continue to increase. From a general merchandise perspective, we've definitely seen the luxury and shoes continue to increase in the stores. Things like TVs and other large electronics, they are declining. It all mix based on what the customer's after and what the customer has to bring in. It also can be quite different neighborhood to neighborhood.

Lachie Given
Lachie Given
CEO at EZCORP

I'd say, John, the biggest change we've seen in inventory is in Latin America. I think you'll see in the materials that we are now 50% of our PLO is jewelry. Historically, we were known as the GM lender. I think the last two years, our training, led by Blair and a really strong leadership across Latin America, has done a phenomenal job in us becoming a very strong jewelry lender, too. I can't remember what the percentage was three years ago, but I'd take a guess it was 30% or 35% jewelry, which is now 50%. I think that Latin American piece is a big part of the growth story there. As Tim said, we've got luxury is growing, sneakers are growing, laptops are down. There's definitely elements of different inventory, I wouldn't say it's as anywhere near as big as the jewelry story.

John Hecht
John Hecht
Managing Director at Jefferies

Okay. Thanks very much.

Lachie Given
Lachie Given
CEO at EZCORP

Thank you.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Thank you.

Operator

Our next question comes from the line of Kyle Joseph of Stephens. Your line is now open.

Kyle Joseph
Kyle Joseph
Managing Director at Stephens

Hey, good morning, guys. Thanks for taking my questions. Since we asked about gold enough, I guess, we'll talk about gas prices. It's obviously been pretty volatile. In the U.S. specifically, how much of an impact are you seeing these days from fluctuations in gas prices?

Lachie Given
Lachie Given
CEO at EZCORP

Look, thanks, Kyle. Look, we don't have the number. Obviously, this is anecdotal, but clearly that puts pressure on this customer, and I think the volatility increases the demand for cash. I can't give you a specific number, but it definitely impacts what our customers are doing.

Kyle Joseph
Kyle Joseph
Managing Director at Stephens

Got it. Then, yeah, on SMG, apologies if I missed this, but I think you're at 108 stores. Just within those markets, do you have a sense for how many stores that could eventually be?

Lachie Given
Lachie Given
CEO at EZCORP

Yeah.

Kyle Joseph
Kyle Joseph
Managing Director at Stephens

There's some overlap.

Lachie Given
Lachie Given
CEO at EZCORP

Yeah. It's an interesting question given the overlap. What we're doing at the moment is focusing on leadership, how we're going to run this business. Is it integrated? Who's running what? I think the focus is to get onto our system. I think that is step one. Then we're going to assess which of these markets. Puerto Rico looks to be a very attractive market. There's markets in the Caribbean. I think we're sort of in the process now of assessing that. Given it's 100% owned, that'll just be part of our de novo program going forward.

Kyle Joseph
Kyle Joseph
Managing Director at Stephens

Got it. Last one from me. On the Latin American PLO growth, obviously really strong. What's driving that? How sustainable is it? Is it just a function of higher inflation down there, or is it kind of influenced by inventory mix as well?

Lachie Given
Lachie Given
CEO at EZCORP

I think, I want to give that team the credit they deserve. It's been phenomenal execution down there. I think the jewelry mix has been a big part of it, just teaching our teams to be much better lenders on jewelry. As I said before, people would come in with phones and electronics and tools. That was what we were known for, and we've just had this very deliberate execution program for the last few years where jewelry has become a much better part of what we do. I think that's been really helpful on the PLO side. I think the macro, absolutely. Things are tough for our customers out there. The macro has been supportive, but I think the Latin American story is much more about what we've done from an execution and leadership perspective than what the macro is doing.

Kyle Joseph
Kyle Joseph
Managing Director at Stephens

Got it. Really helpful. Thanks for taking my questions.

Lachie Given
Lachie Given
CEO at EZCORP

Thanks, Kyle.

Operator

Thank you. Our next question comes from the line of Vincent Caintic of BTIG. Your line is now open.

Vincent Caintic
Vincent Caintic
Managing Director at BTIG

Hi. Good morning. Thanks for taking my questions. Kind of two quick follow-ups. First, Tim, it was helpful. You provided kind of a lot of commentary in terms of how to think about seasonality, and I think there is seasonal component to LatAm, and maybe the U.S. is okay. Then there's also kind of what's happening with jewelry scrap. If you kind of put it all together on a consolidated basis, if you could help us think about like, should we be thinking about EBITDA or EPS kind of slowing down on a quarter-to-quarter basis? Underlying, like it does seem, U.S. and LatAm are doing really strong. I just want to understand, just from a near-term perspective, how all of those things shake out. Thank you.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Thank you. Obviously, we don't provide guidance on those numbers. As we've said, you can see that our scrap gross profit had a big effect on quarter two and less of an effect on quarter three. From a growth perspective. What we did say on the call is that scrap margin is, assuming gold price stays relatively stable, it will start coming down to that 15%-20% range that we've had it while gold was stable. That normalization will mean that there is less growth year-over-year when you including scrap, but obviously excluding scrap is probably a better way to look at the underlying long-term performance of the business.

Lachie Given
Lachie Given
CEO at EZCORP

Vince, thanks for the question. That's the key thing that we are trying as a team to show the market and you guys, the analysts, is that we don't get credit anyway for scrapping in the market. This business should be looked at on a core basis. When you look at the core business, as Tim's done a really good job of outlining in the deck, this is growing really strongly. Lending is strong, sales are strong, margin's improving. We're doing M&A in multiple markets. We're building a lot of new stores. We've got a very liquid balance sheet. Scrapping, look, scrapping goes up and down by the quarter.

Lachie Given
Lachie Given
CEO at EZCORP

We don't get credit for it, which is okay, from a multiple and an earnings perspective, but it shows what the business can really do, and it provides great cash flow, so we can redeploy that into either paying down debt or building de novos or doing M&A. When you look at it including scrap, which I don't think many people do, yes, the earnings come down because of scrap. What's best to speak about and to look at to assess the real value of this business and the platform is the core operating metrics that we're putting out, and they're very, very strong.

Vincent Caintic
Vincent Caintic
Managing Director at BTIG

Okay, great. That's super helpful. Thank you. To follow up on that, of course, we've been getting a lot of these questions and a lot of discussion already on gold prices.

Lachie Given
Lachie Given
CEO at EZCORP

Yeah.

Vincent Caintic
Vincent Caintic
Managing Director at BTIG

My, I guess, understanding is your underwriting of the business, the way you deal with jewelry or any inventory, is you're pricing the business at a discount, you're evaluating the customer's propensity to pay back or if you have to put the item on retail. It seems like the greatest maybe focus is if the aged inventory number goes up or down, and it sounds like, I mean, that number has been doing really well. Regardless of where gold or inflation or other prices go, as long as you're able to turn over the inventory quickly-

Lachie Given
Lachie Given
CEO at EZCORP

Yeah. I think-

Vincent Caintic
Vincent Caintic
Managing Director at BTIG

Is that fair to understand?

Lachie Given
Lachie Given
CEO at EZCORP

Yeah. That's absolutely the age-old pawnbroker's objective, right? We've got to be really strong at the lending counter, but then you've got to make sure you're turning that inventory. Look, aged, I never like to lead with aged because it leads to poor operating practice, but, because it's very, very small dollars. Our aged inventory is less than $5 million. You could write it off today and have very little impact. You're right, turns are very important to this business. From an operating perspective, we are improving incentives and improving training and just to make sure that that remains robust. You can also impact turns pretty easily by scrapping. To someone who's not as experienced at looking at these numbers, "Oh, look, turns are flat." Well, you could easily increase your turns by scrapping. We don't want to do that.

Lachie Given
Lachie Given
CEO at EZCORP

We want to make sure that our jewelry cases are full, that customers get a great experience, and we can sell the jewelry at a higher margin. Yeah, turns absolutely very critical part of this story.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

On the numbers there, like aged GM in the U.S. at 1.9% is $0.7 million of inventory. These dollars are not big. Just keep in mind the size. Obviously jewelry is different, because it can easily be scrapped. Aged general merchandise is the only thing you really need to be worrying about.

Vincent Caintic
Vincent Caintic
Managing Director at BTIG

Right. We're not really taking a view of what gold prices were a year ago because that inventory would already pretty much be gone at this point, if I'm thinking about that correctly.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

Correct. The jewelry is generally scrapped at around that 12-month mark. That's correct.

Vincent Caintic
Vincent Caintic
Managing Director at BTIG

Okay. Got it. Okay. That's super helpful. Thank you.

Lachie Given
Lachie Given
CEO at EZCORP

Thanks, Vince.

Operator

Thank you. Our next question comes from the line of Eric Wold of Texas Capital Securities. Your line is now open.

Eric Wold
Executive Director at Texas Capital Securities

Thanks. Good morning. Thanks for taking the questions. A couple follow-ups on some of the topics before I'll stay off gold prices. There was a question kind of around gas prices and kind of what you're seeing, and you made the comment that the increase in average loan size really being driven by demand, and a need for kind of additional liquidity and short-term cash needs. Maybe dive into that a little bit better. What are you seeing for the consumers on a kind of a more micro level in terms of coming in and seeking loans, in terms of repeat visitation trends, what you can track from those consumers, payoff, forfeitures, anything that kind of gives maybe kind of a roundabout view of your consumer health in this environment right now versus maybe a few quarters ago?

Lachie Given
Lachie Given
CEO at EZCORP

Thank you for the question. Look, I think you start with PLO growth, right? You can just see it is very strong, which means demand for our core loan products is increasing significantly. I think our customer is under pressure and there is a need for cash. It's across everything from GM to jewelry. In terms of forfeitures, I think over a pretty long period of time, that's been pretty stable. We don't really see big changes in our forfeitures. As Tim mentioned earlier, we're seeing increased activity in customers selling us gold. I think the metrics around forfeitures to your question has remained pretty stable. I think you look at sales, you take a different view, is they're also robust. Particularly in Latin America, we're seeing super strong sales growth.

Lachie Given
Lachie Given
CEO at EZCORP

When you think about the customer being under pressure, you look at the sales and you say, "Well, that looks quite strong." I think, it's a mixed bag, the good news for us is that both sides of our business, as I said earlier, again, it is a mix of some macro tailwind. I think much more importantly is what we're doing, at the team level. We're just getting much, much better at lending. We're better at pricing inventory. We're better at using digital initiatives, marketing, AI, around the core of what we do to help satisfy this growing need for cash from our customers.

Tim Jugmans
Tim Jugmans
CFO at EZCORP

I think the important thing there is that we're lending at 40%-65% of what we think the value is, we're assessing that on a regular basis. If we see, say, for example, which we've seen with laptops, is no one wants to buy a laptop anymore, those prices continue to decrease, we're going to be lending on the low end of those loan-to-values, because we want to make sure that we can sell it. The forfeitures are really in line with our pricing, that's why they became pretty consistent through all economic cycles.

Eric Wold
Executive Director at Texas Capital Securities

Got it. Just a follow-up question on the acquisition pipeline. It was a question obviously about SMG and that kind of just coming together timing-wise to go to 100%. What have you kind of seen in the current pipeline? I mean, what's been completed and what's in discussion in terms of kind of length of discussion cycles, receptivity of sellers, valuations, kind of what are you seeing in that versus kind of what you would expect at this point in the cycle?

Lachie Given
Lachie Given
CEO at EZCORP

Look, I think it's funny, this industry. The truth of the matter is that these things have a very long cycle with M&A. I could tell you I've been close to acquisitions for 10 years, and then others for three months. They just want to get going. That one truly is a mixed bag, just the length of time it takes to do these sorts of transactions. You've got to remember, it's not really private equity that we're dealing with or institutional investors we're dealing with. These are usually family-owned businesses, and there's personalities and generational change and that kind of stuff. There's no real difference. I've been doing this a long time now on the M&A side, and I think there's no real change in how that works. From a multiple perspective, I think they're pretty consistent.

Lachie Given
Lachie Given
CEO at EZCORP

Where you've got to be careful is what scrapping has done. Look, I think that the pipeline itself, particularly in Latin America, is super strong. You've got very large independent chains down there. We're pretty excited about that pipeline. As I said earlier, the U.S., I think the U.S. is much more now a small kind of conveyor belt almost, for want of a better word, of just doing smaller acquisitions and targeted around the markets in which we've got really strong teams.

Eric Wold
Executive Director at Texas Capital Securities

Well, thank you, guys.

Lachie Given
Lachie Given
CEO at EZCORP

Thank you, Mike.

Operator

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.

Executives
    • Lachie Given
      Lachie Given
      CEO
    • Tim Jugmans
      Tim Jugmans
      CFO
Analysts
    • Sean Mansouri
      Investor Relations Advisor at Elevate IR
    • Brian McNamara
      Managing Director at Canaccord Genuity
    • David Scharf
      Managing Director at Citizens Capital Markets
    • John Hecht
      Managing Director at Jefferies
    • Kyle Joseph
      Managing Director at Stephens
    • Vincent Caintic
      Managing Director at BTIG
    • Eric Wold
      Executive Director at Texas Capital Securities
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