UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~December 31, 2021 or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-19424

EZCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

74-2540145

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

2500 Bee Cave Road

Bldg One

Suite 200

Rollingwood

78746

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (512) 314-3400

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Non-voting Common Stock, par value $.01 per share

EZPW

NASDAQ Stock Market

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☒
Non-accelerated Filer	☐	Smaller Reporting Company	☒☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The only class of voting securities of the registrant issued and outstanding is the Class B Voting Common Stock, par value $.01 per share, all of which is owned by an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock.

As of ~~July~~January 31, ~~2021, 53,086,438~~2022, 53,557,589 shares of the registrant’s Class A Non-voting Common Stock ("Class A Common Stock"), par value $.01 per share, and 2,970,171 shares of the registrant’s Class B Voting Common Stock, par value $.01 per share, were outstanding.

Table of Contents

EZCORP, Inc.

INDEX TO FORM 10-Q


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of ~~June 30~~December 31 , 2021 and 2020 (Unaudited) and September 30, ~~2020~~20 21			1
Condensed Consolidated Statements of Operations for the Three ~~and~~N ~~ine~~ M ~~onths~~Months Ended ~~June 30~~December 31 , 2021 and 2020 (Unaudited)			2
Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three ~~and~~N ~~ine~~ M ~~onths~~Months Ended ~~June 30~~December 31 , 2021 and 2020 (Unaudited)			4
Condensed Consolidated Statements of Stockholders’ Equity for the Periods Ended ~~June 30~~December 31 , 2021 and 2020 (Unaudited)			4
Condensed Consolidated Statements of Cash Flows for the Three N ~~ine~~ M ~~onths~~ Months Ended ~~June 30~~December 31 , 2021 and 2020 (Unaudited)			5
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)			6
Note 1: Organization and Summary of Significant Accounting Policies			6
Note 2: Acquisitions			7

Note 3 : ~~Expected Credit Losses~~Goodwill			8

Note ~~4: Goodwill~~4 : Earnings Per Share			9
Note 5 : ~~Other Charges~~Leases			9
Note 6 ~~: Earnings Per Share~~			10
~~Note~~ 7 ~~: Leases~~			10
~~Note~~ 8 : Strategic Investments			11
Note 97 : Fair Value Measurements			1211
Note 108 : Debt			1413
Note 9 : Share-Based Compensation			15

Note 1 0 : Commitments and Contingencies			16
Note 1 1 : ~~Share-Based Compensation~~Segment Information			16
Note 1 2 : ~~Income Taxes~~			16
~~Note 1~~3 ~~: Commitments and Contingencies~~			17
~~Note 1~~4 ~~: Segment Information~~			17
~~Note 1~~5 : Supplemental Consolidated Financial Information			2018

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2119
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3327
Item 4. Controls and Procedures			3327
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			3428
Item 1A. Risk Factors			3428

Item 6. Exhibits			3529
SIGNATURES			3630

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EZCORP, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)	June 30, 2021		June 30, 2020		September 30, 2020		(in thousands, except share and per share amounts)	December 31, 2021		December 31, 2020		September 30, 2021
		(Unaudited)							(Unaudited)
Assets:	Assets:							Assets:
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	283,668	$	311,130	$	304,542	Cash and cash equivalents	$	233,274	$	290,450	$	253,667
Restricted cash	Restricted cash	13,795		4,000		8,011		Restricted cash	8,692		8,011		9,957
Pawn loans	Pawn loans	157,155		113,290		131,323		Pawn loans	176,586		147,852		175,901
Pawn service charges receivable, net	Pawn service charges receivable, net	24,965		17,432		20,580		Pawn service charges receivable, net	29,765		24,825		29,337
Inventory, net	Inventory, net	92,242		123,112		95,891		Inventory, net	119,313		94,980		110,989
Notes receivable, net		0		3,866		0

Prepaid expenses and other current assets	Prepaid expenses and other current assets	28,343		25,754		32,903		Prepaid expenses and other current assets	31,209		32,824		31,010
Total current assets	Total current assets	600,168		598,584		593,250		Total current assets	598,839		598,942		610,861
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	35,387		29,483		32,458		Investments in unconsolidated affiliates	42,513		31,773		37,724
Other investments								Other investments	16,500		—		—
Property and equipment, net	Property and equipment, net	55,630		58,098		56,986		Property and equipment, net	52,201		55,204		53,811
Lease right-of-use asset		185,467		204,591		183,809
Right-of-use asset, net								Right-of-use asset, net	201,527		177,308		200,990
Goodwill	Goodwill	283,619		257,326		257,582		Goodwill	284,619		258,453		285,758
Intangible assets, net	Intangible assets, net	61,922		65,003		58,638		Intangible assets, net	61,458		58,794		62,104
Notes receivable, net	Notes receivable, net	1,173		1,140		1,148		Notes receivable, net	1,190		1,156		1,181
Deferred tax asset, net	Deferred tax asset, net	10,292		5,505		8,931		Deferred tax asset, net	15,623		10,000		9,746
Other assets	Other assets	4,992		4,572		4,221		Other assets	5,851		5,534		4,736
Total assets	Total assets	$	1,238,650	$	1,224,302	$	1,197,023	Total assets	$	1,280,321	$	1,197,164	$	1,266,911

Liabilities and equity:	Liabilities and equity:							Liabilities and equity:
Current liabilities:	Current liabilities:							Current liabilities:
Current maturities of long-term debt, net	Current maturities of long-term debt, net	$	0	$	268	$	213	Current maturities of long-term debt, net	$	—	$	213	$	—
Accounts payable, accrued expenses and other current liabilities	Accounts payable, accrued expenses and other current liabilities	84,966		58,358		71,504		Accounts payable, accrued expenses and other current liabilities	75,531		67,777		90,268
Customer layaway deposits	Customer layaway deposits	11,884		11,902		11,008		Customer layaway deposits	13,142		9,904		12,557
Lease liability	Lease liability	47,241		48,840		49,742		Lease liability	51,843		45,351		52,263
Total current liabilities	Total current liabilities	144,091		119,368		132,467		Total current liabilities	140,516		123,245		155,088
Long-term debt, net	Long-term debt, net	260,632		247,618		251,016		Long-term debt, net	311,844		254,322		264,186
Deferred tax liability, net	Deferred tax liability, net	1,309		2,165		524		Deferred tax liability, net	221		172		3,684
Lease liability	Lease liability	149,342		167,716		153,040		Lease liability	161,841		143,620		161,330
Other long-term liabilities	Other long-term liabilities	10,058		7,523		10,849		Other long-term liabilities	11,398		11,303		10,385
Total liabilities	Total liabilities	565,432		544,390		547,896		Total liabilities	625,820		532,662		594,673
Commitments and Contingencies (Note 13)		0		0		0
Commitments and Contingencies (Note 10)								Commitments and Contingencies (Note 10)	0		0		0
Stockholders’ equity:	Stockholders’ equity:							Stockholders’ equity:
Class A Non-voting Common Stock, par value $0.01 per share; shares authorized: 100 million; issued and outstanding: 53,086,438 as of June 30, 2021; 52,097,590 as of June 30, 2020; and 52,332,848 as of September 30, 2020		530		521		521
Class A Non-voting Common Stock, par value $0.01 per share; shares authorized: 100 million; issued and outstanding: 53,344,218 as of December 31, 2021; 52,628,588 as of December 31, 2020; and 53,086,438 as of September 30, 2021								Class A Non-voting Common Stock, par value $0.01 per share; shares authorized: 100 million; issued and outstanding: 53,344,218 as of December 31, 2021; 52,628,588 as of December 31, 2020; and 53,086,438 as of September 30, 2021	533		526		530
Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171	Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171	30		30		30		Class B Voting Common Stock, convertible, par value $0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171	30		30		30
Additional paid-in capital	Additional paid-in capital	402,522		408,601		398,475		Additional paid-in capital	339,955		398,269		403,312
Retained earnings	Retained earnings	325,228		341,517		318,169		Retained earnings	369,359		322,468		326,781
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(55,092)		(70,757)		(68,068)		Accumulated other comprehensive loss	(55,376)		(56,791)		(58,415)
Total equity	Total equity	673,218		679,912		649,127		Total equity	654,501		664,502		672,238
Total liabilities and equity	Total liabilities and equity	$	1,238,650	$	1,224,302	$	1,197,023	Total liabilities and equity	$	1,280,321	$	1,197,164	$	1,266,911

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended December 31,
(in thousands, except per share amount)	(in thousands, except per share amount)	2021		2020		2021		2020		(in thousands, except per share amount)	2021		2020

Revenues:	Revenues:									Revenues:
Merchandise sales	Merchandise sales	$	107,808	$	136,537	$	330,816	$	393,095	Merchandise sales	$	137,720	$	107,783
Jewelry scrapping sales	Jewelry scrapping sales	5,673		20,303		18,507		41,709		Jewelry scrapping sales	6,944		6,759
Pawn service charges	Pawn service charges	60,431		52,460		187,356		217,407		Pawn service charges	76,025		63,489
Other revenues	Other revenues	121		924		428		3,727		Other revenues	305		104
Total revenues	Total revenues	174,033		210,224		537,107		655,938		Total revenues	220,994		178,135
Merchandise cost of goods sold	Merchandise cost of goods sold	60,539		91,859		190,872		261,711		Merchandise cost of goods sold	83,111		64,543
Jewelry scrapping cost of goods sold	Jewelry scrapping cost of goods sold	5,473		16,158		16,076		33,529		Jewelry scrapping cost of goods sold	5,772		5,202
Other cost of revenues		0		32		0		1,093

Net revenues	Net revenues	108,021		102,175		330,159		359,605		Net revenues	132,111		108,390
Operating expenses:	Operating expenses:									Operating expenses:
Store expenses	Store expenses	81,803		82,341		242,261		259,264		Store expenses	86,771		79,309
General and administrative	General and administrative	14,589		16,176		40,870		50,355		General and administrative	15,545		12,510
Impairment of goodwill, intangible and other assets		0		0		0		47,060

Depreciation and amortization	Depreciation and amortization	7,419		7,679		23,080		23,174		Depreciation and amortization	7,574		7,572
Loss on sale or disposal of assets and other		0		255		90		1,260
Other charges		497		0		497		0
Loss (gain) on sale or disposal of assets and other										Loss (gain) on sale or disposal of assets and other	5		(22)

Total operating expenses	Total operating expenses	104,308		106,451		306,798		381,113		Total operating expenses	109,895		99,369
Operating income (loss)		3,713		(4,276)		23,361		(21,508)
Operating income										Operating income	22,216		9,021
Interest expense	Interest expense	5,569		5,379		16,542		16,589		Interest expense	2,431		5,455
Interest income	Interest income	(512)		(628)		(1,918)		(2,412)		Interest income	(304)		(821)
Equity in net (income) loss of unconsolidated affiliates		(643)		1,183		(2,409)		5,896
Other expense (income)		65		28		(389)		(215)
(Loss) income before income taxes		(766)		(10,238)		11,535		(41,366)
Income tax expense (benefit)		1,804		(4,751)		4,476		3,757
Net (loss) income		$	(2,570)	$	(5,487)	$	7,059	$	(45,123)
Equity in net income of unconsolidated affiliates										Equity in net income of unconsolidated affiliates	(1,138)		(516)
Other income										Other income	(120)		(599)
Income before income taxes										Income before income taxes	21,347		5,502
Income tax expense										Income tax expense	5,626		1,203
Net income										Net income	$	15,721	$	4,299

Basic (loss) earnings per share		$	(0.05)	$	(0.10)	$	0.13	$	(0.81)
Diluted (loss) earnings per share		$	(0.05)	$	(0.10)	$	0.13	$	(0.81)
Basic earnings per share										Basic earnings per share	$	0.28	$	0.08
Diluted earnings per share										Diluted earnings per share	$	0.21	$	0.08

Weighted-average basic shares outstanding	Weighted-average basic shares outstanding	55,898		55,068		55,639		55,395		Weighted-average basic shares outstanding	56,183		55,361
Weighted-average diluted shares outstanding	Weighted-average diluted shares outstanding	55,898		55,068		55,653		55,395		Weighted-average diluted shares outstanding	81,948		55,428

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in thousands) 2021 2020 2021 2020
Net (loss) income $ (2,570) $ (5,487) $ 7,059 $ (45,123)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax 3,459 5,416 12,976 (18,359)
Comprehensive income (loss) $ 889 $ (71) $ 20,035 $ (63,482)


	Three Months Ended December 31,
(in thousands)	2021		2020

Net income	$	15,721	$	4,299
Other comprehensive income:
Foreign currency translation adjustment, net of tax	3,039		11,277




Comprehensive income	$	18,760	$	15,576

See accompanying notes to unaudited interim condensed consolidated financial statements.

Table of Contents

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited except for balances as of September 30, ~~2020~~2021 and September 30, ~~2019)~~2020)


		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income					Total Equity				Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss				Total Equity
(in thousands)	(in thousands)	Shares	Par Value								Total Equity	(in thousands)	Shares					Par Value	Additional Paid-in Capital

Balances as of September 30, 2020		55,303	$	551	$	398,475	$	318,169	$	(68,068)						$	649,127
Balances as of September 30, 2021																Balances as of September 30, 2021		56,057			$	560	$	403,312	$	326,781	$	(58,415)			$	672,238
Stock compensation	Stock compensation	—	—		524		—		—					524		Stock compensation		—	—		1,698		—		—				1,698

Release of restricted stock	Release of restricted stock	296	5		—		—		—					5		Release of restricted stock		257	3		—		—		—				3
Taxes paid related to net share settlement of equity awards	Taxes paid related to net share settlement of equity awards	—	—		(730)		—		—					(730)		Taxes paid related to net share settlement of equity awards		—	—		(792)		—		—				(792)

Cumulative effect of adoption of ASU 2020-06 (Note 1)																Cumulative effect of adoption of ASU 2020-06 (Note 1)		—	—		(64,263)		26,857		—				(37,406)

Foreign currency translation gain	Foreign currency translation gain	—	—		—		—		11,277					11,277		Foreign currency translation gain		—	—		—		—		3,039				3,039

Net income	Net income	—	—		—		4,299		—					4,299		Net income		—	—		—		15,721		—				15,721
Balances as of December 31, 2020		55,599	$	556	$	398,269	$	322,468	$	(56,791)				$	664,502
Stock compensation		—	—		1,094		—		—					1,094

Transfer of consideration for prior period acquisition		33	—		185		—		—					185
Release of restricted stock		212	2		—		—		—					2
Taxes paid related to net share settlement of equity awards		—	—		(109)		—		—					(109)

Foreign currency translation loss		—	—		—		—		(1,760)					(1,760)

Net Income		—	—		—		5,330		—					5,330
Balances as of March 31, 2021		55,844	$	558	$	399,439	$	327,798	$	(58,551)				$	669,244
Stock compensation		—	—		1,538		—		—					1,538
Transfer of consideration for current period acquisition		213	2		1,545		—		—					1,547
Balances as of December 31, 2021																Balances as of December 31, 2021		56,314	$	563	$	339,955	$	369,359	$	(55,376)			$	654,501

Foreign currency translation gain		—	—		—		—		3,459					3,459

Net loss		—	—		—		(2,570)		—					(2,570)
Balances as of June 30, 2021		56,057	$	560	$	402,522	$	325,228	$	(55,092)				$	673,218


		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income					Total Equity				Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss				Total Equity
(in thousands)	(in thousands)	Shares	Par Value								Total Equity	(in thousands)	Shares					Par Value	Additional Paid-in Capital

Balances as of September 30, 2019		55,535	$	556	$	407,628	$	389,163	$	(52,398)						$	744,949
Balances as of September 30, 2020																Balances as of September 30, 2020		55,303			$	551	$	398,475	$	318,169	$	(68,068)			$	649,127
Stock compensation	Stock compensation	—	—		1,695		—		—					1,695		Stock compensation		—	—		524		—		—				524

Release of restricted stock	Release of restricted stock	463	5		—		—		—					5		Release of restricted stock		296	5		—		—		—				5
Taxes paid related to net share settlement of equity awards	Taxes paid related to net share settlement of equity awards	—	—		(1,395)		—		—					(1,395)		Taxes paid related to net share settlement of equity awards		—	—		(730)		—		—				(730)

Foreign currency translation gain	Foreign currency translation gain	—	—		—		—		6,071					6,071		Foreign currency translation gain		—	—		—		—		11,277				11,277

Purchase and retirement of treasury stock		(142)	(2)		(488)		(473)		—					(963)

Net income	Net income	—	—		—		1,238		—					1,238		Net income		—	—		—		4,299		—				4,299
Balances as of December 31, 2019		55,856	$	559	$	407,440	$	389,928	$	(46,327)				$	751,600
Stock compensation		—	—		930		—		—					930

Release of restricted stock		13	1		—		—		—					1
Taxes paid related to net share settlement of equity awards		—	—		(63)		—		—					(63)

Foreign currency translation loss		—	—		—		—		(29,846)					(29,846)

Purchase and retirement of treasury stock		(801)	(9)		(2,136)		(2,050)		—					(4,195)

Net loss		—	—		—		(40,874)		—					(40,874)
Balances as of March 31, 2020		55,068	$	551	$	406,171	$	347,004	$	(76,173)				$	677,553
Stock compensation		—	—		2,430		—		—					2,430
Balances as of December 31, 2020																Balances as of December 31, 2020		55,599	$	556	$	398,269	$	322,468	$	(56,791)			$	664,502

Foreign currency translation gain		—	—		—		—		5,416					5,416

Net loss		—	—		—		(5,487)		—					(5,487)
Balances as of June 30, 2020		55,068	$	551	$	408,601	$	341,517	$	(70,757)				$	679,912

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

EZCORP, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended June 30,					Three Months Ended December 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2021		2020

Operating activities:	Operating activities:					Operating activities:
Net income (loss)		$	7,059	$	(45,123)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Net income						Net income	$	15,721	$	4,299
Adjustments to reconcile net income to net cash flows from operating activities:						Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	Depreciation and amortization	23,080		23,174		Depreciation and amortization	7,574		7,572
Amortization of debt discount and deferred financing costs	Amortization of debt discount and deferred financing costs	10,243		9,814		Amortization of debt discount and deferred financing costs	374		3,329
Amortization of lease right-of-use asset	Amortization of lease right-of-use asset	35,885		34,265		Amortization of lease right-of-use asset	12,694		11,504
Accretion of notes receivable discount and deferred compensation fee		0		(688)

Deferred income taxes	Deferred income taxes	(576)		(3,327)		Deferred income taxes	587		(1,421)
Impairment of goodwill and intangible assets		0		47,060

Other adjustments	Other adjustments	(331)		2,128		Other adjustments	(30)		(167)
Provision for inventory reserve	Provision for inventory reserve	(6,812)		(4,477)		Provision for inventory reserve	(820)		(1,510)
Stock compensation expense	Stock compensation expense	3,156		5,093		Stock compensation expense	1,698		524
Equity in net (income) loss of unconsolidated affiliates		(2,409)		5,896
Changes in operating assets and liabilities, net of business acquisitions:
Equity in net income of unconsolidated affiliates						Equity in net income of unconsolidated affiliates	(1,138)		(516)
Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Service charges and fees receivable	Service charges and fees receivable	(2,832)		14,076		Service charges and fees receivable	(419)		(4,034)
Inventory	Inventory	5,382		12,467		Inventory	(2,314)		1,323
Prepaid expenses, other current assets and other assets	Prepaid expenses, other current assets and other assets	7,908		(3,348)		Prepaid expenses, other current assets and other assets	(2,330)		(713)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	(51,565)		(40,450)		Accounts payable, accrued expenses and other liabilities	(29,531)		(23,460)
Customer layaway deposits	Customer layaway deposits	511		(709)		Customer layaway deposits	551		(1,311)
Income taxes	Income taxes	4,423		514		Income taxes	4,741		68
Net cash provided by operating activities		33,122		56,365
Dividends from unconsolidated affiliates						Dividends from unconsolidated affiliates	1,660		—
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	9,018		(4,513)
Investing activities:	Investing activities:					Investing activities:
Loans made	Loans made	(423,450)		(442,752)		Loans made	(166,480)		(142,936)
Loans repaid	Loans repaid	260,536		321,718		Loans repaid	95,542		77,116
Recovery of pawn loan principal through sale of forfeited collateral	Recovery of pawn loan principal through sale of forfeited collateral	155,595		248,290		Recovery of pawn loan principal through sale of forfeited collateral	65,297		53,981
Capital expenditures, net	Capital expenditures, net	(14,635)		(20,867)		Capital expenditures, net	(4,985)		(3,223)
Acquisitions, net of cash acquired		(15,132)		0
Principal collections on notes receivable		0		4,000
Net cash (used in) provided by investing activities		(37,086)		110,389
Issuance of note receivable						Issuance of note receivable	(1,000)		—
Investment in unconsolidated affiliates						Investment in unconsolidated affiliates	(2,477)		—
Investment in other investments						Investment in other investments	(16,500)		—

Net cash used in investing activities						Net cash used in investing activities	(30,603)		(15,062)
Financing activities:	Financing activities:					Financing activities:
Taxes paid related to net share settlement of equity awards	Taxes paid related to net share settlement of equity awards	(839)		(1,458)		Taxes paid related to net share settlement of equity awards	(792)		(730)
Payout of deferred consideration		0		(350)
Proceeds from borrowings, net of issuance costs		0		(106)

Payments on assumed debt and other borrowings	Payments on assumed debt and other borrowings	(15,363)		(316)		Payments on assumed debt and other borrowings	—		(53)
Repurchase of common stock		0		(5,158)

Net cash used in financing activities	Net cash used in financing activities	(16,202)		(7,388)		Net cash used in financing activities	(792)		(783)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	Effect of exchange rate changes on cash and cash equivalents and restricted cash	5,076		(6,678)		Effect of exchange rate changes on cash and cash equivalents and restricted cash	719		6,266
Net (decrease) increase in cash, cash equivalents and restricted cash		(15,090)		152,688
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(21,658)		(14,092)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	312,553		162,442		Cash, cash equivalents and restricted cash at beginning of period	263,624		312,553
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	297,463	$	315,130	Cash, cash equivalents and restricted cash at end of period	$	241,966	$	298,461

Supplemental disclosure of cash flow information	Supplemental disclosure of cash flow information					Supplemental disclosure of cash flow information
Cash and cash equivalents	Cash and cash equivalents	$	283,668	$	311,130	Cash and cash equivalents	$	233,274	$	290,450
Restricted cash	Restricted cash	13,795		4,000		Restricted cash	8,692		8,011
Total cash and cash equivalents and restricted cash	Total cash and cash equivalents and restricted cash	$	297,463	$	315,130	Total cash and cash equivalents and restricted cash	$	241,966	$	298,461

Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Pawn loans forfeited and transferred to inventory	Pawn loans forfeited and transferred to inventory	$	145,839	$	200,160	Pawn loans forfeited and transferred to inventory	$	70,966	$	50,921
Transfer of consideration for current period acquisition		1,547		0
Acquisition earn-out contingency		4,608		0
Accrued acquisition consideration held as restricted cash		5,824		0

See accompanying notes to unaudited interim condensed consolidated financial statements.

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Notes to Interim Condensed Consolidated Financial Statements

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

EZCORP, Inc. (collectively with its subsidiaries, the ~~“Company”, “we”, “us”~~“Company,” “we,” “us,” or “our”) is a leading provider of pawn loans in the United States and Latin America. Pawn loans are non-recourse loans collateralized by tangible property. We also sell merchandise, primarily collateral forfeited from pawn lending operations and pre-owned merchandise purchased from customers.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements (“Condensed Consolidated Financial Statements”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by ~~generally accepted accounting principles~~U.S. GAAP for complete financial statements.

These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended September 30, ~~2020~~,2021, filed with the SEC on ~~December 14, 2020~~November 17, 2021 (“~~2020~~2021 Annual Report”).

In the opinion of management, the accompanying Condensed Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Financial results for the ~~three and nine-month periods~~three-month period ended ~~June 30,~~December 31, 2021, are not necessarily indicative of results that may be expected for the fiscal year ending September 30, ~~2021.~~2022.

Our business is subject to seasonal variations, and operating results for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 and 2020 (the "current quarter" and "prior-year quarter," respectively) are not necessarily indicative of the results of operations for the full fiscal year.

There have been no changes that have had a material impact in significant accounting policies as described in our Annual Report on Form 10-K for the year ended September 30, ~~2020~~.2021 except for as disclosed below related to the adoption of ASU 2020-06.

Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of EZCORP, Inc. and its wholly owned subsidiaries. We use the equity method of accounting for entities in which we have a 50% or less investment and exercise significant influence. We account for equity investments for which we do not have significant influence and without readily determinable fair values at cost with adjustments for observable changes in price in orderly transactions for identical or similar investments of the same issuer or impairments. All inter-company accounts and transactions have been eliminated in consolidation.

~~Reclassifications~~

~~We have reclassified certain amounts in prior-period financial statements to conform to the current period presentation.~~

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions include the determination of inventory reserves, expected credit losses, useful lives of long-lived and intangible assets, valuation of share-based compensation, valuation of equity investments, valuation of deferred tax assets and liabilities, loss contingencies related to litigation and discount rates used for operating leases. Actual results may result in actual amounts differing from reported amounts.

Impact of COVID-19

The COVID-19 pandemic continues to affect the U.S. and global economies, ~~and~~ as ~~previously~~ disclosed in our ~~2020~~2021 Annual Report on Form 10-K. The full extent and duration of the COVID-19 impact on the global economy generally, and on our business specifically, is currently unknown. The impact of the pandemic, ~~also affected our businesses in a variety of ways beginning in~~and the ~~second quarter of fiscal 2020~~recovery therefrom, continued to adversely effect net revenues and ~~continuing~~earnings into fiscal 2021. During the latter part of fiscal 2021, we saw pawn transaction activity continue to rebuild, driving PLO balances closer to pre-pandemic levels, which will drive accelerating PSC revenue in the coming quarters given the natural lag between pawn originations and related fees. We ~~cannot estimate~~continue to assess what type of impact the ~~length or severity~~recent surge of the COVID-19 Omicron variant will have to our business, net revenues and operating expenses in fiscal year 2022. A prolonged pandemic ~~or the related financial consequences~~and recovery may have an adverse effect on our ~~business and~~results of operations, ~~including whether and when historic economic and operating conditions will resume or the extent to which the disruption may impact our~~

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~~business,~~ financial position results of operations or cash flows. Our estimates, judgments and assumptions related to COVID-19 could ultimately differ over time.

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Recently Adopted Accounting Policies

In ~~June 2016,~~August 2020, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued its Accounting Standards Update (“ASU”) ~~2016-13,~~2020-06, ~~Financial Instruments — Credit Losses~~ (Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to consider other factors, such as historical loss experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 was effective on October 1, 2020.

We adopted ASU 2016-13 effective October 1, 2020 using the modified retrospective approach. There was no net cumulative effect adjustment to retained earnings as of October 1, 2020 as a result of this adoption. This amendment did not have a material impact on our balance sheets or cash flows from operations and did not have a material impact on our operating results.

~~Recently Issued Accounting Pronouncements~~

~~In August 2020, the FASB issued ASU 2020-06, “Debt—~~Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and ~~Hedging—~~Hedging – Contracts in Entity’s Own Equity (Subtopic ~~815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”~~815 – 40), (“ASU 2020-06”)~~, which~~. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments ~~by removing major separation models required under current U.S. GAAP.~~and contracts on an entity’s own equity. Additionally, ASU 2020-06 ~~removes certain settlement conditions that are required~~eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for ~~equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.~~as a single unit. The ASU 2020-06 isamendments are effective ~~for the Company~~ for fiscal years beginning after December 15, 2021, ~~including~~and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We early adopted this standard on October 1, 2021 under the modified retrospective basis.

Impact of the Adoption of ASU 2020-06

On October 1, 2021, we early adopted ASU 2020-06 on a modified retrospective basis. Under ASU 2020-06, we no longer separate the convertible senior notes into liability and ~~adoption must be~~equity components. We recognized the cumulative effect of initially applying this new standard as of October 1, 2021. We recognized a cumulative effect of initially applying the ~~beginning~~ASU as an adjustment to the October 1, 2021 opening balance of retained earnings. The conversion option that was previously accounted for in equity under the cash conversion model was recombined into the convertible debt outstanding, and as a result, additional paid in capital and the related unamortized debt discount on the convertible senior notes were reduced. The removal of the remaining debt discounts recorded for this previous separation has the effect of increasing our ~~annual fiscal year. We are currently evaluating~~net debt balance. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.


(in thousands)	As Reported September 30, 2021		Adjustments		Under ASU 2020-06 October 1, 2021
Principal	$	316,250	$	—	$	316,250
Unamortized debt discount	(48,785)		48,785		—
Deferred financing costs, net	(3,279)		(1,500)		(4,779)
Net carrying amount	264,186		47,285		311,471

Deferred tax asset	9,746		5,839		15,585
Deferred tax liability	3,684		(4,040)		(356)

Additional paid-in capital	403,312		(64,263)		339,049
Retained earnings	326,781		26,857		353,638

The impact of ~~this~~adoption on our condensed consolidated statements of operations for the three months ended December 31, 2021 was primarily to decrease interest expense by $3.4 million. This had the effect of increasing our basic earnings per share for the three months ended December 31, 2021 by $0.05, and decreasing our diluted earnings per common share for the three months ended December 31, 2021 by $0.02. Additionally, adoption of the standard requires interest charges on the convertible debt to be added to net income as well as the use of the “if-converted” method to calculate diluted earnings per common share. Refer to Note 4: Earnings Per Share for effect of the convertible notes on diluted earnings per common share.

Recently Issued Accounting Pronouncements

We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on our consolidated financial ~~statements and related disclosures.~~statements.

NOTE 2: ACQUISITIONS

On June 9,8, 2021, we completed the acquisition of 100% of the common shares of PLO del Bajio S. de R.L. de C.V. (“Bajio”) and gained control of the entity, further expanding our geographic footprint within Mexico with the addition of 128 pawn stores. These stores ~~operating~~operate under the name "Cash Apoyo ~~Efectivo,"~~Efectivo" and are located principally in the Mexico City metropolitan ~~area and have strong brand recognition in that market. This is our largest~~area.

At the time of acquisition, ~~to date in terms of store-count. We now operate a~~the total ~~of 1,143 pawn stores, 627 of which are in Latin America, including 503 in Mexico.~~

~~The total~~ consideration ~~paid~~ for Bajio was $23.6 million, consisting of ~~cash of~~ $17.4 million of ~~which $11.6 million was paid in~~ cash, ~~at closing and the remaining $5.8 million is accrued and held as restricted cash to be paid out per the acquisition agreement~~ and 212,870 shares of our Class A Non-Voting Common Stock valued at $1.6 million. In addition, thethe sellers ~~may be~~are entitled to additional payments of up to $4.6 million to be paid in 2 payments over the next two years, contingent on the ~~performance~~growth of the loan portfolios of the acquired ~~stores with growing its loan portfolio. We recorded this earn-out contingency as part~~stores. Up to 50% of any future contingent payments can be made in shares of our Class A Non-Voting Common Stock at our discretion. The value of the contingent consideration was included in the total consideration as the metrics ~~are~~were considered achievable on the date of acquisition. Cash paid at closing was $11.6 million and $3.8 million was paid in the fourth quarter of 2021.

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During the first quarter of 2022, both parties completed the formal working capital reconciliation stipulated within the purchase agreement. As part of the working capital reconciliation, the Company and the seller agreed to reduce the purchase price, which was held in restricted cash as of September 30, 2021, by ~~Management.~~

~~We also repaid $14.9~~$1.3 million. As the working capital adjustment was recorded as of September 30, 2021, this reduction to the purchase price is a measurement period adjustment, and resulted in a $1.3 million reduction to goodwill during the period ended December 31, 2021. This reduced the total consideration for Bajio to $22.3 million. As the future payments decreased, we released $1.3 million of ~~Bajio’s existing debt assumed~~the previously held $2.0 million in restricted cash to our unrestricted cash. Of the ~~acquisition~~remaining $0.7 million in restricted cash, $0.3 million is expected to be paid prior to June 30, 2022, and $0.4 million is expected to be paid on ~~June 9, 2021.~~or around the fifth anniversary of the date of acquisition.

The assets acquired and liabilities assumed are based upon the estimated fair values at the date of acquisition. The excess purchase price over the estimated fair market value of the new assets acquired has been recorded as goodwill.

The ~~estimated fair value of the assets acquired and liabilities assumed are provisional as management~~purchase price allocation is ~~still gathering additional information to complete the purchase accounting. The preliminary allocation of the consideration for the net acquired assets from this business combination were~~ as follows, in thousands:

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Cash and cash equivalents			$	308
~~Earning assets~~Pawn loans			~~9,462~~4,619
~~Lease right-of-use assets~~Pawn service charges receivable			~~10,826~~1,335
Inventory			1,319
Property and equipment			~~4,317~~2,025
Right-of-use assets			10,651
Goodwill			24,778
Intangible assets*assets			3,965
~~Goodwill~~Deferred tax asset, net			~~22,957~~381
Other assets			~~649~~746
Accounts payable, ~~deferred taxes~~accrued expenses and other liabilities			~~(3,150)~~(2,290)
Debt			(14,931)
Lease ~~liability~~		~~(10,826)~~liabilities
~~Assumed debt~~	~~(14,931)~~(10,651)
Total consideration			$	~~23,577~~22,255
*Intangible assets consist of $4.0 million in trade names.

~~The factors contributing to the recognition~~Intangible assets acquired consist of goodwill, which is recorded in our Latin America Pawn segment, were based on several strategic and synergistic benefits we expect to realize from the acquisition, including expansion of our store base as well as the ability to further leverage our pawn expertise, investments in information technology and other back office and support functions of our existing Mexico pawn business. We expect NaN of the goodwill resulting from this business combination will be deductible for income tax purposes.

The results of Bajio have been included in our condensed consolidated financial statements from June 9, 2021 through June 30, 2021, and are reported in our Latin America Pawn segment. The acquired business contributed revenues of $1.7 million and net income of $0.1 million to us for the period from June 9, 2021 to June 30, 2021.

The following unaudited pro forma summary presents consolidated information for us as if the business combination had occurred on October 1, 2019. The pro forma information is not necessarily indicative of our results of operations had the acquisitions been completed on the above date, nor is it necessarily indicative of our future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisitions, nor does it reflect additional revenue opportunities following the acquisition. The pro forma adjustments reflected in the table below are subject to change as additional analysis is performed.

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in thousands, except per share amounts) 2021 2020 2021 2020
Revenue $ 180,854 $ 216,083 $ 558,426 $ 681,069
Net (loss) income (2,475) (5,354) 6,775 (42,628)
Basic (loss) earnings per common share (0.04) (0.10) 0.12 (0.75)
Diluted (loss) earnings per common share (0.04) (0.10) 0.12 (0.75)

~~We did not have any~~ material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma net revenue and net income. These pro forma amounts have been calculated after applying the Company's accounting policies and adjusting the results to reflect the additional amortization that would have been incurred assuming the amortization of theindefinite-lived trade ~~name had been applied from October 1, 2019.~~

During the three and nine months ended June 30, 2021, we incurred total acquisition costs of $0.2 million and $0.4 million, respectively. The acquisition costs were primarily related to legal, accounting and consulting services, were expensed as incurred through June 30, 2021 and are included in general and administrative expenses in the consolidated statements of operations.

In May 2021, we acquired substantially all of the assets associated with 11 pawn stores in the Houston, Texas area, providing an immediate market-leading position in the South Houston area and enhancing our already strong position in the strategically important Houston metro market. We have concluded that this acquisition was immaterial to our overall consolidated financial results and, therefore, have omitted information that would otherwise be required.names.

NOTE 3: ~~EXPECTED CREDIT LOSSES~~

~~We adopted ASU 2016-13 effective October 1, 2020. We have financing receivables within the scope of ASU 2016-13, specifically pawn loans receivables and related pawn service charges receivables.~~

Our pawn loans are short-term in nature, typically 30-120 days for U.S. Pawn loans and 30 days for Latin America Pawn loans. Under our existing accounting policy, if a pawn loan is deemed to be uncollectible, we do not recognize an allowance for doubtful accounts due to the expected recovery of the loan principal amount through the sale of the collateral. We record the forfeited collateral as inventory at the pawn loan principal amount.

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Pawn service charges are recorded under the interest method over the term of the related pawn loan. Under our existing accounting policy, we accrue for any earned but unpaid pawn service charges at the end each month. We then apply a reserve to pawn service charges receivable at the end of each month using a pawn loan forfeiture rate derived from a trailing twelve-month average, adjusted for seasonality factors.

We have evaluated, on a collective basis, our pawn loan receivables and pawn service charges receivables and determined the new credit loss standard did not have a material impact on our consolidated financial statements, as our current polices appropriately capture lifetime expected credit losses.

~~The presentation of pawn loan and pawn service charge receivable as separate line items on our consolidated balance sheet will remain unchanged under the new credit loss standard.~~

~~As of June 30, 2021, pawn loan and related pawn service charges receivable, net were $157.2 million and $25.0 million, respectively.~~

~~NOTE 4:~~ GOODWILL

The following table summarizes the changes in the carrying amount of goodwill by segment and in total:

Nine Months Ended June 30, 2021
(in thousands) U.S. Pawn Latin America Pawn Consolidated
Balances as of September 30, 2020 $ 241,928 $ 15,654 $ 257,582
Acquisitions 2,394 22,957 25,351
Effect of foreign currency translation changes 0 686 686
Balances as of June 30, 2021 $ 244,322 $ 39,297 $ 283,619


	Three Months Ended December 31, 2021
(in thousands)	U.S. Pawn		Latin America Pawn		Consolidated

Balances as of September 30, 2021	$	244,471	$	41,287	$	285,758

Measurement period adjustments	—		(1,322)		(1,322)

Effect of foreign currency translation changes	—		183		183
Balances as of December 31, 2021	$	244,471	$	40,148	$	284,619

Nine Months Ended June 30, 2020
(in thousands) U.S. Pawn Latin America Pawn Consolidated
Balances as of September 30, 2019 $ 251,752 $ 48,775 $ 300,527
Effect of foreign currency translation changes 0 (1,888) (1,888)
Measurement period adjustments 176 (149) 27
Impairment charge (10,000) (31,340) (41,340)
Balances as of June 30, 2020 $ 241,928 $ 15,398 $ 257,326


	Three Months Ended December 31, 2020
(in thousands)	U.S. Pawn		Latin America Pawn		Consolidated

Balances as of September 30, 2020	$	241,928	$	15,654	$	257,582
Effect of foreign currency translation changes	—		871		871


Balances as of December 31, 2020	$	241,928	$	16,525	$	258,453

~~NOTE 5: OTHER CHARGES~~

During the fourth quarter of fiscal 2020, we began to implement strategic initiatives to refocus on our core pawn business and optimize our cost structure in order to improve our bottom line performance and position us for sustainable growth. The initiatives focused on workforce reductions, closure of our CASHMAX operations, store closures, write-offs and other miscellaneous charges. We recorded $20.4 million of such charges for the quarter ended September 30, 2020, and had accrued charges of $10.7 million remaining at September 30, 2020. ~~We recorded $0.5 million of charges for the three months ended June 30, 2021 related to the closure of store operations in Peru.~~

(in thousands) Accrued Charges at September 30, 2020 Charges Payments and Adjustments Accrued Charges at March 31, 2021 Charges Payments and Adjustments Accrued Charges at June 30, 2021
Cash charges:
Labor reduction costs $ 5,946 $ 0 $ (3,418) $ 2,528 $ 0 $ (1,454) $ 1,074
CASHMAX shutdown costs 800 0 (800) 0 0 — 0
Store closure costs 1,806 0 (1,806) 0 497 0 497
Other 2,166 0 (166) 2,000 0 0 2,000
$ 10,718 $ 0 $ (6,190) $ 4,528 $ 497 $ (1,454) $ 3,571

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NOTE 6:4: EARNINGS PER SHARE

The following table reconciles the number of common shares used to compute basic and diluted earnings per share attributable to EZCORP Inc., shareholders:

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in thousands, except per share amounts) 2021 2020 2021 2020
Net (loss) income $ (2,570) $ (5,487) $ 7,059 $ (45,123)
Earnings per common share
Average common share outstanding (denominator) 55,898 55,068 55,639 55,395
(Loss) earnings per common share $ (0.05) $ (0.10) $ 0.13 $ (0.81)
Diluted earnings per common share
Average common share outstanding 55,898 55,068 55,639 55,395
Dilutive effect of restricted stock and convertible notes* 0 0 14 0
Diluted average common shares outstanding (denominator) 55,898 55,068 55,653 55,395
Diluted (loss) earnings per common share $ (0.05) $ (0.10) $ 0.13 $ (0.81)
Potential common shares excluded from the calculation of diluted earnings per share above:
Restricted stock** 1,154 3,042 896 2,677


	Three Months Ended December 31,
(in thousands, except per share amounts)	2021		2020

Basic earnings per common share:
Net income - basic	$	15,721	$	4,299
Weighted shares outstanding - basic	56,183		55,361
Basic earnings per common share	$	0.28	$	0.08

Diluted earnings per common share:
Net income - basic	$	15,721	$	4,299
Add: Convertible Notes interest expense, net of tax	1,884		—
Net income - diluted	$	17,605	$	4,299
Weighted shares outstanding - basic	56,183		55,361
Effect of dilution from equity-based compensation awards*	541		67
Effect of dilution from if-converted Convertible Notes**	25,224		—
Weighted shares outstanding - diluted	81,948		55,428
Diluted earnings per common share	$	0.21	$	0.08

Potential common shares excluded from the calculation of diluted earnings per share above:
Restricted stock***	1,936		657

* Includes time-based share-based awards and ~~Convertible Notes.~~performance based awards for which targets for fiscal year tranches have been achieved and vesting is subject only to achievement of service conditions.

** See Note 108 for ~~discussion of the terms~~conversion price and ~~conditions of the potential impact~~initial conversion rate of the 2024 Convertible Notes and 2025 Convertible Notes. ~~This amount excludes all potential common shares for periods when there is a loss from continuing operations.~~

*** Includes antidilutive share-based awards as well as performance-based share-based awards that are contingently issuable, but for which the condition for issuance has not been met as of the end of the reporting period.

As a result of our adoption of ASU 2020-06 on October 1, 2021, the dilutive impact of the Convertible Notes for our calculation of diluted net income per share is considered using the if-converted method. During the three months ended December 31, 2021, we increased net income by $1.9 million to arrive at the numerator used to calculate diluted earnings per common share, which represents interest expense recognized on the convertible notes that were subject to this change in methodology. For periods prior to our October 1, 2021 adoption of ASU 2020-06, we applied the treasury stock method to account for the dilutive impact of the 2024 and 2025 Convertible Notes for diluted earnings per share purposes.

NOTE 7:5: LEASES

We determine if a contract contains a lease at inception. Our lease portfolio consists primarily of operating leases for pawn store locations and corporate offices with lease terms ranging from three to ten years.

The information below provides a summary of our leasing activities. See Note 12 in our ~~2020~~2021 Annual Report for additional information about our leasing activities.

The table below presents balances of our operating leases:


(in thousands)	December 31, 2021		December 31, 2020		September 30, 2021

Right-of-use asset	$	201,527	$	177,308	$	200,990



Lease liability, current	$	51,843	$	45,351	$	52,263
Lease liability, non-current	161,841		143,620		161,330
Total lease liability	$	213,684	$	188,971	$	213,593

(in thousands) June 30, 2021 June 30, 2020
September 30,
2020
Right-of-use asset $ 185,467 $ 204,591 $ 183,809
Lease liability, current $ 47,241 $ 48,840 $ 49,742
Lease liability, non-current 149,342 167,716 153,040
Total lease liability $ 196,583 $ 216,556 $ 202,782

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The table below provides the composition of our lease costs:

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in thousands) 2021 2020 2021 2020
Operating lease expense $ 15,699 $ 15,624 $ 47,237 $ 47,603
Variable lease expense 3,601 3,025 9,768 8,925
Other (1)
(845) 0 (2,570) 0
Total lease expense $ 18,455 $ 18,649 $ 54,435 $ 56,528
(1) Includes sublease rental income.

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	Three Months Ended December 31,
(in thousands)	2021		2020

Operating lease expense*	$	16,362	$	15,199
Variable lease expense	3,542		3,045

Total lease expense	$	19,904	$	18,244
* Includes sublease rental income.

Lease expense is recognized on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in "Store" and "General and Administrative" expense, based on the underlying lease use.

Other supplemental information includes the following for our operating leases:


		Nine Months Ended June 30,					Three Months Ended December 31,
		2021		2020			2021		2020

Weighted-average remaining contractual lease term (years)	Weighted-average remaining contractual lease term (years)	5.21		5.58		Weighted-average remaining contractual lease term (years)	5.05		5.06
Weighted-average incremental borrowing rate	Weighted-average incremental borrowing rate	7.86	%	8.25	%	Weighted-average incremental borrowing rate	8.10	%	7.85	%

Maturities of lease liabilities as of ~~June 30,~~December 31, 2021 were as follows (in thousands):


Remaining ~~2021~~2022	$	~~14,491~~
~~Fiscal 2022~~	~~59,908~~50,171
Fiscal 2023	~~47,637~~58,474
Fiscal 2024	~~35,724~~46,262
Fiscal 2025	~~24,970~~35,686
Fiscal 2026	26,164
Thereafter	~~57,358~~43,418
Total lease payments	$	~~240,088~~260,175
Less: Portion representing interest	~~43,505~~46,491
Present value of operating lease liabilities	$	~~196,583~~213,684
Less: Current portion	~~47,241~~51,843
Non-current portion	$	~~149,342~~161,841

We recorded ~~$33.5~~$14.3 million and ~~$10.1~~$1.6 million in non-cash additions to our right of use assets and lease liabilities for the ~~nine~~three months ended ~~June 30,~~December 31, 2021 and ~~June 30,~~December 31, 2020, respectively.

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NOTE 8:6: STRATEGIC INVESTMENTS

Cash Converters International Limited

On ~~April 14,~~October 1, 2021, we ~~received~~purchased an additional ~~9,519,277~~13 million shares inof Cash Converters International Limited ("Cash ~~Converters International"~~Converters") ~~resulting from the reinvestment of a dividend, bringing~~for $2.5 million. This purchase increased our total ownership ~~to 223,702,991 shares, or 35.65% of~~in Cash Converters ~~International as~~to 236,702,991 shares, representing a 37.72% ownership interest. Additionally, on October 14, 2021, we received a cash dividend of ~~June 30, 2021.~~$1.7 million from Cash Converters.

The following tables present summary financial information for Cash Converters ~~International’s~~ most recently reported results at ~~December 31, 2020~~June 30, 2021 after translation to U.S. dollars:


		December 31,					June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020

Current assets	Current assets	$	170,412	$	164,906	Current assets	$	167,553	$	157,183
Non-current assets	Non-current assets	189,810		199,277		Non-current assets	191,788		172,833
Total assets	Total assets	$	360,222	$	364,183	Total assets	$	359,341	$	330,016

Current liabilities	Current liabilities	$	59,962	$	93,958	Current liabilities	$	61,395	$	68,028
Non-current liabilities	Non-current liabilities	58,368		60,503		Non-current liabilities	57,511		51,275
Shareholders’ equity	Shareholders’ equity	241,892		209,722		Shareholders’ equity	240,435		210,713
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	360,222	$	364,183	Total liabilities and shareholders’ equity	$	359,341	$	330,016


		Half-Year Ended December 31,					Half-Year Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020

Gross revenues	Gross revenues	$	71,153	$	98,531	Gross revenues	$	150,165	$	187,025
Gross profit	Gross profit	51,231		59,250		Gross profit	105,851		112,511
Net profit (loss)	Net profit (loss)	5,561		(13,280)		Net profit (loss)	12,081		(7,032)

See Note 97 for the fair value and carrying value of our investment in Cash ~~Converters International.~~Converters.

Founders One, LLC

On October 6, 2021, the Company invested $15.0 million in exchange for a non-redeemable voting participating preferred equity interest in Founders One, LLC (“Founders”), a newly-formed entity with one other member. Founders used that $15.0 million to acquire an equity interest in Simple Management Group, Inc. (“SMG”) which owns and operates more than 20 pawn stores principally in the Caribbean region, with plans to build and acquire more stores in that region. The investment in Founders is a variable interest entity but for which the Company is not the primary beneficiary and, therefore, is not consolidated. Further, as we are not the appointed manager, we do not have the ability to direct the activities of the investment entity that most significantly impact its economic performance. This investment in Founders is accounted for utilizing the measurement alternative within ASC 321, Investments — Equity Securities. Our $15.0 million carrying value of the investment is included in “Other Investments” in our consolidated balance sheets. The Company’s maximum exposure for losses in this investment is its contributed investment of $15.0 million.

See Note 7 for the fair value and carrying value of our investment in Founders.

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NOTE 9:7: FAIR VALUE MEASUREMENTS

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

•Level 1 — Quoted market prices in active markets for identical assets or liabilities.

•Level 2 — Other observable market-based inputs or unobservable inputs that are corroborated by market data.

•Level 3 — Unobservable inputs that are not corroborated by market data.

We have elected not to measure at fair value any eligible items for which fair value measurement is optional.

There were no transfers in or out of Level 1, Level 2 or Level 3 for financial assets or liabilities measured at fair value on a recurring basis during the periods presented.

~~Fair Value Measurement on a Recurring Basis~~

~~As of June 30, 2021, June 30, 2020 and September 30, 2020, we did not have any financial assets or liabilities measured at fair value on a recurring basis.~~

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Financial Assets and Liabilities Not Measured at Fair Value

The tables below present our estimates of fair value of financial assets and liabilities that were not measured at fair ~~value on a recurring basis:~~value:


		Carrying Value		Estimated Fair Value									Carrying Value		Estimated Fair Value
		June 30, 2021		June 30, 2021		Fair Value Measurement Using							December 31, 2021		December 31, 2021		Fair Value Measurement Using
(in thousands)	(in thousands)					Level 1		Level 2		Level 3		(in thousands)					Level 1		Level 2		Level 3

Financial assets:	Financial assets:											Financial assets:
2.89% promissory note receivable due April 2024	2.89% promissory note receivable due April 2024	$	1,173	$	1,173	$	0	$	0	$	1,173	2.89% promissory note receivable due April 2024	$	1,190	$	1,190	$	—	$	—	$	1,190
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	35,387		43,440		35,970		0		7,470		Investments in unconsolidated affiliates	42,513		52,671		45,650		—		7,021

Other investments												Other investments	16,500		16,500		—		—		16,500
Financial liabilities:	Financial liabilities:											Financial liabilities:
2024 Convertible Notes	2024 Convertible Notes	$	121,910	$	150,219	$	0	$	150,219	$	0	2024 Convertible Notes	$	142,106	$	147,063	$	—	$	147,063	$	—
2025 Convertible Notes	2025 Convertible Notes	138,722		154,129		0		154,129		0		2025 Convertible Notes	169,738		155,060		—		155,060		—


		Carrying Value		Estimated Fair Value									Carrying Value		Estimated Fair Value
		June 30, 2020		June 30, 2020		Fair Value Measurement Using							December 31, 2020		December 31, 2020		Fair Value Measurement Using
(in thousands)	(in thousands)					Level 1		Level 2		Level 3		(in thousands)					Level 1		Level 2		Level 3

Financial assets:	Financial assets:											Financial assets:
Notes receivable from Grupo Finmart, net		$	3,866	$	3,945	$	0	$	0	$	3,945
2.89% promissory note receivable due April 2024	2.89% promissory note receivable due April 2024	1,140		1,140		0		0		1,140		2.89% promissory note receivable due April 2024	1,156		1,156		—		—		1,156
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	29,483		33,602		25,779		0		7,823		Investments in unconsolidated affiliates	31,773		44,716		37,039		—		7,677

Financial liabilities:	Financial liabilities:											Financial liabilities:
2024 Convertible Notes	2024 Convertible Notes	$	115,681	$	130,669	$	0	$	130,669	$	0	2024 Convertible Notes	$	118,736	$	134,838	$	—	$	134,838	$	—
2025 Convertible Notes	2025 Convertible Notes	131,378		125,235		0		125,235		0		2025 Convertible Notes	134,983		138,000		—		138,000		—
8.5% unsecured debt due 2024	8.5% unsecured debt due 2024	998		998		0		0		998		8.5% unsecured debt due 2024	816		816		—		—		816
CASHMAX secured borrowing facility		(171)		295		0		0		295


		Carrying Value		Estimated Fair Value									Carrying Value		Estimated Fair Value
		September 30, 2020		September 30, 2020		Fair Value Measurement Using							September 30, 2021		September 30, 2021		Fair Value Measurement Using
(in thousands)	(in thousands)					Level 1		Level 2		Level 3		(in thousands)					Level 1		Level 2		Level 3

Financial assets:	Financial assets:											Financial assets:
2.89% promissory note receivable due April 2024	2.89% promissory note receivable due April 2024	$	1,148	$	1,148	$	0	$	0	$	1,148	2.89% promissory note receivable due April 2024	$	1,181	$	1,181	$	—	$	—	$	1,181
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	32,458		32,597		24,833		0		7,764		Investments in unconsolidated affiliates	37,724		48,954		41,638		—		7,316

Financial liabilities:	Financial liabilities:											Financial liabilities:
2024 Convertible Notes	2024 Convertible Notes	$	117,193	$	129,979	$	0	$	129,979	$	0	2024 Convertible Notes	$	123,543	$	153,281	$	—	$	153,281	$	—
2025 Convertible Notes	2025 Convertible Notes	133,164		137,569		0		137,569		0		2025 Convertible Notes	140,643		155,250		—		155,250		—
8.5% unsecured debt due 2024		872		872		0		0		872

Due to the short-term nature of cash and cash equivalents, pawn loans, pawn service charges receivable and other debt, we estimate that the carrying value approximates fair value. We consider our cash and cash equivalents to be measured using Level 1 inputs and our pawn loans, pawn service charges receivable and other debt to be measured using Level 3 inputs. Significant increases or decreases in the underlying assumptions used to value pawn loans, pawn service charges receivable, consumer loans, fees and interest receivable and other debt could significantly increase or decrease these fair value estimates.

Included in “Accounts payable, accrued expenses and other current liabilities“ in our Consolidated Balance Sheets is $4.6 million which represents the fair value of acquisition-related contingent consideration as discussed in Note 2: Acquisitions. The key assumptions used to determine the fair value of acquisition-related contingent consideration are estimated by management, not observable in the market and, therefore considered Level 3 inputs within the fair value hierarchy.

In March 2019, we received $1.1 million in previously escrowed seller funds as a result of settling certain indemnification claims with the seller of GPMX. In April 2019, we loaned the $1.1 million back to the seller of GPMX in exchange for a promissory note. The note bears interest at the rate of 2.89% per annum and is secured by certain marketable securities owned by the seller and held in a U.S. brokerage account. All principal and accrued interest is due and payable in April 2024. The fair value of the note approximated its carrying value as of ~~June 30,~~December 31, 2021.

We use the equity method of accounting to account for our ~~35.65%~~37.72% ownership in Cash Converters International. The inputs used to generate the fair value of the investment in Cash Converters were considered Level 1 inputs. These inputs ~~are comprised~~consist of (a) the quoted stock price on the

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Australian Stock Exchange multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate as of the end of our reporting period. We included no control premium for owning a large percentage of outstanding shares.

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We use the equity method of accounting to account for our 13.14% ownership in Rich Data Corporation, a previously consolidated variable interest entity for which we no longer have the power to direct the activities that most significantly affect its economic performance. We believe its fair value ~~approximates~~approximated carrying value although such fair value is highly variable and includes significant unobservable inputs.

Of the $16.5 million included in the table above, $15.0 million is related the investment in Founders. We believe the investment's fair value approximated it's carrying value although such fair value is highly variable and includes significant unobservable inputs.

We measured the fair value of the 2024 and 2025 Convertible Notes using quoted price inputs. The notes are not actively traded, and thus the price inputs represent a Level 2 measurement. As the quoted price inputs are highly variable from day to day, the fair value estimates disclosed above could significantly increase or decrease.

In September 2020, we received the final payment from AlphaCredit on the notes receivable related to the sale of Grupo Finmart and recorded the amount under “Restricted cash” in our consolidated balance sheet as of ~~June 30,~~December 31, 2021. In August 2019, AlphaCredit notified us of an indemnity claim for certain pre-closing taxes, but the nature, extent and validity of such claim has yet to be determined.

NOTE ~~10:~~8: DEBT

The Company adopted ASU 2020-06 on October 1, 2021. See Note 1 for further discussion of this recently adopted accounting policy.

The following table presents the Company's debt instruments outstanding:


		June 30, 2021						June 30, 2020						September 30, 2020							December 31, 2021						December 31, 2020						September 30, 2021
(in thousands)	(in thousands)	Gross Amount		Debt Discount and Issuance Costs		Carrying Amount		Gross Amount		Debt Discount and Issuance Costs		Carrying Amount		Gross Amount		Debt Discount and Issuance Costs		Carrying Amount		(in thousands)	Gross Amount		Debt Issuance Costs		Carrying Amount		Gross Amount		Debt Discount and Issuance Costs		Carrying Amount		Gross Amount		Debt Discount and Issuance Costs		Carrying Amount

2024 Convertible Notes	2024 Convertible Notes	$	143,750	$	(21,840)	$	121,910	$	143,750	$	(28,069)	$	115,681	$	143,750	$	(26,557)	$	117,193	2024 Convertible Notes	$	143,750	$	(1,644)	$	142,106	$	143,750	$	(25,014)	$	118,736	$	143,750	$	(20,207)	$	123,543
2025 Convertible Notes	2025 Convertible Notes	172,500		(33,778)		138,722		172,500		(41,122)		131,378		172,500		(39,336)		133,164		2025 Convertible Notes	172,500		(2,762)		169,738		172,500		(37,517)		134,983		172,500		(31,857)		140,643
8.5% unsecured debt due 2024*	8.5% unsecured debt due 2024*	0		0		0		998		0		998		872		0		872		8.5% unsecured debt due 2024*	—		—		—		816		—		816		—		—		—
CASHMAX secured borrowing facility*		0		0		0		295		(466)		(171)		0		0		0
Total	Total	$	316,250	$	(55,618)	$	260,632	$	317,543	$	(69,657)	$	247,886	$	317,122	$	(65,893)	$	251,229	Total	$	316,250	$	(4,406)	$	311,844	$	317,066	$	(62,531)	$	254,535	$	316,250	$	(52,064)	$	264,186
Less current portion	Less current portion	0		0		0		268		0		268		213		0		213		Less current portion	—		—		—		213		—		213		—		—		—
Total long-term debt	Total long-term debt	$	316,250	$	(55,618)	$	260,632	$	317,275	$	(69,657)	$	247,618	$	316,909	$	(65,893)	$	251,016	Total long-term debt	$	316,250	$	(4,406)	$	311,844	$	316,853	$	(62,531)	$	254,322	$	316,250	$	(52,064)	$	264,186

* Amount translated from Guatemalan quetzals ~~and Canadian dollars~~ as of applicable period end. ~~Certain disclosures omitted due to materiality considerations.~~Debt was repaid before maturity the date in January 2021.

The following table presents the Company's contractual maturities related to the debt instruments as of ~~June 30,~~December 31, 2021:

Schedule of Contractual Maturities
(in thousands) Total Less Than 1 Year 1 - 3 Years 3 - 5 Years More Than 5 Years
2024 Convertible Notes* $ 143,750 $ 0 $ 0 $ 143,750 $ 0
2025 Convertible Notes* 172,500 0 0 172,500 0
$ 316,250 $ 0 $ 0 $ 316,250 $ 0


	Schedule of Contractual Maturities
(in thousands)	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years

2024 Convertible Notes	$	143,750	$	—	$	143,750	$	—	$	—
2025 Convertible Notes	172,500		—		—		172,500		—

	$	316,250	$	—	$	143,750	$	172,500	$	—

* Excludes the potential impact of embedded derivatives as discussed below.

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The following table presents the Company's interest expense related to the Convertible Notes for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 and 2020:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended December 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2021		2020

2024 Convertible Notes:	2024 Convertible Notes:									2024 Convertible Notes:
Contractual interest expense	Contractual interest expense	$	1,033	$	1,033	$	3,100	$	3,100	Contractual interest expense	$	1,033	$	1,033
Amortization of debt discount and deferred financing costs		1,602		1,484		4,716		4,370
Amortization of deferred financing costs										Amortization of deferred financing costs	167		112
Amortization of debt discount										Amortization of debt discount	—		1,430
Total interest expense	Total interest expense	$	2,635	$	2,517	$	7,816	$	7,470	Total interest expense	$	1,200	$	2,575

2025 Convertible Notes:	2025 Convertible Notes:									2025 Convertible Notes:
Contractual interest expense	Contractual interest expense	$	1,024	$	1,024	$	3,073	$	3,072	Contractual interest expense	$	1,024	$	1,024
Amortization of debt discount and deferred financing costs		1,886		1,754		5,558		5,168
Amortization of deferred financing costs										Amortization of deferred financing costs	207		140
Amortization of debt discount										Amortization of debt discount	—		1,679
Total interest expense	Total interest expense	$	2,910	$	2,778	$	8,631	$	8,240	Total interest expense	$	1,231	$	2,843

2.875% Convertible Senior Notes Due 2024

In July 2017, we issued $143.75 million aggregate principal amount of 2.875% Convertible Senior Notes Due 2024 (the “2024 Convertible Notes”). The 2024 Convertible Notes were issued pursuant to an indenture dated July 5, 2017 (the "2017 Indenture") by and between the Company and Wells Fargo Bank, National Association, as the original trustee. Effective October 1, 2019, Truist (formerly BB&T) assumed the duties and responsibilities as trustee under the 2017 Indenture. The 2024 Convertible Notes were issued in a private offering under Rule 144A under the Securities Act of 1933. The 2024 Convertible Notes pay interest semi-annually in arrears at a rate of 2.875% per annum on January 1 and July 1 of each year, commencing January 1, 2018, and mature on July 1, 2024 (the "2024 Maturity Date"), unless converted, redeemed or repurchased in accordance with the terms prior to such date. At maturity, the holders of the 2024 Convertible Notes will be entitled to receive cash equal to the principal of the 2024 Convertible Notes plus accrued interest.

The carrying amount of the 2024 Convertible Notes as a separate equity-classified instrument (the “2024 Convertible Notes Embedded Derivative”) included in “Additional paid-in capital” in our condensed consolidated balance sheets as of June 30, 2021 was $39.8 million, ($25.3 million, net of tax). The effective interest rate for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 was approximately 9%3.35%. As of ~~June 30,~~December 31, 2021, the remaining unamortized debt ~~discount and~~ issuance costs will be amortized using the effective interest method through the 2024 Maturity Date assuming no early conversion.

The 2024 Convertible Notes are convertible ~~into cash or shares of Class A Common Stock, or any combination thereof, at our option subject to satisfaction of certain conditions and during the periods described in the 2017 Indenture,~~ based on an initial conversion rate of 100 shares of Class A Common Stock per $1,000 principal amount ~~of 2024 Convertible Notes~~ (equivalent to an initial conversion price of $10.00 per ~~share~~share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2024 Convertible Notes contain certain make-whole fundamental change premiums and customary anti-dilution adjustments. Upon conversion, we may settle in cash, shares of Class A Common ~~Stock). We account for~~Stock or any combination thereof, at our election.

Prior to January 1, 2024, the 2024 Convertible Notes will be convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2017 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock ~~issuable upon conversion under~~for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the ~~treasury stock method. To~~last trading day of the ~~extent the average share price is over $10.00 per share for any~~immediately preceding fiscal quarter ~~we are required~~is greater than or equal to ~~recognize incremental dilution~~130% of ~~our earnings per share.~~

~~If, among other triggers described~~the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the 2017 Indenture, per $1,000 principal amount of notes for each trading day of the ~~market~~measurement period was less than 98% of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; (3) if we call any or all of the 2024 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events, as defined in the 2017 Indenture. On or after January 1, 2024 until the close of business on the business day immediately preceding the 2024 Maturity Date, holders of 2024 Convertible Notes may, at their option, convert their 2024 Convertible Notes at any time, regardless of the foregoing circumstances.

At our option, we may redeem for cash all or any portion of the 2024 Convertible Notes on or after July 6, 2021, if the last reported sale price of the Class A Common Stock ~~meets~~has been at least 130% of the ~~threshold based on~~conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100% of the ~~final 30 trading days~~principal amount of ~~the quarter for~~ the 2024 Convertible Notes to ~~become convertible at~~be redeemed, plus accrued and unpaid interest to, but excluding, the option of the holders during the subsequent quarter, we may be required to classify the 2024 Convertible Notes as current on our condensed consolidated balance sheets for each quarter in which such triggers are met. redemption date.

The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of ~~June 30,~~December 31, 2021. As of ~~June 30,~~December 31, 2021, the if-converted value of the 2024 Convertible Notes did not exceed the principal amount.

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2.375% 2025 Convertible Senior Notes Due 2025

In May 2018, we issued $172.5 million aggregate principal amount of 2.375% Convertible Senior Notes Due 2025 (the “2025 Convertible Notes”). The 2025 Convertible Notes were issued pursuant to an indenture dated May 14, 2018 (the "2018 Indenture") by and between the Company and Wells Fargo Bank, National Association, as the original trustee. Effective October 1, 2019, Truist (formerly BB&T) assumed the duties and responsibilities as trustee under the 2018 Indenture. The 2025 Convertible Notes were issued in a private offering under Rule 144A under the Securities Act of 1933. The 2025 Convertible Notes pay interest semi-annually in arrears at a rate of 2.375% per annum on May 1 and November 1 of each year, commencing November 1, 2018, and mature on May 1, 2025 (the "2025 Maturity Date"), unless converted, redeemed or repurchased in accordance with the terms prior to such date. The carrying amount of the 2025 Convertible Notes as a separate equity-classified instrument (the “2025 Convertible Notes Embedded Derivative”) included in “Additional paid-in capital” in our condensed consolidated balance sheets as of June 30, 2021 was $49.6 million, ($39.1 million, net of tax).

The effective interest rate for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 was approximately ~~9%.~~2.88% for the 2025 Convertible Notes. As of ~~June 30,~~December 31, 2021, the remaining unamortized debt ~~discount and~~ issuance costs will be amortized using the effective interest method through the 2025 Maturity Date assuming no early conversion.

~~Table of Contents~~

The 2025 Convertible Notes are convertible ~~into cash or shares of Class A Common Stock, or any combination thereof, at our option subject to satisfaction of certain conditions and during the periods described in the 2018 Indenture,~~ based on an initial conversion rate of 62.8931 shares of Class A Common Stock per $1,000 principal amount ~~of 2025 Convertible Notes~~ (equivalent to an initial conversion price of $15.90 per ~~share~~share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2025 Convertible Notes contain certain make-whole fundamental change premiums and customary anti-dilution adjustments. Upon conversion, we may settle in cash, shares of Class A Common ~~Stock). We account for~~Stock or any combination thereof, at our election.

Prior to November 1, 2024, the 2025 Convertible Notes are convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ended on June 30, 2018 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock ~~issuable upon conversion under~~for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the ~~treasury stock method. To~~last trading day of the ~~extent the average share price is over $15.90 per share for any~~immediately preceding fiscal quarter is greater than or ~~year-to-date~~equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period ~~we are required to recognize incremental dilution of our earnings per share.~~

~~If, among other triggers described~~after any 5 consecutive trading day period (the “measurement period”) in which the trading price, as defined in the 2018 Indenture, per $1,000 principal amount of notes for each trading day of the ~~market~~measurement period was less than 98% of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; (3) if we call any or all of the 2025 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events, as defined in the 2018 Indenture. On or after November 1, 2024 until the close of business on the business day immediately preceding the 2025 Maturity Date, holders of 2025 Convertible Notes may, at their option, convert their 2025 Convertible Notes at any time, regardless of the foregoing circumstances.

We may not redeem the 2025 Convertible Notes prior to May 1, 2022. At our option, we may redeem for cash all or any portion of the 2025 Convertible Notes on or after May 1, 2022, if the last reported sale price of the Class A Common Stock ~~meets~~has been at least 130% of the ~~threshold based on~~conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100% of the ~~final 30 trading days~~principal amount of ~~the quarter for~~ the 2025 Convertible Notes to ~~become convertible at~~be redeemed, plus accrued and unpaid interest to, but excluding, the option of the holders during the subsequent quarter, we may be required to classify the 2025 Convertible Notes as current on our condensed consolidated balance sheets for each quarter in which such triggers are met. redemption date.

The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of ~~June 30,~~December 31, 2021. As of ~~June 30,~~December 31, 2021, the if-converted value of the 2025 Convertible Notes did not exceed the principal amount.

~~CASHMA~~X ~~Secured Borrowing Facility~~

In November 2018, we entered into a receivable's securitization facility with a third-party lender to provide funding for installment loan originations in our Canadian CASHMAX business. We terminated this facility in September 2020 as part of the closure of the operations of our CASHMAX business. See our 2020 Annual Report for additional information regarding the closure of our Canadian operations.

NOTE ~~11:~~9: SHARE-BASED COMPENSATION

Common Stock Repurchase Program

In December 2019, the Company's Board of Directors (the "Board") authorized the repurchase of up to $60.0 million of our Class A Common Stock over three years. Repurchases under the program were suspended in March 2020 in order to preserve liquidity as a result of uncertainties related to the COVID-19 pandemic. NaN share repurchases under the program have been made during fiscal 2021. During fiscal 2020, we repurchased and retired 943,149 shares of our Class A Common Stock for $5.2 million, which was allocated between "Additional paid-in capital" and "Retained earnings" in our condensed consolidated balance sheets. Repurchases under the program were suspended in March 2020 in order to preserve liquidity as a result of uncertainties related to the COVID-19 pandemic and no further share repurchases have been made since March of 2020.

Stock Compensation

We maintain a Board-approved incentive plan to retain the services of our valued officers, directors and employees and to incentivize such persons to make contributions to our company and motivate excellent performance (the "Incentive Plan"). Under the Incentive Plan, we grant awards of restricted stock or restricted stock units to employees and non-employee directors. Awards granted to employees are typically subject to performance and service conditions. Awards granted to non-employee directors are time-based awards subject only to service conditions. Awards granted under the Incentive Plan are measured at the grant date fair value with compensation costs associated with the awards recognized over the requisite service period, usually the vesting period, on a straight-line basis.

In December 2020, we granted 143,145 restricted stock awards to our non-employee directors at a grant date fair value of $5.03. These awards vested in February 2021 (79,525 awards) and March 2021 (63,620 awards). In February 2021, we granted 127,744 restricted stock awards to our non-employee directors at a grant date fair value of $5.01, which awards will vest at the next annual meeting of stockholders, but no later than March 31, 2022.

In January 2021, we granted 289,592 restricted stock awards to employees at a grant date fair value of $4.68 and 275,107 restricted stock awards to employees at a grant date fair value of $4.71. These awards vest on September 30, 2021 and September 30, 2022, respectively.

~~In February 2021, we granted 392,419 restricted stock awards to employees at a grant date fair value of $4.96, which vest on September 30, 2023.~~

~~During the first quarter of fiscal 2020, we granted 222,912 shares of restricted stock awards to non-employee directors based on a share price of $6.46. These awards vested on September 30, 2020.~~

~~NOTE 12: INCOME TAXES~~

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. We recognized the effect on the consolidated financial statements in the period ended March 31, 2020. For the period ended June 30, 2021, the CARES Act has not had a material impact on our consolidated financial statements. At this time, we do not expect the impact of the CARES Act to have a material impact on our consolidated financial statements for the year ending September 30, 2021.

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The following table presents a summary of stock compensation activity:


	Shares	Weighted Average Grant Date Fair Value

Outstanding as of September 30, 2021	2,218,777	$	4.86
Granted	1,208,046	7.65
Released (a)	(358,883)	4.68
Cancelled	—	—
Outstanding as of December 31, 2021	3,067,940	$	5.86

(a) 101,103 shares were withheld to satisfy related income tax withholding.

NOTE ~~13: COMMITMENTS AND~~10: CONTINGENCIES

Currently, and from time to time, we are involved in various claims, disputes, lawsuits, investigations, and legal and regulatory proceedings. We accrue for contingencies if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because these matters are inherently unpredictable and unfavorable developments or resolutions can occur, assessing contingencies requires judgments and is highly subjective about future events. The amount of resulting loss may differ from these estimates.

While we are unable to determine the ultimate outcome of any current litigation or regulatory actions, we do not believe the resolution of any particular matter will have a material adverse effect on our financial condition, results of operations or liquidity.

NOTE ~~14:~~11: SEGMENT INFORMATION

Our operations are primarily managed on a geographical basis and are comprised of 3 reportable segments. The factors for determining our reportable segments include the manner in which our chief operating decision maker (CODM) evaluates performance for purposes of allocating resources and assessing performance. During the first quarter of fiscal 2021, the financial information of our Lana business activities were no longer reviewed by the CODM for evaluating performance since Lana no longer has business activities. Rather, Lana offers support activities to U.S. Pawn. As a result, Lana is no longer an operating or reportable segment. Our historical segment results have been recast to conform to current presentation.

We currently report our segments as follows:

•U.S. Pawn — all pawn activities in the United States;

•Latin America Pawn — all pawn activities in Mexico and other parts of Latin America; and

•Other ~~International~~Investments — primarily our equity interest in the net income of Cash Converters International and Rich Data ~~Corporation.~~Corporation along with our investment in Founders.

There are no inter-segment revenues presented below, and the amounts below were determined in accordance with the same accounting principles used in our condensed consolidated financial statements.

The following tables present revenue for each reportable segment, disaggregated revenue within our 3 reportable segments and Corporate, segment profits and segment contribution.

Three Months Ended June 30, 2021
(in thousands) U.S. Pawn Latin America Pawn Other International Total Segments Corporate Items Consolidated
Revenues:
Merchandise sales $ 84,465 $ 23,343 $ 0 $ 107,808 $ 0 $ 107,808
Jewelry scrapping sales 1,908 3,765 0 5,673 0 5,673
Pawn service charges 44,039 16,392 0 60,431 0 60,431
Other revenues 32 0 89 121 0 121
Total revenues 130,444 43,500 89 174,033 0 174,033
Merchandise cost of goods sold 45,310 15,229 0 60,539 0 60,539
Jewelry scrapping cost of goods sold 1,878 3,595 0 5,473 0 5,473
Other cost of revenues 0 0 0 0 0 0
Net revenues 83,256 24,676 89 108,021 0 108,021
Segment and corporate expenses (income):
Store expenses 62,507 19,296 0 81,803 0 81,803
General and administrative 0 0 0 0 14,589 14,589
Depreciation and amortization 2,600 1,806 0 4,406 3,013 7,419
Other charges 0 497 0 497 0 497
Interest expense 0 0 0 0 5,569 5,569
Interest income 0 (484) 0 (484) (28) (512)
Equity in net income of unconsolidated affiliates 0 0 (643) (643) 0 (643)
Other (income) expense 0 (5) 18 13 52 65
Segment contribution $ 18,149 $ 3,566 $ 714 $ 22,429
Income (loss) before income taxes $ 22,429 $ (23,195) $ (766)

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	Three Months Ended December 31, 2021
(in thousands)	U.S. Pawn		Latin America Pawn		Other Investments		Total Segments		Corporate Items		Consolidated

Revenues:
Merchandise sales	$	102,078	$	35,642	$	—	$	137,720	$	—	$	137,720
Jewelry scrapping sales	4,980		1,964		—		6,944		—		6,944
Pawn service charges	56,557		19,468		—		76,025		—		76,025
Other revenues	22		240		43		305		—		305
Total revenues	163,637		57,314		43		220,994		—		220,994
Merchandise cost of goods sold	57,832		25,279		—		83,111		—		83,111
Jewelry scrapping cost of goods sold	3,975		1,797		—		5,772		—		5,772

Net revenues	101,830		30,238		43		132,111		—		132,111
Segment and corporate expenses (income):
Store expenses	64,689		22,082		—		86,771		—		86,771
General and administrative	—		—		—		—		15,545		15,545

Depreciation and amortization	2,670		1,980		—		4,650		2,924		7,574
Loss on sale or disposal of assets and other	—		5		—		5		—		5

Interest expense	—		—		—		—		2,431		2,431
Interest income	—		(182)		—		(182)		(122)		(304)
Equity in net income of unconsolidated affiliates	—		—		(1,138)		(1,138)		—		(1,138)

Other (income) expense	—		(134)		(12)		(146)		26		(120)
Segment contribution	$	34,471	$	6,487	$	1,193	$	42,151
Income (loss) before income taxes							$	42,151	$	(20,804)	$	21,347


		Three Months Ended June 30, 2020													Three Months Ended December 31, 2020
(in thousands)	(in thousands)	U.S. Pawn		Latin America Pawn		Other International		Total Segments		Corporate Items		Consolidated		(in thousands)	U.S. Pawn		Latin America Pawn		Other Investments		Total Segments		Corporate Items		Consolidated

Revenues:	Revenues:													Revenues:
Merchandise sales	Merchandise sales	$	116,258	$	20,279	$	0	$	136,537	0		$	136,537	Merchandise sales	$	82,253	$	25,530	$	—	$	107,783	$	—	$	107,783
Jewelry scrapping sales	Jewelry scrapping sales	17,129		3,174		0		20,303		0		20,303		Jewelry scrapping sales	4,004		2,755		—		6,759		—		6,759
Pawn service charges	Pawn service charges	41,069		11,391		0		52,460		0		52,460		Pawn service charges	50,220		13,269		—		63,489		—		63,489
Other revenues	Other revenues	40		0		884		924		0		924		Other revenues	22		7		75		104		—		104
Total revenues	Total revenues	174,496		34,844		884		210,224		0		210,224		Total revenues	136,499		41,561		75		178,135		—		178,135
Merchandise cost of goods sold	Merchandise cost of goods sold	75,838		16,021		0		91,859		0		91,859		Merchandise cost of goods sold	48,059		16,484		—		64,543		—		64,543
Jewelry scrapping cost of goods sold	Jewelry scrapping cost of goods sold	12,875		3,283		0		16,158		0		16,158		Jewelry scrapping cost of goods sold	2,844		2,358		—		5,202		—		5,202
Other cost of revenues		0		32		0		32		0		32

Net revenues	Net revenues	85,783		15,508		884		102,175		0		102,175		Net revenues	85,596		22,719		75		108,390		—		108,390
Segment and corporate expenses (income):	Segment and corporate expenses (income):													Segment and corporate expenses (income):
Store expenses	Store expenses	66,243		15,041		1,057		82,341		0		82,341		Store expenses	62,092		17,217		—		79,309		—		79,309
General and administrative	General and administrative	0		0		0		0		16,176		16,176		General and administrative	—		—		—		—		12,510		12,510

Depreciation and amortization	Depreciation and amortization	2,749		1,647		3		4,399		3,280		7,679		Depreciation and amortization	2,736		1,860		—		4,596		2,976		7,572
(Gain) loss on sale or disposal of assets and other		234		23		(20)		237		18		255
Loss (gain) on sale or disposal of assets and other														Loss (gain) on sale or disposal of assets and other	27		(101)		—		(74)		52		(22)

Interest expense	Interest expense	0		0		140		140		5,239		5,379		Interest expense	—		—		—		—		5,455		5,455
Interest income	Interest income	0		(404)		0		(404)		(224)		(628)		Interest income	—		(764)		—		(764)		(57)		(821)
Equity in net income of unconsolidated affiliates	Equity in net income of unconsolidated affiliates	0		0		1,183		1,183		0		1,183		Equity in net income of unconsolidated affiliates	—		—		(516)		(516)		—		(516)

Other (income) expense	Other (income) expense	0		(61)		(5)		(66)		94		28		Other (income) expense	—		(455)		(210)		(665)		66		(599)
Segment contribution (loss)		$	16,557	$	(738)	$	(1,474)	$	14,345
Loss before income taxes								$	14,345	$	(24,583)	$	(10,238)
Segment contribution														Segment contribution	$	20,741	$	4,962	$	801	$	26,504
Income (loss) before income taxes														Income (loss) before income taxes							$	26,504	$	(21,002)	$	5,502

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Nine Months Ended June 30, 2021
(in thousands) U.S. Pawn Latin America Pawn Other International Total Segments Corporate Items Consolidated
Revenues:
Merchandise sales $ 260,545 $ 70,271 $ 0 $ 330,816 $ 0 $ 330,816
Jewelry scrapping sales 9,493 9,014 0 18,507 0 18,507
Pawn service charges 143,836 43,520 0 187,356 0 187,356
Other revenues 83 7 338 428 0 428
Total revenues 413,957 122,812 338 537,107 0 537,107
Merchandise cost of goods sold 145,181 45,691 0 190,872 0 190,872
Jewelry scrapping cost of goods sold 7,871 8,205 0 16,076 0 16,076
Net revenues 260,905 68,916 338 330,159 0 330,159
Segment and corporate expenses (income):
Store expenses 188,256 54,005 0 242,261 0 242,261
General and administrative 0 0 0 0 40,870 40,870
Depreciation and amortization 7,972 5,459 0 13,431 9,649 23,080
Loss on sale or disposal of assets and other 27 0 0 27 63 90
Other charges 0 497 0 497 0 497
Interest expense 0 0 0 0 16,542 16,542
Interest income 0 (1,819) 0 (1,819) (99) (1,918)
Equity in net income of unconsolidated affiliates 0 0 (2,409) (2,409) 0 (2,409)
Other (income) expense 0 (375) (183) (558) 169 (389)
Segment contribution $ 64,650 $ 11,149 $ 2,930 $ 78,729
Income (loss) before income taxes $ 78,729 $ (67,194) $ 11,535

Nine Months Ended June 30, 2020
(in thousands) U.S. Pawn Latin America Pawn Other International Total Segments Corporate Items Consolidated
Revenues:
Merchandise sales $ 314,059 $ 79,036 $ 0 $ 393,095 $ 0 $ 393,095
Jewelry scrapping sales 32,905 8,804 0 41,709 0 41,709
Pawn service charges 166,859 50,548 0 217,407 0 217,407
Other revenues 107 50 3,570 3,727 0 3,727
Total revenues 513,930 138,438 3,570 655,938 0 655,938
Merchandise cost of goods sold 202,488 59,223 0 261,711 0 261,711
Jewelry scrapping cost of goods sold 25,430 8,099 0 33,529 0 33,529
Other cost of revenues 0 69 1,024 1,093 0 1,093
Net revenues 286,012 71,047 2,546 359,605 0 359,605
Segment and corporate expenses (income):
Store expenses 201,921 53,493 3,850 259,264 0 259,264
General and administrative 0 0 0 0 50,355 50,355
Impairment of goodwill, intangible and other assets 10,000 35,936 1,124 47,060 0 47,060
Depreciation and amortization 8,325 5,476 60 13,861 9,313 23,174
(Gain) loss on sale or disposal of assets and other 234 (72) (20) 142 1,118 1,260
Interest expense 0 430 464 894 15,695 16,589
Interest income 0 (1,161) 0 (1,161) (1,251) (2,412)
Equity in net loss of unconsolidated affiliates 0 0 5,896 5,896 0 5,896
Other (income) expense 0 (303) 14 (289) 74 (215)
Segment contribution (loss) $ 65,532 $ (22,752) $ (8,842) $ 33,938
Income (loss) before income taxes $ 33,938 $ (75,304) $ (41,366)

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NOTE ~~15:~~12: SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

The following table provides supplemental information on net amounts included in our condensed consolidated balance sheets:


(in thousands)	(in thousands)	June 30, 2021		June 30, 2020		September 30, 2020		(in thousands)	December 31, 2021		December 31, 2020		September 30, 2021

Gross pawn service charges receivable	Gross pawn service charges receivable	$	31,648	$	23,674	$	27,259	Gross pawn service charges receivable	$	38,040	$	31,721	$	37,360
Allowance for uncollectible pawn service charges receivable	Allowance for uncollectible pawn service charges receivable	(6,683)		(6,242)		(6,679)		Allowance for uncollectible pawn service charges receivable	(8,275)		(6,896)		(8,023)
Pawn service charges receivable, net	Pawn service charges receivable, net	$	24,965	$	17,432	$	20,580	Pawn service charges receivable, net	$	29,765	$	24,825	$	29,337

Gross inventory	Gross inventory	$	98,761	$	133,319	$	108,205	Gross inventory	$	124,286	$	106,053	$	115,300
Inventory reserves	Inventory reserves	(6,519)		(10,207)		(12,314)		Inventory reserves	(4,973)		(11,073)		(4,311)
Inventory, net	Inventory, net	$	92,242	$	123,112	$	95,891	Inventory, net	$	119,313	$	94,980	$	110,989

Prepaid expenses and other	Prepaid expenses and other	$	7,278	$	8,980	$	10,614	Prepaid expenses and other	$	10,614	$	8,079	$	5,386
Accounts receivable and other	Accounts receivable and other	7,111		6,813		6,991		Accounts receivable and other	6,258		9,546		9,322
Income taxes receivable	Income taxes receivable	13,954		9,961		15,298		Income taxes receivable	14,337		15,199		16,302
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	28,343	$	25,754	$	32,903	Prepaid expenses and other current assets	$	31,209	$	32,824	$	31,010

Property and equipment, gross	Property and equipment, gross	$	283,304	$	265,149	$	267,509	Property and equipment, gross	$	288,285	$	274,071	$	284,867
Accumulated depreciation	Accumulated depreciation	(227,674)		(207,051)		(210,523)		Accumulated depreciation	(236,084)		(218,867)		(231,056)
Property and equipment, net	Property and equipment, net	$	55,630	$	58,098	$	56,986	Property and equipment, net	$	52,201	$	55,204	$	53,811

Accounts payable	Accounts payable	$	19,325	$	15,304	$	19,114	Accounts payable	$	18,925	$	17,169	$	22,462
Accrued expenses and other		65,641		43,054		52,390
Accrued payroll								Accrued payroll	11,486		12,061		9,093
Incentive accrual								Incentive accrual	5,158		3,866		16,868
Other payroll related expenses								Other payroll related expenses	7,964		10,798		10,695
Accrued sales and VAT taxes								Accrued sales and VAT taxes	9,704		10,295		10,936
Accrued Income Taxes Payable								Accrued Income Taxes Payable	6,024		611		3,826
Other current liabilities								Other current liabilities	16,270		12,977		16,388
Accounts payable, accrued expenses and other current liabilities	Accounts payable, accrued expenses and other current liabilities	$	84,966	$	58,358	$	71,504	Accounts payable, accrued expenses and other current liabilities	$	75,531	$	67,777	$	90,268

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to inform the reader about matters affecting the financial condition and results of operations of EZCORP, Inc. and its subsidiaries (collectively, “we,” “us”, “our”, "EZCORP" or the “Company”). The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere within this report. This discussion contains forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. See "Part I, Item 1A — Risk Factors" of our Annual Report on Form 10-K for the year ended September 30, ~~2020~~,2021, as supplemented by the information set forth in “Part I, Item 3 — Quantitative and Qualitative Disclosures about Market Risk” and "Part II, Item 1A — Risk Factors" of this Report, for a discussion of certain risks, uncertainties and assumptions associated with these statements.

Business Overview

EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a leading provider of pawn ~~loans~~services in the United States and Latin America. Pawn loans are nonrecourse loans collateralized by personal property. We also sell merchandise, primarily collateral forfeited from unpaid loans or goods purchased directly from customers.

We exist to serve our customers’ short-term cash needs, helping them to live and enjoy their lives. We are focused on three strategic pillars:




			Strengthen the Core			~~Renewed~~Relentless focus on ~~the unique~~superior execution and ~~essential elements of~~operational excellence in our core pawn business
			Cost ~~Reduction~~Efficiency and Simplification			~~Significant and sustained adjustment~~Shape a culture of cost ~~base~~efficiency through ongoing focus on simplification and optimization
			Innovate and Grow			Broaden customer engagement to service more customers more frequently in more locations

Pawn Activities

At our pawn stores, we ~~offer pawn loans, which are typically small, nonrecourse loans~~advance cash against the value of collateralized by tangible personal property. We earn pawn service charges ~~on our pawn loans, which~~(“PSC”) for those cash advances, and the PSC rate varies by state and ~~loan~~transaction size. ~~Collateral for our pawn loans~~At the time of the transaction, we take possession of the pawned collateral, which consists of tangible personal property, generally jewelry, consumer electronics, tools, sporting goods and musical instruments. ~~Security~~If the customer chooses to redeem their pawn, they will repay the amount advanced plus any accrued PSC. If the customer chooses not to redeem their pawn, the pawned collateral becomes our inventory, which we sell in our retail merchandise sales activities or, in some cases, scrap for its inherent gold or precious stone content. Consequently, the success of our pawn ~~loans~~business is ~~provided via~~largely dependent on our ability to accurately assess the probability of pawn redemption and the estimated resale or scrap value of the collateralized personal ~~property and the perceived probability of the loans' redemption.~~property.

Our ability to offer quality ~~pre-owned~~second-hand goods at prices significantly lower than original retail prices attracts value-conscious customers. The gross profit on sales of inventory depends primarily on our assessment of the ~~loan~~estimated resale or ~~purchase~~scrap value at the time the property is either accepted as ~~loan~~pawn collateral or purchased and our ability to sell that merchandise in a timely manner. As a significant portion of our inventory and sales involve gold and jewelry, our results can be influenced by the market price of gold and diamonds.

Growth and Expansion

Our strategy is to expand the number of locations we operate through opening new (“de novo”) locations and through acquisitions and investments in both Latin America, ~~and~~ the United States and potential new markets. Our ability to ~~add~~open de novo stores, acquire new stores and make other related investments is dependent on several variables, such as projected achievement of internal investment hurdles, the availability of acceptable sites or acquisition candidates, the alignment of acquirer/seller price expectations, the regulatory environment, local zoning ordinances, access to capital and the availability of qualified personnel. ~~We see opportunity for further expansion through acquisitions and de novo openings in Latin America and acquisitions in the United States.~~

Seasonality and Quarterly Results

In the United States, ~~pawn service charges are~~PSC is historically highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending ~~season and~~season. PSC is historically lowest in our third fiscal quarter (April through June) following the tax refund season and merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales

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surrounding Valentine’s Day and the availability of tax refunds. In Latin America, most of our customers receive additional compensation from their employers in December, and many receive additional compensation in June or July, applying downward pressure on loan balances and fueling some merchandise sales in those periods. As a net effect of these and other factors and excluding discrete charges, our consolidated profit before tax is generally highest in our first fiscal quarter (October through December) and lowest in our third

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fiscal quarter (April through June). These historical trends have been impacted by ~~COVID-19. However,~~COVID-19, but we expect these historical trends to return in the future.

Financial Highlights

We remain focused on optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher ~~pawn service charges (“PSC”).~~PSC. The following chart presents sources of net revenues, including PSC, merchandise sales gross profit ("Merchandise sales GP") and jewelry scrapping gross profit ("Jewelry Scrapping GP") for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 and 2020:

The following chart presents sources of net revenues by geographic disbursement for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 and 2020:

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Business Developments

COVID-19

The COVID-19 pandemic continues to affect the U.S. and global economies, ~~and~~ as disclosed in our ~~2020~~2021 Annual Report on Form ~~10-K, the pandemic also affected our business in a variety of ways beginning in the second quarter of fiscal 2020 and continuing into fiscal 2021.~~10-K. The full extent and duration of the COVID-19 impact on the global economy generally, and on our business specifically, is currently unknown. ~~We expect the~~The impact of the pandemic, and the recovery therefrom, ~~will continue~~continued to adversely ~~affect~~effect net revenues and earnings into fiscal 2021. During the latter part of fiscal 2021, we saw pawn transaction activity continue to rebuild, driving PLO balances closer to pre-pandemic levels, which will drive accelerating PSC revenue in the coming quarters given the natural lag between pawn originations and related fees. We continue to assess what type of impact the recent surge of the COVID-19 Omicron variant will have to our business net revenues and operating expenses in fiscal ~~2021.~~year 2022. A prolonged pandemic and recovery may have an adverse effect on our results of operations, financial position and liquidity in future periods.

~~Reinvestment of Dividends~~Investments in Unconsolidated Entities

On ~~February 21,~~October 1, 2021, we purchased an additional 13 million shares of Cash Converters International announced that its board of directors declared an interim dividend of AUD $0.01 per share, which was payable on April 14, 2021 to ordinary shareholders of record as of the close of business on March 25, 2021. We elected to receivefor $2.5 million. This purchase increased our ~~dividend entitlement~~total ownership in ~~the form of additional ordinary shares pursuant to~~ Cash Converters ~~International's pre-existing Dividend Reinvestment Plan. Under that plan,~~to 236,702,991 shares, representing a 37.72% ownership interest. Additionally, on ~~April~~October 14, 2021, we received ~~an additional 9,519,277 shares, bringing our total ownership to 223,702,991 shares, representing 35.65%~~a cash dividend of $1.7 million from Cash ~~Converters International's total outstanding ordinary shares.~~

~~Acquisitions~~Converters.

On ~~June 9,~~October 6, 2021, ~~we completed~~ the ~~acquisition of 100% of the common shares of PLO del Bajio S. de R.L. de C.V.~~Company purchased $15.0 million in exchange for a non-redeemable voting participating preferred equity interest in Founders One, LLC (“~~Bajio”~~Founders”), a newly-formed entity with one other member. Founders used that $15.0 million to acquire an equity interest in Simple Management Group, Inc. (“SMG”) which owns and ~~gained control of the entity, further expanding our geographic footprint within Mexico with the addition of 128~~operates more than 20 pawn ~~stores. These~~ stores ~~operating under the name "Cash Apoyo Efectivo," are located~~ principally in the ~~Mexico City metropolitan area~~Caribbean region, with plans to build and acquire more stores in that region.

Executive Management Changes

On January 12, 2022, Jason A. Kulas informed the Company's Board of Directors (the "Board") that he was resigning from his position as Chief Executive Officer to accept a position at another company. The same day, the Board appointed Lachlan P. Given and John Blair Powell, Jr. as co-Interim Chief Executive Officers, effective immediately. Both Mr. Given and Mr. Powell are executive officers of the Company and have ~~strong brand recognition~~extensive experience with the Company and its business. A description of their respective backgrounds and experiences can be found in ~~that market. This is our largest acquisition to date in terms of store-count. The total consideration paid for Bajio was $23.6 million, consisting of~~ ~~cash of $17.4 million,~~ ~~of which $11.6 million was paid in cash at closing~~"Part III, Item 10 — Directors, Executive Officers and the remaining $5.8 million is accrued and held as restricted cash to be paid out per the acquisition agreement, and 212,870 shares of our Class A Non-Voting Common Stock valued at $1.6 million. In addition, th~~e sellers may be entitled to additional payments of up to $4.6 million over the next two years, contingent on the performance~~Corporate Governance — Executive Officers" of the ~~acquired stores with growing its loan portfolio. We also repaid $14.9 million of Bajio’s existing debt assumed in the acquisition.~~

In May 2021, we acquired 11 pawn stores in the Houston, Texas area, providing an immediate market-leading position in the South Houston area and enhancing our already strong position in the strategically important Houston metro market.

~~Strategic Initiatives~~

~~During the fourth quarter of fiscal 2020, we began to implement strategic initiatives to refocus~~Company's Annual Report on our core pawn business and optimize our cost structure in order to improve our bottom line performance and position us for sustainable growth. During the third quarter of fiscal 2021, due to uneconomic rate caps and limited synergies across our platform, we finalized our decisionForm 10-K for the ~~closure of our 11 stores in Peru and incurred costs of $0.5 million related to the closure.~~fiscal year ended September 30, 2021.

Results of Operations

Non-GAAP Constant Currency Financial Information

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide certain other non-GAAP financial information on a constant currency basis ("constant currency"). and "same store" basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzales and other Latin American currencies. We analyze results on a same store basis (which is defined as stores open during the entirety of the comparable periods) to better understand existing store performance without the influence of increases or decreases resulting solely from changes in store count. We believe presentation of constant currency and same store results is meaningful and useful in understanding the activities and business metrics of our Latin America Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a better understanding and evaluation of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use this non-GAAP financial information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to, but not rather than or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and are not directly calculable from the rates below.

~~Table of Contents~~

Constant currency results, where presented, also exclude the foreign currency gain or loss. The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021 and ~~June 30,~~December 31, 2020 were as follows:

June 30,
Three Months Ended
June 30,
Nine Months Ended
June 30,
2021 2020 2021 2020 2021 2020
Mexican peso 19.9 23.1 20.0 23.3 20.3 20.8
Guatemalan quetzal 7.6 7.5 7.6 7.5 7.6 7.5
Honduran lempira 23.6 24.4 23.7 24.4 23.8 24.3
Peruvian sol 3.9 3.5 3.8 3.4 3.7 3.4

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	December 31,		Three Months Ended December 31,
	2021	2020	2021	2020

Mexican peso	20.5	19.9	20.7	20.5
Guatemalan quetzal	7.5	7.6	7.6	7.6
Honduran lempira	24.1	23.8	23.9	24.1
Peruvian sol	4.0	3.6	4.0	3.6

Operating Results

Segments

We manage our business and report our financial results in three reportable operating segments;

•U.S. Pawn — Represents all pawn activities in the United States;

•Latin America Pawn — Represents all pawn activities in Mexico and other parts of Latin America; and

•Other ~~International~~Investments — Represents our equity interest in the net income of Cash Converters International and Rich Data Corporation, ~~and~~along with our ~~financial services stores~~investment in ~~Canada, operating under the CASHMAX brand. In the fourth quarter of fiscal 2020, we closed our stores in Canada, and closing activities related to CASHMAX in fiscal year 2021 are not material.~~Founders.

See Note ~~14 (Segment Information)~~11 - Segment Information for information regarding changes in reportable segments. ~~Our historical segment results have been recast to conform to current presentation.~~

Store Data by Segment

Three Months Ended June 30, 2021
U.S. Pawn Latin America Pawn Consolidated
As of March 31, 2021 505 506 1,011
New locations opened — 4 4
Locations acquired 11 128 139
Locations sold, combined or closed — (11) (11)
As of June 30, 2021 516 627 1,143


	Three Months Ended December 31, 2021
	U.S. Pawn	Latin America Pawn	Consolidated

As of September 30, 2021	516	632	1,148
New locations opened	—	1	1


As of December 31, 2021	516	633	1,149

Three Months Ended June 30, 2020
U.S. Pawn Latin America Pawn Other International Consolidated
As of March 31, 2020 512 493 22 1,027
New locations opened — 3 — 3
Locations sold, combined or closed (1) — — (1)
As of June 30, 2020 511 496 22 1,029

Nine Months Ended June 30, 2021
U.S. Pawn Latin America Pawn Consolidated
As of September 30, 2020 505 500 1,005
New locations opened — 10 10
Locations acquired 11 128 139
Locations sold, combined or closed — (11) (11)
As of June 30, 2021 516 627 1,143


	Three Months Ended December 31, 2020
	U.S. Pawn	Latin America Pawn	Consolidated

As of September 30, 2020	505	500	1,005
New locations opened	—	2	2


As of December 31, 2020	505	502	1,007

~~Table of Contents~~

Nine Months Ended June 30, 2020
U.S. Pawn Latin America Pawn Other International Consolidated
As of September 30, 2019 512 480 22 1,014
New locations opened — 16 — 16
Locations sold, combined or closed (1) — — (1)
As of June 30, 2020 511 496 22 1,029

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Three Months Ended ~~June 30,~~December 31, 2021 vs. Three Months Ended ~~June 30,~~December 31, 2020

These tables, as well as the discussion that follows, should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.

U.S. Pawn

The following table presents selected summary financial data for our U.S. Pawn segment:


		Three Months Ended June 30,						Change		Three Months Ended December 31,						Change
(in thousands)	(in thousands)	2021			2020				(in thousands)	2021			2020

Net revenues:	Net revenues:								Net revenues:
Pawn service charges	Pawn service charges	$	44,039		$	41,069		7%	Pawn service charges	$	56,557		$	50,220		13%

Merchandise sales	Merchandise sales	84,465			116,258			(27)%	Merchandise sales	102,078			82,253			24%
Merchandise sales gross profit	Merchandise sales gross profit	39,155			40,420			(3)%	Merchandise sales gross profit	44,246			34,194			29%
Gross margin on merchandise sales	Gross margin on merchandise sales	46		%	35		%	1,100bps	Gross margin on merchandise sales	43		%	42		%	100bps

Jewelry scrapping sales	Jewelry scrapping sales	1,908			17,129			(89)%	Jewelry scrapping sales	4,980			4,004			24%
Jewelry scrapping sales gross profit	Jewelry scrapping sales gross profit	30			4,254			(99)%	Jewelry scrapping sales gross profit	1,005			1,160			(13)%
Gross margin on jewelry scrapping sales	Gross margin on jewelry scrapping sales	2		%	25		%	(2,300)bps	Gross margin on jewelry scrapping sales	20		%	29		%	(900)bps

Other revenues	Other revenues	32			40			(20)%	Other revenues	22			22			—%
Net revenues	Net revenues	83,256			85,783			(3)%	Net revenues	101,830			85,596			19%

Segment operating expenses:	Segment operating expenses:								Segment operating expenses:
Store expenses	Store expenses	62,507			66,243			(6)%	Store expenses	64,689			62,092			4%
Depreciation and amortization	Depreciation and amortization	2,600			2,749			(5)%	Depreciation and amortization	2,670			2,736			(2)%
Loss on sale or disposal of assets and other	Loss on sale or disposal of assets and other	—			234			(100)%	Loss on sale or disposal of assets and other	—			27			(100)%

Segment contribution	Segment contribution	$	18,149		$	16,557		10%	Segment contribution	$	34,471		$	20,741		66%

Other data:	Other data:								Other data:
Net earning assets (a)	Net earning assets (a)	$	186,322		$	176,866		5%	Net earning assets (a)	$	231,408		$	199,569		16%
Inventory turnover	Inventory turnover	2.8			3.2			(13)%	Inventory turnover	2.8			2.6			8%
Average monthly ending pawn loan balance per store (b)	Average monthly ending pawn loan balance per store (b)	$	206		$	172		20%	Average monthly ending pawn loan balance per store (b)	$	270		$	233		16%
Monthly average yield on pawn loans outstanding	Monthly average yield on pawn loans outstanding	14		%	14		%	—bps	Monthly average yield on pawn loans outstanding	13		%	14		%	(100)bps
Pawn loan redemption rate	Pawn loan redemption rate	88		%	88		%	—bps	Pawn loan redemption rate	83		%	84		%	(100)bps


*			~~Represents a percentage computation that is not mathematically meaningful.~~
(a)			Balance includes pawn loans and inventory.
(b)			Balance is calculated based upon the average of the monthly ending balances during the applicable period.

Pawn service charges increased ~~by 7%~~13% as a result of higher average PLO for the quarter. ~~Same stores pawn service charges also increased by 7%.~~

Merchandise sales ~~decreased 27% on both a total and same store basis resulting from the~~ increased ~~demand in~~24% compared to the prior year ~~quarter due to the impact of federal economic stimulus.~~quarter. Merchandise sales gross profit ~~decreased 3%~~increased 29% to ~~$39.2~~$44.2 million ~~offset by~~as well as a ~~1,100~~100 bps improvement in merchandise sales gross profit margin, reflecting a continued focus on improving retailing and lower levels of aged general merchandise inventory.

Store expenses increased 4% primarily due to ~~reduced aged inventory levels. (There was a 900 bps improvement when excluding a loss~~rising labor costs resulting from ~~looting of $2.2 million from merchandise cost of goods sold in the prior year).~~

~~Store expenses decreased by 6% driven by a reduction in labor expense.~~growing transaction volume and store count.

Segment contribution increased ~~$1.6~~$13.7 million or ~~10%. When excluding~~66%, due to the ~~looting charge taken~~changes in ~~the prior year quarter, segment contribution decreased $0.6 million,~~net revenues and store expenses described above.

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Latin America Pawn

The following table presents selected summary financial data for the Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from its functional currencies noted above under “Results of Operations — Non-GAAP Financial Information."


		Three Months Ended June 30,												Three Months Ended December 31,
(in thousands)	(in thousands)	2021 (GAAP)			2020 (GAAP)			Change (GAAP)	2021 (Constant Currency)			Change (Constant Currency)	(in thousands)	2021 (GAAP)			2020 (GAAP)			Change (GAAP)	2021 (Constant Currency)			Change (Constant Currency)

Net revenues:	Net revenues:												Net revenues:
Pawn service charges	Pawn service charges	$	16,392		$	11,391		44%	$	14,829		30%	Pawn service charges	$	19,468		$	13,269		47%	$	19,559		47%

Merchandise sales	Merchandise sales	23,343			20,279			15%	20,844			3%	Merchandise sales	35,642			25,530			40%	36,022			41%
Merchandise sales gross profit	Merchandise sales gross profit	8,114			4,258			91%	7,179			69%	Merchandise sales gross profit	10,363			9,046			15%	10,471			16%
Gross margin on merchandise sales	Gross margin on merchandise sales	35		%	21		%	1,400bps	34		%	1,300bps	Gross margin on merchandise sales	29		%	35		%	(600)bps	29		%	(600)bps

Jewelry scrapping sales	Jewelry scrapping sales	3,765			3,174			19%	3,429			8%	Jewelry scrapping sales	1,964			2,755			(29)%	1,973			(28)%
Jewelry scrapping sales gross profit	Jewelry scrapping sales gross profit	170			(109)			(256)%	165			(251)%	Jewelry scrapping sales gross profit	167			397			(58)%	167			(58)%
Gross margin on jewelry scrapping sales	Gross margin on jewelry scrapping sales	5		%	(3)		%	800bps	5		%	800bps	Gross margin on jewelry scrapping sales	9		%	14		%	(500)bps	8		%	(600)bps

Other revenues, net	Other revenues, net	—			(32)			(100)%	—			(100)%	Other revenues, net	240			7			3,329%	242			3,357%
Net revenues	Net revenues	24,676			15,508			59%	22,173			43%	Net revenues	30,238			22,719			33%	30,439			34%

Segment operating expenses:	Segment operating expenses:												Segment operating expenses:
Store Expenses	Store Expenses	19,296			15,041			28%	17,276			15%	Store Expenses	22,082			17,217			28%	22,247			29%

Depreciation and amortization	Depreciation and amortization	1,806			1,647			10%	1,622			(2)%	Depreciation and amortization	1,980			1,860			6%	1,995			7%
Other Charges		497			—			*	491			*

Segment operating contribution	Segment operating contribution	3,077			(1,180)			361%	3,275			378%	Segment operating contribution	6,176			3,642			70%	6,197			70%

Other segment income ~~(a)~~	Other segment income ~~(a)~~	(489)			(442)			11%	65			(115)%	Other segment income ~~(a)~~	(311)			(1,320)			(76)%	(384)			(71)%
Segment contribution	Segment contribution	$	3,566		$	(738)		583%	$	3,210		535%	Segment contribution	$	6,487		$	4,962		31%	$	6,581		33%

Other data:	Other data:												Other data:
Net earning assets ~~(b)~~(a)	Net earning assets ~~(b)~~(a)	$	63,075		$	59,441		6%	$	56,453		(5)%	Net earning assets ~~(b)~~(a)	$	64,490		$	43,263		49%	$	65,773		52%
Inventory turnover	Inventory turnover	4.0			2.2			82%	4.0			82%	Inventory turnover	3.6			3.8			(5)%	3.7			(3)%
Average monthly ending pawn loan balance per store ~~(c)~~(b)	Average monthly ending pawn loan balance per store ~~(c)~~(b)	$	65		$	59		10%	$	59		—%	Average monthly ending pawn loan balance per store ~~(c)~~(b)	$	60		$	53		13%	$	61		15%
Monthly average yield on pawn loans outstanding	Monthly average yield on pawn loans outstanding	16		%	12		%	400bps	16		%	400bps	Monthly average yield on pawn loans outstanding	17		%	17		%	—bps	17		%	—bps
Pawn loan redemption rate ~~(d)~~(c)	Pawn loan redemption rate ~~(d)~~(c)	79		%	77		%	200bps	79		%	200bps	Pawn loan redemption rate ~~(d)~~(c)	81		%	83		%	(200)bps	81		%	(200)bps


*			~~Represents a percentage computation that is not mathematically meaningful.~~
(a)			Fiscal 2021 constant currency amount excludes a nominal net GAAP basis foreign currency transaction adjustment resulting from movement in exchange rates. The net foreign currency transaction adjustment for fiscal 2020 was nominal and are included in the above results.
~~(b)~~			Balance includes pawn loans and inventory.
~~(c)~~(b)			Balance is calculated based upon the average of the monthly ending balances during the applicable period.
~~(d)~~(c)			Rate is solely inclusive of results from Mexico Pawn.


	2021 Change (GAAP)	2021 Change (Constant Currency)
Same Store data: (a)
PLO	18%	20%
PSC	28%	29%
Merchandise Sales	15%	16%
Merchandise Sales Gross Profit	(4)%	(3)%
Store Expenses	5%	6%

In the current quarter, we~~acquired 128 stores and~~ opened ~~four~~one de novo ~~stores,~~store, bringing total segment ~~store-count~~store-count to ~~627 at the end of the quarter (net of the closure of 11 stores in Peru).~~633.

~~Pawn service charges~~PLO increased ~~44% (30%~~37% to $35.5 million (40% on constant currency basis). On a same store basis, PLO increased 18% (20% on a constant currency basis). ~~Same store pawn service charges~~

PSC increased ~~by 38% (24%~~47% in the first quarter to $19.5 million (up 47% to $19.6 million on a constant currency basis) as a result of higher average PLO for the quarter.

Merchandise sales increased 15% (3% on a constant currency basis) and 8% on a same store basis (4% decrease on a constant currency basis). Merchandise sales gross profit increased 91% to $8.1 million (69% to $7.2 million on a constant currency basis) driven by a 1,400 basis points improvement in merchandise sales gross profit margin primarily due to reduced aged inventory levels and improved inventory turnover.

~~Store expenses increased by 28% (15% on a constant currency basis) primarily~~ ~~due to an increase in transaction volume and costs resulting from the re-opening of stores impacted by the COVID-19 pandemic last year.~~

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Merchandise sales increased 40% (41% on a constant currency basis) and 15% on a same store basis (16% on a constant currency basis). Offsetting the sales increase, merchandise sales gross profit margin decreased from 35% to 29% reflecting a return to more normalized margins. Overall, merchandise sales gross profit increased 15% to $10.4 million (16% to $10.5 million on a constant currency basis).

Store expenses increased $4.9 million or 28% (29% on a constant currency basis) primarily due to growth in store count and rising labor costs resulting from growing transaction volume. On a same-store basis, store expenses increased by $0.9 million or 5% ($1.0 million or 6% on a constant currency basis).

Segment contribution increased ~~$4.3~~$1.5 million, ~~primarily~~or 31%, to $6.5 million ($1.6 million or 33% on a constant currency basis), due to the ~~shutdown of stores related to the COVID-19 pandemic last year.~~changes in net revenues and store expenses described above.

Other ~~International~~Investments

The following table presents selected financial data for our Other ~~International~~Investments segment after translation to U.S. dollars from its functional currency of primarily Australian and Canadian dollars:

Three Months Ended June 30, Change
(in thousands) 2021 2020
Net revenues:
Consumer loan fees, interest and other $ 89 $ 884 (90)%
Consumer loan debt — — *
Net revenues 89 884 (90)%
Segment operating expenses:
Store expenses — 1,057 *
Depreciation and amortization — 3 *
Gain on sale or disposal of assets — (20) *
Equity in net (income) loss of unconsolidated affiliates (643) 1,183 (154)%
Segment operating contribution 732 (1,339) 155%
Other segment expense 18 135 (87)%
Segment contribution (loss) $ 714 $ (1,474) 148%


*			~~Represents a percentage computation that is not mathematically meaningful.~~


	Three Months Ended December 31,				Change
(in thousands)	2021		2020

Net revenues:
Consumer loan fees, interest and other	$	43	$	75	(43)%

Net revenues	43		75		(43)%

Segment operating expenses:




Equity in net income of unconsolidated affiliates	(1,138)		(516)		121%
Segment operating contribution	1,181		591		100%

Other segment (income)	(12)		(210)		(94)%
Segment contribution	$	1,193	$	801	49%

Segment contribution was ~~$0.7~~$1.2 million, an increase of ~~$2.2~~$0.4 million from the prior-year quarter primarily due to the increase in equity income for our unconsolidated affiliates.

We operated 22 financial services stores in Canada under the CASHMAX brand during fiscal year 2020. During the fourth quarter of fiscal year 2020, we closed our CASHMAX business and are no longer operating stores in Canada.

Other Items

The following table reconciles our consolidated segment contribution discussed above to net income attributable to EZCORP, Inc., including items that affect our consolidated financial results but are not allocated among segments:

Three Months Ended June 30, Percentage Change
(in thousands) 2021 2020
Segment contribution $ 22,429 $ 14,345 56%
Corporate expenses (income):
General and administrative 14,589 16,176 (10)%
Depreciation and amortization 3,013 3,280 (8)%
Gain on sale or disposal of assets and other — 18 (100)%
Interest expense 5,569 5,239 6%
Interest income (28) (224) (88)%
Other expense 52 94 *
Loss before income taxes (766) (10,238) 93%
Income tax expense (benefit) 1,804 (4,751) (138)%
Net loss $ (2,570) $ (5,487) 53%


*			~~Represents a percentage computation that is not mathematically meaningful.~~


	Three Months Ended December 31,				Percentage Change
(in thousands)	2021		2020

Segment contribution	$	42,151	$	26,504	59%
Corporate expenses (income):
General and administrative	15,545		12,510		24%
Depreciation and amortization	2,924		2,976		(2)%
Gain on sale or disposal of assets and other	—		52		(100)%
Interest expense	2,431		5,455		(55)%
Interest income	(122)		(57)		114%

Other expense	26		66		(61)%
Income before income taxes	21,347		5,502		288%
Income tax expense	5,626		1,203		368%




Net income	$	15,721	$	4,299	266%

Segment contribution increased ~~$8.1~~$15.6 million or 59% over the ~~prior-year~~prior year quarter ~~or 56%~~ primarily due to the ~~increase in~~improved operating results of all three segments above.

General and administrative expenses increased $3.0 million, or 24% primarily driven by the ~~Latin America Pawn segment contribution resulting from~~timing of fiscal year 2021 expenses.

Interest expense decreased $3.0 million primarily driven by the ~~re-opening~~ASU 2020-06 accounting policy change which no longer requires debt discount be included on our balance sheet effective October 1, 2021. The policy change eliminates the non-cash interest amortization of ~~stores impacted by COVID-19 last year.~~that debt discount. See Note 1 to the consolidated financials for further discussion of this recently adopted accounting policy.

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General and administrative expenses decreased $1.6 million or 10% due to strategic initiatives implemented in the fourth quarter of fiscal year 2020 to optimize our cost structure at the corporate level.

Income tax expense increased ~~$6.6~~$4.4 million ~~for the quarter~~ primarily due to a~~n increase in income taxes for the current year due to~~ an ~~approximately $9.5 million~~ increase in income before income ~~taxes.~~taxes of $15.8 million this quarter compared to the prior year same quarter.

Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations.

~~Nine Months Ended June~~ See Annual Report on Form 10-K for the year ended September 30, 2021 ~~vs. Nine Months Ended June 30, 2020~~

~~The tables below~~Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and ~~discussion that follows should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.~~

~~U.S. Pawn~~

~~The following table presents selected summary financial data~~Supplemental Data” for ~~the U.S. Pawn segment:~~

Nine Months Ended June 30, Change
(in thousands) 2021 2020
Net revenues:
Pawn service charges $ 143,836 $ 166,859 (14)%
Merchandise sales 260,545 314,059 (17)%
Merchandise sales gross profit 115,364 111,571 3%
Gross margin on merchandise sales 44 % 36 % 800bps
Jewelry scrapping sales 9,493 32,905 (71)%
Jewelry scrapping sales gross profit 1,622 7,475 (78)%
Gross margin on jewelry scrapping sales 17 % 23 % (600)bps
Other revenues 83 107 (22)%
Net revenues 260,905 286,012 (9)%
Segment operating expenses:
Store expenses 188,256 201,921 (7)%
Impairment of goodwill, intangibles and other assets — 10,000 *
Depreciation and amortization 7,972 8,325 (4)%
Segment operating contribution 64,677 65,766 (2)%
Other segment expense 27 234 *
Segment contribution $ 64,650 $ 65,532 (1)%
Other data:
Average monthly ending pawn loan balance per store (a) $ 218 $ 248 (12)%
Monthly average yield on pawn loans outstanding 14 % 14 % —bps
Pawn loan redemption rate 87 % 87 % —bps


*			~~Represents a percentage computation that is not mathematically meaningful.~~
~~(a)~~			~~Balance is calculated based upon the average of the monthly ending balances during the applicable period.~~

~~Pawn service charges decreased 14% in total and~~ ~~on a same store basis. This decrease reflects~~ ~~a substantial decline in new loans activity and associated loan balances as customer borrowing behaviors were impacted by COVID-19.~~

~~Merchandise sales decreased 17% in total and~~ ~~on a same store basis~~ due to lower inventory levels. Merchandise sales gross profit increased 3% to $115.4 million driven by a 800 bps improvement in merchandise sales gross profit margin, primarily driven by reduced aged inventory levels and improved inventory turnover.

~~Store expenses decreased by 7% due to a reduction in labor expense.~~

~~Table~~quantification of ~~Contents~~

~~Segment contribution decreased $0.9 million primarily due to the changes in revenue and store expenses described above, offset by the $10.0 million~~ ~~goodwill impairment charge recorded during the prior year quarter. Excluding the goodwill impairment charge, segment contribution decreased $10.9 million, or 14%,~~ ~~to $64.7 million.~~

~~Latin America Pawn~~

The following table presents selected summary financial data our Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from functional currencies. See “Results of Operations — Non-GAAP Financial Information” above.

Nine Months Ended June 30,
(in thousands) 2021 (GAAP) 2020 (GAAP) Change (GAAP) 2021 (Constant Currency) Change (Constant Currency)
Net revenues:
Pawn service charges $ 43,520 $ 50,548 (14)% $ 42,873 (15)%
Merchandise sales 70,271 79,036 (11)% 69,431 (12)%
Merchandise sales gross profit 24,580 19,813 24% 24,191 22%
Gross margin on merchandise sales 35 % 25 % 1,000bps 35 % 1,000bps
Jewelry scrapping sales 9,014 8,804 2% 8,757 (1)%
Jewelry scrapping sales gross profit 809 705 15% 833 18%
Gross margin on jewelry scrapping sales 9 % 8 % 100bps 10 % 200bps
Other revenues, net 7 (19) (137)% 6 (132)%
Net revenues 68,916 71,047 (3)% 67,903 (4)%
Segment operating expenses:
Store expenses 54,005 53,493 1% 53,395 —%
Depreciation and amortization 5,459 5,476 —% 5,407 (1)%
Impairment of goodwill, intangibles and other assets — 35,936 (100)% — (100)%
Other Charges 497 — * 491 *
Segment operating contribution (loss) 8,955 (23,858) 138% 8,610 136%
Other segment income (a) (2,194) (1,106) 98% (2,110) 91%
Segment contribution (loss) $ 11,149 $ (22,752) 149% $ 10,720 147%
Other data:
Average monthly ending pawn loan balance per store (b) $ 58 $ 77 (25)% $ 57 (26)%
Monthly average yield on pawn loans outstanding 16 % 15 % 100bps 16 % 100bps
Pawn loan redemption rate 81 % 77 % 400bps 81 % 400bps


*			~~Represents a percentage computation that is not mathematically meaningful.~~
~~(a)~~			Fiscal 2021 constant currency amount excludes a nominal net GAAP basis foreign currency transaction adjustment resulting from movement in exchange rates. The net foreign currency transaction adjustment for fiscal 2020 was nominal and are included in the above results.
~~(b)~~			~~Balance is calculated based upon the average of the monthly ending balances during the applicable period.~~

~~During the nine months ended June 30, 2021, our Latin America pawn segment acquired 128 stores and opened ten de novo stores.~~

~~The change in net revenue attributable to same stores and new stores added since the prior-year is summarized as follows:~~

Pawn service charges decreased 14% (15% on a constant currency basis). Same stores pawn service charges also decreased by 16% (17% on a constant currency basis). The average ending monthly pawn loan balance outstanding during the nine month period was down 25% (26% on a constant currency basis). During most of this period, we have experienced a substantial decline in new loans activity and associated loan balances as the result of the impact of constrained traffic, limited operating hours and increased remittances from the U.S.

Merchandise sales decreased 11% (12% on a constant currency basis) and 14% on a same store basis due to lower inventory levels. This decrease in merchandise sales was offset by an increase in merchandise sales gross profit of 24% to $24.6 million (22% to $24.2 million on a

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~~constant currency basis) driven by a 1,000 bps improvement in merchandise sales gross profit margin primarily due to reduced aged inventory levels and improved inventory turnover.~~

~~Store expenses decreased by 1% (flat on a constant currency basis) driven by a reduction in labor expense.~~

Segment contribution increased $33.9 million primarily due to the impairment charges of $35.9 million recorded during the prior year quarter. Excluding the impairment charges, segment contribution decrease~~d $2.0 million, or 15%, to $11.1 million. This decrease was primarily due to the changes in revenue and store expenses described above.~~

~~Other International~~

~~The following table presents selected financial data for our Other International segment after translation to U.S. dollars from its functional currency of primarily Australian and Canadian dollars:~~

Nine Months Ended June 30, Change
(in thousands) 2021 2020
Net revenues:
Consumer loan fees, interest and other $ 338 $ 3,570 (91)%
Consumer loan debt — 1,024 (100)%
Net revenues 338 2,546 (87)%
Segment operating expenses:
Store expenses — 3,850 (100)%
Impairment of goodwill, intangible and other assets — 1,124 (100)%
Gain on sale or disposal of assets — (20) (100)%
Equity in net (income) loss on unconsolidated affiliates (2,409) 5,896 141%
Segment operating contribution 2,747 (8,304) 133%
Other segment (income) expense (183) 538 134%
Segment contribution (loss) $ 2,930 $ (8,842) 133%

Segment contribution was $2.9 million, an increase of $11.8 million from the prior-year quarter primarily due to a an increase of $5.0 million of net segment operating contribution resulting from the closure of our Canada operations and a $7.1 million charge, ($10.1 million, net of a $3.0 million tax benefit) in the first quarter of fiscal 2020 for the our share of the Cash Converters International settlement of a class action lawsuit. During the fourth quarter of fiscal year 2020, we closed our CASHMAX business and are no longer operating stores in Canada.

~~Other Items~~

Nine Months Ended June 30, Percentage Change
(in thousands) 2021 2020
Segment contribution $ 78,729 $ 33,938 132%
Corporate expenses (income):
General and administrative 40,870 50,355 (19)%
Depreciation and amortization 9,649 9,313 4%
Loss on sale or disposal of assets 63 1,118 (94)%
Interest expense 16,542 15,695 5%
Interest income (99) (1,251) (92)%
Other expense 169 74 128%
Income (loss) from continuing operations before income taxes 11,535 (41,366) 128%
Income tax expense 4,476 3,757 19%
Net income (loss) attributable to EZCORP, Inc. $ 7,059 $ (45,123) 116%

~~Segment contribution increased $44.8 million or 132% over the prior-year period,~~ primarily due to a $47.1 million impairment charge of certain long-lived assets in the second quarter of fiscal 2020. Excluding the impairment charges, segment contribution decreased by $2.3 million or

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3% primarily due to reduced pawn service charges from a decline in new loan activity and associated loan balances as a result of a change in customer borrowing behaviors due to COVID-19, partially offset by increased merchandise sales gross profit and decreased store expenses.

~~General and administrative expenses decreased $9.5 million due to strategic initiatives implemented in the fourth quarter of fiscal year 2020 to optimize our cost structure at the corporate level.~~

Income tax expense increased $0.7 million primarily due to an increase in income taxes for the current year due to an approximately $52.9 million increase in income before income taxes offset by a decrease in income tax expense of approximately $14.0 million due to non-deductible goodwill impairments booked in the quarter ended March 31, 2020.

Liquidity and Capital Resources

We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund working capital needs, currently anticipated capital expenditures, currently anticipated business growth and expansion, tax payments, and current and projected debt service requirements.

Cash and Cash Equivalents

Our cash and equivalents balance was ~~$283.7~~$233.3 million at ~~June 30,~~December 31, 2021 compared to ~~$304.5~~$253.7 million at September 30, ~~2020.~~2021. At ~~June 30,~~December 31, 2021, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.

Cash Flows

The table and discussion below presents a summary of the selected sources and uses of our cash:


		Nine Months Ended June 30,				Percentage Change		Three Months Ended December 31,				Percentage Change
(in thousands)	(in thousands)	2021		2020			(in thousands)	2021		2020

Cash flows provided by operating activities		$	33,122	$	56,365	(41)%
Cash flows (used in) provided by investing activities		(37,086)		110,389		(134)%
Cash flows provided by (used in) operating activities							Cash flows provided by (used in) operating activities	$	9,018	$	(4,513)	(300)%
Cash flows used in investing activities							Cash flows used in investing activities	(30,603)		(15,062)		103%
Cash flows used in financing activities	Cash flows used in financing activities	(16,202)		(7,388)		(119)%	Cash flows used in financing activities	(792)		(783)		(1)%
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	5,076		(6,678)		176%	Effect of exchange rate changes on cash, cash equivalents and restricted cash	719		6,266		89%
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(15,090)	$	152,688	(110)%
Net decrease in cash, cash equivalents and restricted cash							Net decrease in cash, cash equivalents and restricted cash	$	(21,658)	$	(14,092)	54%

~~Net~~
The increase in cash flows provided by operating activities ~~decreased $23.2 million or 41%~~ year-over-year due to a decrease of $4.5 million in net income adjusted for non-cash items, and a decrease of $18.7 million in changes to working capital. Changes in working capital are primarily related to the timing of collections in pawn service charges receivable, layaway deposits, inventory purchases, and the timing of outgoing payments of accounts payable and prepaid expenses.

~~Net cash provided by investing activities decreased by $147.5 million, or 134%, year-over-year~~was primarily due to a ~~$92.7~~$11.4 million ~~decrease~~increase in net income.

The $15.5 million increase in cash flows used in investing activities year-over-year was primarily due to $16.5 million in outgoing cash flows used to fund investments and an increase of $5.1 million in net pawn lending, offset by an $11.3 million increase in the sale of forfeited ~~collateral, a decrease of $41.9~~collateral. Of the $16.5 million used to fund investments, $15.0 million was invested in ~~net pawn loan lending and collections and acquisitions of $15.1 million.~~

~~Net cash used in financing activities increased $8.8 million, or 119%, year-over-year primarily due to the payment of assumed debt of $14.9 million from the Bajio acquisition (discussed~~Founders, as discussed in Note ~~2), offset by a $5.2 million decrease~~6 in ~~the repurchase of common stock paid during the prior year.~~Part I, Item 1: Notes to Interim Condensed Consolidated Financial Statements.

The net effect of ~~cash flows~~these changes was a ~~$15.1~~$56.5 million decrease in cash on hand during the current ~~year-to-date period,~~year, resulting in a ~~$297.5~~$242.0 million ending cash and restricted cash balance.

Sources and Uses of Cash

In December 2019, our Board of Directors authorized a stock repurchase program that will allow us to repurchase up to $60 million of our Class A Non-voting Common Stock over three years. On March 20, 2020, we suspended the repurchase of shares under the program in order to preserve current liquidity given the uncertainty of the impact of the COVID-19 pandemic to our operations. As of ~~September 30, 2020,~~December 31, 2021, we had repurchased and retired 943,149 shares of our Class A Common Stock for $5.2 million. The resumption of our stock repurchase program and the amount and timing of purchases will be dependent on a variety of factors, such as the return to normal business conditions, stock price, trading volume, general market conditions, legal and regulatory requirements, cash flow levels, and corporate

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considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities. The Board of Directors has reserved the right to modify, suspend or terminate the program at any time. During the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021, there were no stock repurchases.

We anticipate that cash flows from operations and cash on hand will be adequate to fund any future stock repurchases, our contractual obligations, planned de novo store growth, capital expenditures and working capital requirements through fiscal ~~2021.~~2022. We continue to explore acquisition opportunities, both large and small, and may choose to pursue additional debt, equity or equity-linked financings in the future should the need arise. Given the current uncertainty related to the COVID-19 pandemic, we may adjust our capital or other expenditures. Depending on the level of acquisition activity and other factors, our ability to repay our longer term debt obligations, including the convertible

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debt maturing in 2024 and 2025, may require us to refinance these obligations through the issuance of new debt securities, equity securities, convertible securities or through new credit facilities.

Contractual Obligations

In "Part II, Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended September 30, ~~2020~~202,1, we reported that we had ~~$604.6~~$602.6 million in total contractual obligations as of September 30, ~~2020.~~2021. There have been no material changes to this total obligation since September 30, ~~2020,~~2021, other than changes as the result of adoption of accounting standards as further discussed in Note 1 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."

We are responsible for the maintenance, property taxes and insurance at most of our locations. In the fiscal year ended September 30, ~~2020,~~2021, these collectively amounted to ~~$12.3~~$25.5 million.

Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements

~~See Note~~In August 2020, the FASB issued its Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Additionally, ASU 2020-06 eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for as a single unit. We early adopted this standard on October 1, 2021 under the modified retrospective basis. The effect of eliminating our debt discount on the 2024 and 2025 Convertible Notes ~~to Interim~~will decrease non-cash interest expense amortization on our Condensed Consolidated ~~Financial Statements included in "Part I, Item 1 — Financial Statements."~~Statement of Operations, and the reduction of interest expense will affect our basic earnings per common share. When calculating net income per share of common stock attributable to common shareholders, the Company uses the if-converted method as required under ASU 2020-06 to determine the dilutive effect of the Convertible Notes. The Company did not incur any impact to liquidity or cash flows with recently adopted accounting policy.

Cautionary Statement Regarding Risks and Uncertainties that May Affect Future Results

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements, other than statements of historical facts, regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans and objectives are forward-looking statements. These statements are often, but not always, made with words or phrases like "may," "should," "could," "will," "predict," "anticipate," "believe," "estimate," "expect," "intend," "plan," "projection" and similar expressions. Such statements are only predictions of the outcome and timing of future events based on our current expectations and currently available information and, accordingly, are subject to substantial risks, uncertainties and assumptions. Actual results could differ materially from those expressed in the forward-looking statements due to a number of risks and uncertainties, many of which are beyond our control. In addition, we cannot predict all of the risks and uncertainties that could cause our actual results to differ from those expressed in the forward-looking statements. Accordingly, you should not regard any forward-looking statements as a representation that the expected results will be achieved. Important risk factors that could cause results or events to differ from current expectations are identified and described in "Part I, Item 1A — Risk Factors" of our Annual Report on Form 10-K for the year ended September 30, ~~2020~~2021 and "Part II, Item 1A — Risk Factors" of this Report.

We specifically disclaim any responsibility to publicly update any information contained in a forward-looking statement except as required by law. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in interest rates, gold values and foreign currency exchange rates, and are described in detail in "Part II, Item 7A — Quantitative and Qualitative Disclosures about Market Risk" of our Annual Report on Form 10-K for the year ended September 30, ~~2020.~~2021. With the exception of the impacts of COVID-19, which are discussed elsewhere in this Report, there have been no material changes in our reported market risks or risk management policies since the filing of our Annual Report on Form 10-K for the year ended September 30, ~~2020.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

This report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934 (the "Exchange Act"). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

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Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~June 30,~~December 31, 2021. Our principal executive officer and principal financial officer have concluded that as of ~~June 30,~~December 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June 30,~~December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 1310 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."

ITEM 1A. RISK FACTORS

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in "Part I, Item 1A — Risk Factors" of our Annual Report on Form 10-K for the year ended September 30, ~~2020, as supplemented by the information set forth below.~~2021.

Illinois recently passed the Predatory Loan Prevention Act, which we do not believe applies to pawn. If it is determined that the new law applies to pawn transactions, our business in Illinois (20 stores) could be adversely affected.

The Illinois Predatory Loan Prevention Act was signed into law on March 23, 2021. Pawn transactions are not mentioned in the act, and we believe that pawn transactions are not subject to the provisions of the act. On April 28, the Illinois Department of Financial & Professional Regulation issued a fact sheet that lists "pawn loans" as among the types of consumer loans covered by the law. We are seeking formal confirmation that the new act does not apply to pawn transactions. If it is determined that the act does apply to pawn, then our business in Illinois could be adversely affected and we could be subject to civil penalties.

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ITEM 6. EXHIBITS

The following exhibits are filed with, or incorporated by reference into, this report.

Incorporated by Reference

Filed Herewith

Exhibit

Description of Exhibit

Form

File No.

Exhibit

Filing Date

31.1

Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2

Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1†

Certifications of Principal Executive Officer ~~pursuant to 18 U.S.C. Section 1350~~

~~32.2†~~

~~Certifications of Principal Financial Officer,~~s , pursuant to 18 U.S.C. Section 1350

101.INS

Inline XBRL Instance Document (the instance document does not appear in the interactive data files because the XBRL tags are embedded within the Inline XBRL document)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File in Inline XBRL format (contained in Exhibit 101)

_____________________________


†			The certifications furnished in Exhibit 32.1 ~~and Exhibit 32.2~~ hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		EZCORP, INC.

Date:	~~August 4, 2021~~February 2, 2022	/s/ ~~Jason A. Kulas~~Timothy K. Jugmans
		~~Jason A. Kulas,~~Timothy K. Jugmans, Chief ~~Executive~~Financial Officer

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	Nine Months Ended June 30, 2021
(in thousands)	U.S. Pawn		Latin America Pawn		Consolidated

Balances as of September 30, 2020	$	241,928	$	15,654	$	257,582
Acquisitions	2,394		22,957		25,351
Effect of foreign currency translation changes	0		686		686
Balances as of June 30, 2021	$	244,322	$	39,297	$	283,619


	Nine Months Ended June 30, 2020
(in thousands)	U.S. Pawn		Latin America Pawn		Consolidated

Balances as of September 30, 2019	$	251,752	$	48,775	$	300,527
Effect of foreign currency translation changes	0		(1,888)		(1,888)
Measurement period adjustments	176		(149)		27
Impairment charge	(10,000)		(31,340)		(41,340)
Balances as of June 30, 2020	$	241,928	$	15,398	$	257,326


(in thousands)		Accrued Charges at September 30, 2020		Charges		Payments and Adjustments		Accrued Charges at March 31, 2021		Charges		Payments and Adjustments		Accrued Charges at June 30, 2021
Cash charges:
	Labor reduction costs	$	5,946	$	0	$	(3,418)	$	2,528	$	0	$	(1,454)	$	1,074
	CASHMAX shutdown costs	800		0		(800)		0		0		—		0
	Store closure costs	1,806		0		(1,806)		0		497		0		497
	Other	2,166		0		(166)		2,000		0		0		2,000
		$	10,718	$	0	$	(6,190)	$	4,528	$	497	$	(1,454)	$	3,571


	Three Months Ended June 30, 2021
(in thousands)	U.S. Pawn		Latin America Pawn		Other International		Total Segments		Corporate Items		Consolidated

Revenues:
Merchandise sales	$	84,465	$	23,343	$	0	$	107,808	$	0	$	107,808
Jewelry scrapping sales	1,908		3,765		0		5,673		0		5,673
Pawn service charges	44,039		16,392		0		60,431		0		60,431
Other revenues	32		0		89		121		0		121
Total revenues	130,444		43,500		89		174,033		0		174,033
Merchandise cost of goods sold	45,310		15,229		0		60,539		0		60,539
Jewelry scrapping cost of goods sold	1,878		3,595		0		5,473		0		5,473
Other cost of revenues	0		0		0		0		0		0
Net revenues	83,256		24,676		89		108,021		0		108,021
Segment and corporate expenses (income):
Store expenses	62,507		19,296		0		81,803		0		81,803
General and administrative	0		0		0		0		14,589		14,589

Depreciation and amortization	2,600		1,806		0		4,406		3,013		7,419

Other charges	0		497		0		497		0		497
Interest expense	0		0		0		0		5,569		5,569
Interest income	0		(484)		0		(484)		(28)		(512)
Equity in net income of unconsolidated affiliates	0		0		(643)		(643)		0		(643)

Other (income) expense	0		(5)		18		13		52		65
Segment contribution	$	18,149	$	3,566	$	714	$	22,429
Income (loss) before income taxes							$	22,429	$	(23,195)	$	(766)


	Nine Months Ended June 30,						Change
(in thousands)	2021			2020

Net revenues:
Pawn service charges	$	143,836		$	166,859		(14)%

Merchandise sales	260,545			314,059			(17)%
Merchandise sales gross profit	115,364			111,571			3%
Gross margin on merchandise sales	44		%	36		%	800bps

Jewelry scrapping sales	9,493			32,905			(71)%
Jewelry scrapping sales gross profit	1,622			7,475			(78)%
Gross margin on jewelry scrapping sales	17		%	23		%	(600)bps

Other revenues	83			107			(22)%
Net revenues	260,905			286,012			(9)%

Segment operating expenses:
Store expenses	188,256			201,921			(7)%
Impairment of goodwill, intangibles and other assets	—			10,000			*
Depreciation and amortization	7,972			8,325			(4)%
Segment operating contribution	64,677			65,766			(2)%

Other segment expense	27			234			*
Segment contribution	$	64,650		$	65,532		(1)%

Other data:
Average monthly ending pawn loan balance per store (a)	$	218		$	248		(12)%
Monthly average yield on pawn loans outstanding	14		%	14		%	—bps
Pawn loan redemption rate	87		%	87		%	—bps