UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q



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

For the quarterly period ended ~~March~~December 31, 2019

or 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 ~~Texas~~	TX	78746
(Address of principal executive offices)					(Zip Code)

Registrant’s telephone number, including area code: ~~(512)~~ (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~~ xYes☒ 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~~ xYes☒ 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	¨☐	Accelerated ~~filer~~Filer	x☒
Non-accelerated ~~filer~~Filer	¨☐	Smaller ~~reporting company~~Reporting Company	¨☐
		Emerging ~~growth company~~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 x☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

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 ~~April 25, 2019, 52,475,070~~January 29, 2020, 52,651,188 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.

EZCORP, Inc.

INDEX TO FORM 10-Q



PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2019 and 2018 and September 30, ~~2018~~2019 (Unaudited)	1

Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~March~~December 31, 2019 and 2018 (Unaudited)	2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Six~~ Months Ended ~~March~~December 31, 2019 and 2018 (Unaudited)	3

Condensed Consolidated Statements of Stockholders’ Equity for the ~~Three and Six Months~~Periods Ended ~~March~~December 31, 2019 and 2018 (Unaudited)	3

Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~March~~December 31, 2019 and 2018 (Unaudited)	54

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	65

Note 1: Organization and Summary of Significant Accounting Policies	65

Note 2: Acquisitions	106

Note 3: Earnings Per Share	116

Note 4: Leases	7

Note 5: Strategic Investments	8

Note 6: Fair Value Measurements	8

Note 7: Debt	9

Note 8: Stock Compensation	12

Note ~~5: Fair Value Measurements~~	13

~~Note 6: Debt~~	15

~~Note 7: Stock Compensation~~	18

~~Note 8:~~9: Contingencies	18

~~Note 9: Segment Information~~	2112

Note 10: Segment Information	14

Note 11: Supplemental Consolidated Financial Information ~~and Other~~	2516

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2516

Item 3. Quantitative and Qualitative Disclosures about Market Risk	4327

Item 4. Controls and Procedures	4327

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	4428

Item 1A. Risk Factors	4528

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6. Exhibits	4529

SIGNATURES	4630

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EZCORP, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)	EZCORP, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)									EZCORP, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)

	March 31, 2019			March 31, 2018			September 30, 2018			December 31, 2019			December 31, 2018			September 30, 2019

	(Unaudited)									(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	347,786		$	159,216		$	285,311		$	143,141		$	297,031		$	157,567
Pawn loans	173,138			159,410			198,463			195,586			193,984			199,058
Pawn service charges receivable, net	27,097			24,130			30,959			32,250			31,558			31,802
Inventory, net	173,348			158,642			166,997			187,369			175,422			179,355
Notes receivable, net	23,450			38,091			34,199			7,450			26,711			7,182
Prepaid expenses and other current assets	32,984			29,533			33,456			36,142			31,483			30,796
Total current assets	777,803			569,022			749,385			601,938			756,189			605,760
Investment in unconsolidated affiliates	29,387			46,509			49,500
Investments in unconsolidated affiliates										29,272			35,511			34,516
Property and equipment, net	67,518			64,833			73,649			65,246			69,770			67,357
Lease right-of-use asset										225,950			—			—
Goodwill	296,881			290,884			299,248			301,282			296,638			300,527
Intangible assets, net	58,503			45,728			54,923			68,995			55,956			68,044
Notes receivable, net	8,509			18,660			3,226			1,124			4,599			1,117
Deferred tax asset, net	10,119			15,087			7,986			2,123			10,104			1,998
Other assets	4,395			19,773			3,863			5,012			4,442			4,383
Total assets	$	1,253,115		$	1,070,496		$	1,241,780		$	1,300,942		$	1,233,209		$	1,083,702

Liabilities and equity:
Current liabilities:
Current maturities of long-term debt, net	$	192,901		$	103,287		$	190,181		$	215		$	190,238		$	214
Accounts payable, accrued expenses and other current liabilities	58,696			60,538			57,958			51,621			57,380			77,957
Customer layaway deposits	13,564			12,225			11,824			12,548			11,747			12,915
Lease liability										48,052			—			—
Total current liabilities	265,161			176,050			259,963			112,436			259,365			91,086
Long-term debt, net	232,733			198,338			226,702			241,209			229,928			238,380
Deferred tax liability, net	9,012			2,525			8,817			2,119			9,617			1,985
Lease liability										186,352			—			—
Other long-term liabilities	6,450			9,359			6,890			7,226			6,150			7,302
Total liabilities	513,356			386,272			502,372			549,342			505,060			338,753
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)
Stockholders’ equity:
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding: 52,475,070 as of March 31, 2019; 51,494,246 as of March 31, 2018; and 51,614,746 as of September 30, 2018	524			515			516
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million; issued and outstanding: 52,886,122 as of December 31, 2019; 52,475,070 as of December 31, 2018; and 52,565,064 as of September 30, 2019										529			524			526
Class B Voting Common Stock, convertible, par value $.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171	30			30			30			30			30			30
Additional paid-in capital	402,505			353,698			397,927			407,440			400,081			407,628
Retained earnings	386,650			373,560			386,622			389,928			383,256			389,163
Accumulated other comprehensive loss	(49,950		)	(40,247		)	(42,356		)	(46,327		)	(48,739		)	(52,398		)
EZCORP, Inc. stockholders’ equity	739,759			687,556			742,739			751,600			735,152			744,949
Noncontrolling interest	—			(3,332		)	(3,331		)	—			(7,003		)	—
Total equity	739,759			684,224			739,408			751,600			728,149			744,949
Total liabilities and equity	$	1,253,115		$	1,070,496		$	1,241,780		$	1,300,942		$	1,233,209		$	1,083,702

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS												EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018			2019			2018

	(Unaudited)												(Unaudited)
	(in thousands, except per share amounts)												(in thousands, except per share amounts)
Revenues:
Merchandise sales	$	121,260		$	114,945		$	242,284		$	228,533		$	126,728		$	121,024
Jewelry scrapping sales	10,380			11,525			19,661			23,738			9,528			9,281
Pawn service charges	81,799			74,031			165,318			150,053			84,725			83,519
Other revenues	1,291			1,897			3,162			4,244			1,454			1,871
Total revenues	214,730			202,398			430,425			406,568			222,435			215,695
Merchandise cost of goods sold	77,800			72,220			154,912			143,387			84,076			77,112
Jewelry scrapping cost of goods sold	8,833			9,574			16,883			19,911			7,754			8,050
Other cost of revenues	407			347			891			924			536			484
Net revenues	127,690			120,257			257,739			242,346			130,069			130,049
Operating expenses:
Operations	88,243			82,180			177,029			165,826			90,625			90,853
Administrative	16,487			13,341			31,742			26,420			17,489			13,165
Depreciation and amortization	7,012			6,451			13,860			12,174			7,733			6,848
(Gain) loss on sale or disposal of assets and other	(823		)	100			3,619			139
Loss on sale or disposal of assets and other													744			4,442
Total operating expenses	110,919			102,072			226,250			204,559			116,591			115,308
Operating income	16,771			18,185			31,489			37,787			13,478			14,741
Interest expense	8,589			5,829			17,380			11,676			5,329			8,791
Interest income	(3,126		)	(4,268		)	(6,465		)	(8,538		)	(843		)	(3,339		)
Equity in net (income) loss of unconsolidated affiliates	(431		)	(876		)	688			(2,326		)
Equity in net loss of unconsolidated affiliates													5,897			1,119
Impairment of investment in unconsolidated affiliates	6,451			—			19,725			—			—			13,274
Other expense (income)	269			(4		)	(117		)	(186		)	71			(386		)
Income from continuing operations before income taxes	5,019			17,504			278			37,161
Income tax expense	2,360			5,797			1,279			13,208
Income (loss) from continuing operations before income taxes													3,024			(4,718		)
Income tax expense (benefit)													1,759			(1,058		)
Income (loss) from continuing operations, net of tax	2,659			11,707			(1,001		)	23,953			1,265			(3,660		)
Loss from discontinued operations, net of tax	(18		)	(500		)	(201		)	(722		)	(27		)	(183		)
Net income (loss)	2,641			11,207			(1,202		)	23,231			1,238			(3,843		)
Net loss attributable to noncontrolling interest	(753		)	(374		)	(1,230		)	(989		)	—			(477		)
Net income attributable to EZCORP, Inc.	$	3,394		$	11,581		$	28		$	24,220
Net income (loss) attributable to EZCORP, Inc.													$	1,238		$	(3,366	)

Basic earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.06		$	0.22		$	—		$	0.46
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.06		$	0.21		$	—		$	0.44
Basic earnings (loss) per share attributable to EZCORP, Inc. — continuing operations													$	0.02		$	(0.06	)
Diluted earnings (loss) per share attributable to EZCORP, Inc. — continuing operations													$	0.02		$	(0.06	)

Weighted-average basic shares outstanding	55,445			54,464			55,236			54,447			55,666			55,032
Weighted-average diluted shares outstanding	55,463			57,624			55,247			56,642			55,687			55,032

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)												EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018			2019		2018

	(Unaudited)												(Unaudited)
	(in thousands)												(in thousands)
Net income (loss)	$	2,641		$	11,207		$	(1,202	)	$	23,231		$	1,238	$	(3,843	)
Other comprehensive (loss) gain:
Foreign currency translation (loss) gain, net of income tax (benefit) expense for our investment in unconsolidated affiliate of ($602) and ($515) for the three and six months ended March 31, 2019 respectively, and $6 and $182 for the three and six months ended March 31, 2018, respectively.	(1,211		)	5,945			(7,594		)	(529		)
Other comprehensive gain (loss):
Foreign currency translation gain (loss), net of income tax expense for our investment in unconsolidated affiliate of $122 and $87 for the three months ended December 31, 2019 and 2018.													6,071		(6,383		)
Comprehensive income (loss)	1,430			17,152			(8,796		)	22,702			7,309		(10,226		)
Comprehensive loss attributable to noncontrolling interest	(753		)	(228		)	(1,230		)	(883		)	—		(477		)
Comprehensive income (loss) attributable to EZCORP, Inc.	$	2,183		$	17,380		$	(7,566	)	$	23,585		$	7,309	$	(9,749	)

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive (Loss) Income
Noncontrolling Interest Total Equity
Shares Par Value

(Unaudited, except balances as of September 30, 2017)
(in thousands)
Balances as of September 30, 2017 54,398
$ 544
$ 348,532
$ 347,885
$ (38,157 ) $ (2,449 ) $ 656,355
Stock compensation —
—
2,889
—
—
—
2,889
Release of restricted stock 66
1
—
—
—
—
1
Taxes paid related to net share settlement of equity awards —
—
(311 ) —
—
—
(311 )
Foreign currency translation loss —
—
—
—
(6,434 ) (40 ) (6,474 )
Net income (loss) —
—
—
12,639
—
(615 ) 12,024
Balances as of December 31, 2017 54,464
$ 545
$ 351,110
$ 360,524
$ (44,591 ) $ (3,104 ) $ 664,484
Stock compensation —
—
2,588
—
—
—
2,588
Reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act —
—
—
1,455
(1,455 ) —
—
Foreign currency translation gain —
—
—
—
5,799
146
5,945
Net income (loss) —
—
—
11,581
—
(374 ) 11,207
Balances as of March 31, 2018 54,464
$ 545
$ 353,698
$ 373,560
$ (40,247 ) $ (3,332 ) $ 684,224

EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Equity
	Shares	Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Equity

	(Unaudited, except balances as of September 30, 2018)
	(in thousands)
Balances as of September 30, 2018	54,585	$	546	$	397,927		$	386,622		$	(42,356	)	$	(3,331	)	$	739,408
Stock compensation	—	—		2,247			—			—			—			2,247
Release of restricted stock	860	8		—			—			—			—			8
Taxes paid related to net share settlement of equity awards	—	—		(3,288		)	—			—			—			(3,288		)
Transfer of subsidiary shares to noncontrolling interest	—	—		3,195			—			—			(3,195		)	—
Foreign currency translation loss	—	—		—			—			(6,383		)	—			(6,383		)
Net loss	—	—		—			(3,366		)	—			(477		)	(3,843		)
Balances as of December 31, 2018	55,445	$	554	$	400,081		$	383,256		$	(48,739	)	$	(7,003	)	$	728,149

Common Stock
Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive Loss
Noncontrolling Interest Total Equity
Shares Par Value

(Unaudited, except balances as of September 30, 2018)
(in thousands)
Balances as of September 30, 2018 54,585
$ 546
$ 397,927
$ 386,622
$ (42,356 ) $ (3,331 ) $ 739,408
Stock compensation —
—
2,247
—
—
—
2,247
Release of restricted stock 860
8
—
—
—
—
8
Taxes paid related to net share settlement of equity awards —
—
(3,288 ) —
—
—
(3,288 )
Transfer of subsidiary shares to noncontrolling interest —
—
3,195
—
—
(3,195 ) —
Foreign currency translation loss —
—
—
—
(6,383 ) —
(6,383 )
Net loss —
—
—
(3,366 ) —
(477 ) (3,843 )
Balances as of December 31, 2018 55,445
$ 554
$ 400,081
$ 383,256
$ (48,739 ) $ (7,003 ) $ 728,149
Stock compensation —
—
2,424
—
—
—
2,424
Deconsolidation of subsidiary —
—
—
—
—
7,756
7,756
Foreign currency translation loss —
—
—
—
(1,211 ) —
(1,211 )
Net income (loss) —
—
—
3,394
—
(753 ) 2,641
Balances as of March 31, 2019 55,445
$ 554
$ 402,505
$ 386,650
$ (49,950 ) $ —
$ 739,759



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

	(Unaudited, except balances as of September 30, 2019)
	(in thousands)
Balances as of September 30, 2019	55,535		$	556		$	407,628		$	389,163		$	(52,398	)	$	744,949
Stock compensation	—		—			1,695			—			—			1,695
Release of restricted stock	463		5			—			—			—			5
Taxes paid related to net share settlement of equity awards	—		—			(1,395		)	—			—			(1,395		)
Foreign currency translation gain	—		—			—			—			6,071			6,071
Purchase and retirement of treasury stock	(142	)	(2		)	(488		)	(473		)	—			(963		)
Net income	—		—			—			1,238			—			1,238
Balances as of December 31, 2019	55,856		$	559		$	407,440		$	389,928		$	(46,327	)	$	751,600

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS						EZCORP, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018

	(Unaudited)						(Unaudited)
	(in thousands)						(in thousands)
Operating activities:
Net (loss) income	$	(1,202	)	$	23,231
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Net income (loss)							$	1,238		$	(3,843	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization	13,860			12,174			7,733			6,848
Amortization of debt discount and deferred financing costs	11,225			7,439			3,229			5,585
Amortization of lease right-of-use asset							11,474			—
Accretion of notes receivable discount and deferred compensation fee	(2,492		)	(5,032		)	(275		)	(1,376		)
Deferred income taxes	358			2,801			10			352
Impairment of investment in unconsolidated affiliate	19,725			—			—			13,274
Other adjustments	1,265			1,081			1,298			5,052
Reserve on jewelry scrap receivable	3,646			—
Stock compensation expense	4,697			5,534			1,695			2,238
Loss (income) from investment in unconsolidated affiliates	688			(2,326		)
Loss from investments in unconsolidated affiliates							5,897			1,119
Changes in operating assets and liabilities, net of business acquisitions:
Service charges and fees receivable	3,797			4,644			(355		)	(726		)
Inventory	421			(628		)	(1,592		)	685
Prepaid expenses, other current assets and other assets	(3,590		)	(2,982		)	(9,649		)	(1,564		)
Accounts payable, accrued expenses and other liabilities	(409		)	(5,357		)	(29,966		)	(836		)
Customer layaway deposits	1,810			1,128			(467		)	18
Income taxes, net of excess tax benefit from stock compensation	(3,176		)	3,937
Net cash provided by operating activities	50,623			45,644
Income taxes							(1,188		)	(3,445		)
Net cash (used in) provided by operating activities							(10,918		)	23,381
Investing activities:
Loans made	(353,537		)	(330,732		)	(187,362		)	(186,588		)
Loans repaid	225,695			220,267			109,623			106,643
Recovery of pawn loan principal through sale of forfeited collateral	142,656			134,870			76,515			70,594
Additions to property and equipment, net	(13,863		)	(19,251		)	(5,574		)	(5,880		)
Acquisitions, net of cash acquired	(627		)	(63,780		)	—			(332		)
Principal collections on notes receivable	14,591			9,152			—			7,284
Net cash provided by (used in) investing activities	14,915			(49,474		)
Net cash used in investing activities							(6,798		)	(8,279		)
Financing activities:
Taxes paid related to net share settlement of equity awards	(3,288		)	(311		)	(1,395		)	(3,288		)
Payout of deferred consideration							(175		)	—
Proceeds from borrowings, net of issuance costs	1,066			—			(109		)	743
Payments on borrowings	(509		)	—			(292		)	(67		)
Repurchase of common stock							(963		)	—
Net cash used in financing activities	(2,731		)	(311		)	(2,934		)	(2,612		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(599		)	(238		)	1,349			(782		)
Net increase (decrease) in cash, cash equivalents and restricted cash	62,208			(4,379		)
Net (decrease) increase in cash, cash equivalents and restricted cash							(19,301		)	11,708
Cash, cash equivalents and restricted cash at beginning of period	285,578			163,868			162,442			285,578
Cash, cash equivalents and restricted cash at end of period	$	347,786		$	159,489		$	143,141		$	297,286

Non-cash investing and financing activities:
Pawn loans forfeited and transferred to inventory	$	151,211		$	134,952		$	82,878		$	80,301

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc.

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

~~March~~December 31, 2019

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

When used in this report, the terms “we,” “us,” “our,” “EZCORP” and the “Company” mean EZCORP, Inc. and its consolidated subsidiaries, collectively.

We are 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 used merchandise purchased from customers, and operate a small number of financial services stores in Canada.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Our management has included all adjustments it considers necessary for a fair presentation which are of a normal, recurring nature. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended September 30, ~~2018~~2019 ~~and as corrected below.~~. The balance sheet as of September 30, ~~2018~~2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Our business is subject to seasonal variations, and operating results for the three ~~and six~~ months ended ~~March~~December 31, 2019 and 2018 (the "current quarter" and ~~"current six-months" and~~ "prior-year ~~quarter" and "prior-year six-months,~~quarter," respectively) are not necessarily indicative of the results of operations for the full fiscal year.

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended September 30, ~~2018~~2019, other than those described ~~below.~~below and in Note 10.

Use of Estimates and Assumptions

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventories, loan loss allowances, long-lived and intangible assets, share-based compensation, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and various other assumptions that we believe are reasonable under the circumstances. We use this information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

~~Corrections to Prior Period Financial Statements~~

During the current quarter, we identified errors in our previously reported financial statements during the ordinary course of account reviews and subsequent investigation of related accounts. None of the identified errors was material to any previously reported period. These have now been corrected in all periods presented. The errors relate primarily to the overstatement of historical balances of pawn service charges receivable resulting from errors in the configuration of information technology reports. These errors resulted in an overstatement of October 1, 2017 beginning retained earnings of $3.8 million. The impact of these corrections on the condensed consolidated financial statements is as follows (in thousands except per share amounts):

~~Condensed Consolidated Balance Sheets~~

March 31, 2018
As Previously Reported Corrections As Corrected

Cash and cash equivalents $ 159,912
$ (696 ) $ 159,216
Pawn service charges receivable, net 30,493
(6,363 ) 24,130
Prepaid expenses and other current assets 29,222
311
29,533
Goodwill 289,438
1,446
290,884
Deferred tax asset, net 13,842
1,245
15,087
Accounts payable, accrued expenses and other current liabilities 60,689
(151 ) 60,538
Retained earnings 377,682
(4,122 ) 373,560
Accumulated other comprehensive loss (40,463 ) 216
(40,247 )

September 30, 2018
As Previously Reported Corrections As Corrected

Cash and cash equivalents $ 286,015
$ (704 ) $ 285,311
Pawn service charges receivable, net 38,318
(7,359 ) 30,959
Prepaid expenses and other current assets 33,154
302
33,456
Goodwill 297,448
1,800
299,248
Deferred tax asset, net 7,165
821
7,986
Accounts payable, accrued expenses and other current liabilities 57,800
158
57,958
Retained earnings 392,180
(5,558 ) 386,622
Accumulated other comprehensive loss (42,616 ) 260
(42,356 )

~~Condensed Consolidated Statements of Operations~~

Three Months Ended March 31, 2018
As Previously Reported Corrections As Corrected

Pawn service charges $ 74,367
$ (336 ) $ 74,031
Operations expense 82,160
20
82,180
Income from continuing operations before income taxes 17,860
(356 ) 17,504
Income tax expense 5,921
(124 ) 5,797
Income from continuing operations, net of tax 11,939
(232 ) 11,707
Basic earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.23
$ (0.01 ) $ 0.22
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.21
$ —
$ 0.21

Six Months Ended March 31, 2018
As Previously Reported Corrections As Corrected

Pawn service charges $ 150,727
$ (674 ) $ 150,053
Operations expense 165,770
56
165,826
Administrative expense 26,659
(239 ) 26,420
Income from continuing operations before income taxes 37,652
(491 ) 37,161
Income tax expense 13,358
(150 ) 13,208
Income from continuing operations, net of tax 24,294
(341 ) 23,953
Basic earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.46
$ —
$ 0.46
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.45
$ (0.01 ) $ 0.44

~~Condensed Consolidated Statements of Cash Flows~~

Six Months Ended March 31, 2018
As Previously Reported Corrections As Corrected

Net income $ 23,572
$ (341 ) $ 23,231
Service charges and fees receivable 3,964
680
4,644
Accounts payable, accrued expenses and other liabilities (5,006 ) (351 ) (5,357 )
Income taxes, net of excess tax benefit from stock compensation 4,085
(148 ) 3,937
Net cash provided by operating activities* 45,804
(160 ) 45,644
Effect of exchange rate changes on cash and cash equivalents and restricted cash (227 ) (11 ) (238 )


*	~~As previously reported amount includes the impact of adoption of accounting policies described below.~~

Recently Adopted Accounting Policies

In ~~August 2018,~~February 2016, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ASU 2016-02, Leases (Topic 842). This Accounting Standards Update ("ASU") ~~2018-15, Intangibles — Goodwill~~requires companies to generally recognize on the balance sheet operating and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which requires a customer in a cloud computing arrangement that is a service contract to followfinancing lease liabilities and corresponding right-of-use assets. The provisions of this ASU are effective as of the ~~internal-use software guidance in Accounting Standards Codification ("ASC") 350-40 to determine which implementation costs to defer and recognize as an asset. This ASU generally aligns the guidance~~beginning of our fiscal 2020 on recognizing implementation costs incurred in a cloud computing arrangement that is a service contract with that for implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. Our hosting arrangements that are service contracts include various third-party software applications.October 1, 2019. We adopted this ASU ~~during~~using the ~~first quarter of our fiscal 2019 on a~~optional prospective ~~basis for all service contracts entered into after adoption, with no material impact upon adoption.~~

~~In November 2016, the FASB issued~~transition method provided under ASU ~~2016-18 Statement of Cash Flows~~2018-11, Leases, (Topic ~~230)~~842): Restricted Cash. This ASU requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted this ASU during the first quarter of our fiscal 2019 with no impact on our financial position or results of operations. However, we have recast our statements of cash flows on a retrospective basis to include restricted cash when reconciling the beginning-of-period and end-of-period total amounts.

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU provides guidance on eight specific cash flow issues. We adopted this ASU during the first quarter of our fiscal 2019 on a prospective basis with no impact on our financial position, results of operations or cash flows.

In May 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10). The amendments in this ASU make targeted improvements to GAAP primarily as it pertains to equity investments (not including equity method of accounting), fair value disclosures, balance sheet presentation, and other items pertaining to financial instruments. We adopted this ASU during the first quarter of our fiscal 2019 on a prospective basis, as applicable, with no impact on our financial position, results of operations or cash flows upon adoption.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) to defer the effective date to

December 15, 2017 for annual reporting periods beginning after that date, with early adoption permitted, but not before the original effective date of December 15, 2016. The core principle of this ASU, and the subsequently issued ASUs modifying or clarifying this ASU, is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. The new standard allows for two methods of adoption: (a) full retrospective adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized as an adjustment to the opening retained earnings balance.

~~We adopted this ASU and related guidance~~Targeted Improvement as of October 1, ~~2018 using~~2019. We additionally elected the ~~modified retrospective method. We evaluated~~package of practical expedients under Accounting Standards Codification (“ASC”) 842-10-65-1(f) as well as the ~~impact~~practical expedient not to separate lease and non-lease components for all real estate leases under ASC 842-10-15-37. Further, we have elected an accounting policy not to record right-of-use assets and lease liabilities for all leases which have a duration of ~~ASC 606 on our consolidated financial position, results of operations, cash flows and disclosure requirements noting no material impact to our consolidated financial statements or disclosures.~~less than 12-months. See Note 94 for disaggregated information about our sources of revenue. Additionally, we have concluded that ASC 606 does not impact our revenue recognition for pawn service charges or consumer loan fees as we believe neither of those revenue streams are within the scope of ASC 606.

~~The following is a summary of our current revenue recognition policies.~~

~~Pawn Service Charges Revenue~~

We record pawn service charges using the effective interest method over the life of the loan for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following months. Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition. If a pawn loan is not repaid, we value the forfeited collateral (inventory) at the lower of cost (pawn loan principal) or net realizable value of the item.

~~Merchandise and Related Sales Revenue~~

This revenue stream involves the sale of merchandise to retail customers in our pawn stores. The performance obligation is the delivery of the merchandise to the customer. Revenue and the related cost of merchandise sold is recognized at the time of sale. Customers have a very limited period of time to return merchandise for a refund or exchange, and actual returns for refunds are insignificant. Sales tax collected on the sale of merchandise is excluded from the amount recognized as sales and instead recorded as a liability in “Accounts payable, accrued expenses and other current liabilities” in our condensed consolidated balance sheets until remitted to the appropriate governmental authorities.

~~Jewelry Scrapping Sales Revenue~~

This revenue stream involves the sales of scrap (precious metals and stones) to refiners. The performance obligation is the legal transfer of scrap to the refiner. Revenue, and the related cost of scrap sold, is recognized when scrap inventory is provided to the refiner, which is when the customer obtains control of the promised good. The receivables outstanding at the end of a given reporting period are not material. Payment of the receivable from the customer is generally received within a short period of time after the legal transfer of the scrap materials to the refiner.

~~Other Revenue~~

~~Layaway fees, product protection plan revenues, and jewelry VIP package revenues are not significant.~~additional discussion.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU, along with subsequently issued related ASUs, requires financial assets (or groups of financial assets) measured at amortized cost basis to be presented at the net amount expected to be

collected, among other provisions. ~~The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.~~ Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A reporting entity should generally apply the amendment on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting ~~periods~~period in which the amendment is effective. We have not identified any impacts to our financial statements that we believe will

be material as a result of the adoption of the ASU, although we continue to evaluate the impact of adoption. We believe we are following an appropriate timeline to allow for proper recognition, presentation and disclosure upon adoption of this ASU which is effective for the first quarter of our fiscal 2021.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The provisions of this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted based upon guidance issued within the ASU. We are in the process of evaluating the impact of adopting ASU 2016-02 on our consolidated financial position, results of operations and cash flows, and anticipate a material impact on our consolidated financial position. Additionally, we are evaluating the disclosure requirements under this ASU and are identifying and preparing to implement changes to our accounting policies, practices and controls to support adoption of the ASU and have completed upgrades to our third-party software solution to support adoption. We will complete our implementation to allow for proper recognition, presentation and disclosure upon adoption of the ASU which is effective for our fiscal 2020. We currently plan to adopt this ASU using the optional transition method provided under ASU 2018-11, Leases, (Topic 842): Targeted Improvement which was issued in July 2018, allowing for application of ASU 2016-02 at the adoption date.

Please refer to Note 1 of Notes to Consolidated Financial Statements included in "Part II, Item 8 — Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended September 30, ~~2018~~2019 for discussion of our significant accounting policies and other accounting pronouncements issued but not yet adopted.

NOTE 2: ACQUISITIONS

~~Fiscal~~In June 2019, ~~Acquisitions~~

we acquired assets related to 7 pawn stores operating under the name "Metro Pawn" in Nevada, entering the Reno market and expanding our presence in the Las Vegas metropolitan area, for an aggregate purchase price of $7.0 million in cash, of which $3.9 million was recorded as goodwill. In December 2018, we acquired assets related to ~~five~~5 pawn stores in Mexico for an aggregate purchase price of $0.3 million in cash, of which $0.1 million was recorded as goodwill. We expect substantially all goodwill attributable to the fiscal 2019 acquisitions to be deductible for tax purposes. We have concluded that ~~this acquisition was~~these acquisitions were immaterial to our overall consolidated financial results and, therefore, have omitted ~~certain~~ information that would otherwise be required.

~~Fiscal 2018 Acquisition of Camira Administration Corp. and Subsidiaries (“GPMX”)~~

On October 6, 2017, we completed the acquisition of 100% of the outstanding stock of Camira Administration Corp. and subsidiaries (“GPMX”), a business that, at the time, owned and operated 112 stores located in Guatemala, El Salvador, Honduras and Peru for a total purchase price of $61.7 million. The GPMX acquisition significantly expanded our store base into Latin American countries outside of Mexico and provides us with a platform for further growth in the region. The accompanying condensed consolidated results of operations for the six months ended March 31, 2019 include the results of operations for GPMX, while the comparable prior-year period includes the results of GPMX for the period October 6, 2017 to March 31, 2018, affecting comparability of fiscal 2019 and 2018 year-to-date amounts. We have performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the total consideration based on the fair values of those identifiable assets and liabilities.

~~All Other Fiscal 2018 Acquisitions~~

On June 25, 2018, June 11, 2018 and December 4, 2017, we acquired pawn stores operating in Mexico under the names “Montepio San Patricio,” "Presta Dinero" and "Bazareño," respectively. These acquisitions significantly strengthened our competitive position in existing regions, gave us a presence in new regions and allowed us to achieve synergies in management and administration. The accompanying condensed consolidated results of operations for the six months ended March 31, 2019 include the results of operations for these acquisitions, while the comparable prior-year periods only include the results of Bazareño for the period December 4, 2017 to March 31, 2018, affecting comparability of fiscal 2019 and 2018 amounts.

We have performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the total consideration based on the fair values of those identifiable assets and liabilities for these acquisitions. During the first quarter of fiscal 2019, we finalized accounting for the Montepio San Patricio and Presta Dinero acquisitions, which were completed in fiscal 2018, and increased associated deferred tax assets by $1.8 million with an offsetting reduction in goodwill.

NOTE 3: EARNINGS PER SHARE

Components of basic and diluted earnings per share and excluded antidilutive potential common shares are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018			2019			2018

	(in thousands, except per share amounts)												(in thousands, except per share amounts)
Net income from continuing operations attributable to EZCORP (A)	$	3,412		$	12,081		$	229		$	24,942
Net income (loss) from continuing operations attributable to EZCORP (A)													$	1,265		$	(3,183	)
Loss from discontinued operations, net of tax (B)	(18		)	(500		)	(201		)	(722		)	(27		)	(183		)
Net income attributable to EZCORP (C)	$	3,394		$	11,581		$	28		$	24,220
Net income (loss) attributable to EZCORP (C)													$	1,238		$	(3,366	)

Weighted-average outstanding shares of common stock (D)	55,445			54,464			55,236			54,447			55,666			55,032
Dilutive effect of restricted stock and 2024 Convertible Notes*	18			3,160			11			2,195
Dilutive effect of restricted stock*													21			—
Weighted-average common stock and common stock equivalents (E)	55,463			57,624			55,247			56,642			55,687			55,032

Basic earnings per share attributable to EZCORP:
Basic earnings (loss) per share attributable to EZCORP:
Continuing operations (A / D)	$	0.06		$	0.22		$	—		$	0.46		$	0.02		$	(0.06	)
Discontinued operations (B / D)	—			(0.01		)	—			(0.01		)	—			—
Basic earnings per share (C / D)	$	0.06		$	0.21		$	—		$	0.45
Basic earnings (loss) per share (C / D)													$	0.02		$	(0.06	)

Diluted earnings per share attributable to EZCORP:
Diluted earnings (loss) per share attributable to EZCORP:
Continuing operations (A / E)	$	0.06		$	0.21		$	—		$	0.44		$	0.02		$	(0.06	)
Discontinued operations (B / E)	—			(0.01		)	—			(0.01		)	—			—
Diluted earnings per share (C / E)	$	0.06		$	0.20		$	—		$	0.43
Diluted earnings (loss) per share (C / E)													$	0.02		$	(0.06	)

Potential common shares excluded from the calculation of diluted earnings per share above*:
Restricted stock**	2,991			3,596			2,789			3,278			2,216			2,626


*	See Note 67 for discussion of the terms and conditions of the potential impact of the 2019 Convertible ~~Note~~Notes Warrants, 2024 Convertible Notes and 2025 Convertible Notes. As required by ASC 260-10-45-19, 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 and market conditioned 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.

NOTE 4: LEASES

As described in Note 1, we adopted ASU 2016-02, Leases (Topic 842) as of October 1, 2019. We lease our pawn locations and corporate offices under operating leases and determine if an arrangement is or contains a lease at inception. After an initial lease term of generally three to ten years, our real property lease agreements typically allow renewals in three to five-year increments. We generally account for the initial lease term of our pawn locations as up to ten years, including renewal options. Our corporate office is leased through March 2029 with annually escalating rent and includes 2 five-year extension options at the end of the initial lease term. Our pawn location lease agreements generally include rent escalations throughout the initial lease term, with certain future rental payments contingent on increases in a consumer price index, included in variable lease expense. Many leases include both lease and non-lease components, which we have elected not to account for separately. Lease components generally include rent, taxes and insurance, while non-lease components generally include common area or other maintenance.

The weighted-average remaining lease term for operating leases as of December 31, 2019 was 6.02 years. As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying the portfolio approach to groups of leases with similar characteristics. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of October 1, 2019 to initially measure our lease liability. The weighted average incremental borrowing rate used to measure our lease liability as of December 31, 2019 was 8.44%.

The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 computed based on the consumer price index and foreign currency exchange rate as applicable then in effect and excluding executory costs on October 1, 2019 are as follows (in thousands):



Right-of-use asset	$	246,028
Straight-line rent accrual	(8,479		)
	$	237,549

Lease liability, current	$	45,272
Lease liability, non-current	200,756
	$	246,028

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 included in "Operations" and "Administrative" expense, based on the underlying lease use, in our condensed consolidated statements of operations for the three months ended December 31, 2019 are as follows (in thousands):



Operating lease expense	$	16,526
Variable lease expense	2,807
	$	19,333

Maturity of our lease liabilities as of December 31, 2019 is as follows (in thousands):



Nine months ending September 30, 2020	$	47,822
Fiscal 2021	58,922
Fiscal 2022	49,943
Fiscal 2023	40,548
Fiscal 2024	31,309
Thereafter	73,695
	$	302,239
Less: Portion representing interest	(67,835		)
	$	234,404

Prior to our adoption of ASC 842, future minimum undiscounted rentals due under non-cancelable leases as of September 30, 2019 for each subsequent fiscal year were as follows (in thousands):



2020	$	69,291
2021	60,588
2022	46,720
2023	32,062
2024	19,969
Thereafter	39,256
	$	267,886

We present the changes in our lease right-of-use asset and lease liabilities gross in our condensed consolidated statements of cash flows. The supplemental cash flow information relating to our operating leases for the three months ended December 31, 2019 is as follows (in thousands):



Lease right-of-use assets obtained in exchange for operating lease liabilities subsequent to adoption of ASC 842	$	748

NOTE 4:5: STRATEGIC INVESTMENTS

As of ~~March~~December 31, 2019, we owned 214,183,714 shares, or approximately 34.75%, of Cash Converters International Limited ("Cash Converters International"). The following tables present summary financial information for Cash Converters International’s most recently reported results after translation to U.S. dollars:


	December 31,				June 30,
	2018		2017		2019		2018

	(in thousands)				(in thousands)
Current assets	$	172,836	$	203,664	$	173,826	$	229,105
Non-current assets	151,492		151,189		152,483		148,195
Total assets	$	324,328	$	354,853	$	326,309	$	377,300

Current liabilities	$	81,165	$	128,731	$	77,434	$	122,924
Non-current liabilities	22,109		14,559		26,163		15,449
Shareholders’ equity	221,054		211,563		222,712		238,927
Total liabilities and shareholders’ equity	$	324,328	$	354,853	$	326,309	$	377,300


	Half-Year Ended December 31,					Fiscal Year Ended June 30,
	2018			2017		2019			2018

	(in thousands)					(in thousands)
Gross revenues	$	99,390		$	95,784	$	201,365		$	201,800
Gross profit	56,884			63,212		111,932			128,366
Net (loss) profit	(3,791		)	7,292		(1,210		)	17,443

~~Through the first two quarters of fiscal~~On October 21, 2019, ~~the fair value of our investment in~~ Cash Converters International ~~as estimated by reference~~agreed to ~~its quoted market price per share and the applicable foreign currency exchange rate, declined from its value at September 30, 2018 and ended each quarter below its carrying value. As~~settle a class action lawsuit previously filed on behalf of March 31, 2019 and December 31, 2018, we determined that our investment was impaired and that such impairment was other-than-temporary. In reaching this conclusion, we considered all available evidence, including evidenceborrowers residing in ~~existence as of September 30, 2018 as discussed in~~ Note 4 of Notes to Consolidated Financial Statements included in "Part II, Item 8 — Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended September 30, 2018. Additionally, we noted the following developments subsequent to September 30, 2018: (i) continued decline in Cash Converters International's share price; and (ii) ongoing uncertainty around remaining Queensland, Australia ~~class action lawsuit. As a result, we recognized an other-than-temporary impairment in~~who took out personal loans from Cash Converters International ~~of $13.3 million ($10.3 million, net of taxes)~~between July 30, 2009 and ~~$6.5 million ($5.0 million, net of taxes) during the first and second quarters of fiscal 2019, respectively.~~

~~The above impairments increased the difference between the amount at which our investment was carried and the amount of underlying equity in net assets of~~June 30, 2013. Cash Converters International ~~and was~~agreed to pay AUD $42.5 million, subject to court approval. We recorded ~~in “Impairment~~a charge, net of ~~investment in unconsolidated affiliate” in~~tax, of $7.1 million for our ~~condensed consolidated statements~~proportionate share of ~~operations~~the settlement in the ~~“Other International” segment. We will continue~~current quarter related to ~~monitor the fair value~~this event, in addition to our regularly included share of ~~our investment in~~earnings from Cash Converters International. Cash Converters International ~~for other-than-temporary impairments in future reporting periods~~has indicated that it expects to pay the settlement amount with cash on hand and may record additional impairment charges should the fair value of our investment in Cash Converters International further decline below its carrying value for an extended period of time. See Note 5 for the fair value and carrying value of our investment in Cash Converters International.cash flow from operations.

NOTE 5:6: FAIR VALUE MEASUREMENTS

Our assets and liabilities discussed below are classified in one of the following three categories based on the inputs used to develop their fair values: 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; and Level 3 — Unobservable

inputs that are not corroborated by market data.

~~Recurring Fair Value Measurements~~

~~The tables below present our financial assets (liabilities) that were carried and measured~~ We have elected not to measure at fair value ~~on a recurring basis:~~

Financial Assets (Liabilities) Balance Sheet Location March 31, 2019 March 31, 2018 September 30, 2018

(in thousands)
2019 Convertible Notes Hedges — Level 2 Prepaid expenses and other current assets $ —
$ —
$ 2,552
2019 Convertible Notes Hedges — Level 2 Other assets —
16,042
—
2019 Convertible Notes Embedded Derivative — Level 2 Current maturities of long-term debt, net —
—
(2,552 )
2019 Convertible Notes Embedded Derivative — Level 2 Long-term debt, net —
(16,042 ) —

~~We measured the~~any eligible items for which fair value ~~of the cash-settled call options pertaining to the~~ ~~2.125% Cash Convertible Senior~~ ~~Notes Due 2019 (the “2019 Convertible Notes Hedges”) and the 2019 Convertible Notes derivative instrument (the “2019 Convertible Notes Embedded Derivative”) using the Black-Scholes-Merton~~model based on observable Level 1 and Level 2 inputs such as conversion price of underlying shares, current share price, implied volatility, risk free interest rate and other factors. The volatility input used as of March 31, 2019 was 36% based on historically observed market inputs.

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.

~~Financial Assets and Liabilities Not Measured at Fair Value~~

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


	Carrying Value		Estimated Fair Value								Carrying Value			Estimated Fair Value
	March 31, 2019		March 31, 2019		Fair Value Measurement Using						December 31, 2019			December 31, 2019		Fair Value Measurement Using
					Level 1		Level 2		Level 3							Level 1		Level 2		Level 3

	(in thousands)										(in thousands)
Financial assets:
Notes receivable from Grupo Finmart, net	$	25,166	$	26,601	$	—	$	—	$	26,601	$	7,450		$	7,729	$	—	$	—	$	7,729
Zero-coupon convertible promissory note due January 2021	6,793		6,793		—		—		6,793
Investment in unconsolidated affiliates	29,387		29,387		26,611		—		2,776
2.89% promissory note receivable due April 2024											1,124			1,124		—		—		1,124
Investments in unconsolidated affiliates											29,272			42,460		34,555		—		7,905

Financial liabilities:
2019 Convertible Notes	$	192,688	$	193,440	$	—	$	193,440	$	—
2024 Convertible Notes	108,533		159,994		—		159,994		—		$	112,740		$	136,634	$	—	$	136,634	$	—
2025 Convertible Notes	122,918		151,179		—		151,179		—		127,902			136,965		—		136,965		—
8.5% unsecured notes due 2024	1,191		1,191		—		—		1,191
8.5% unsecured debt due 2024											1,042			1,042		—		—		1,042
CASHMAX secured borrowing facility	304		1,105		—		—		1,105		(260		)	404		—		—		404



	Carrying Value		Estimated Fair Value
	December 31, 2018		December 31, 2018		Fair Value Measurement Using
	December 31, 2018		December 31, 2018		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable from Grupo Finmart, net	$	31,310	$	33,710	$	—	$	—	$	33,710
Investments in unconsolidated affiliates	35,511		35,511		35,511		—		—

Financial liabilities:
2019 Convertible Notes	$	190,076	$	190,613	$	—	$	190,613	$	—
2024 Convertible Notes	107,182		145,202		—		145,202		—
2025 Convertible Notes	121,316		134,447		—		134,447		—
8.5% unsecured debt due 2024	1,237		1,237		—		—		1,237
CASHMAX secured borrowing facility	334		1,160		—		—		1,160



	Carrying Value			Estimated Fair Value
	September 30, 2019			September 30, 2019		Fair Value Measurement Using
	September 30, 2019			September 30, 2019		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable from Grupo Finmart, net	$	7,182		$	7,582	$	—	$	—	$	7,582
2.89% promissory note receivable due April 2024	1,117			1,117		—		—		1,117
Investments in unconsolidated affiliates	34,516			28,308		20,252		—		8,056

Financial liabilities:
2024 Convertible Notes	$	111,311		$	139,969	$	—	$	139,969	$	—
2025 Convertible Notes	126,210			138,345		—		138,345		—
8.5% unsecured debt due 2024	1,092			1,092		—		—		1,092
CASHMAX secured borrowing facility	(19		)	634		—		—		634

Carrying Value Estimated Fair Value
March 31, 2018 March 31, 2018 Fair Value Measurement Using
Level 1 Level 2 Level 3

(in thousands)
Financial assets:
Notes receivable from Grupo Finmart, net $ 56,751
$ 65,091
$ —
$ —
$ 65,091
Investment in unconsolidated affiliates 46,509
46,926
46,926
—
—

Financial liabilities:
2019 Convertible Notes $ 182,296
$ 206,856
$ —
$ 206,856
$ —
2024 Convertible Notes 103,287
212,060
—
212,060

Carrying Value Estimated Fair Value
September 30, 2018 September 30, 2018 Fair Value Measurement Using
Level 1 Level 2 Level 3

(in thousands)
Financial assets:
Notes receivable from Grupo Finmart, net $ 37,425
$ 41,153
$ —
$ —
$ 41,153
Investment in unconsolidated affiliates 49,500
49,500
49,500
—
—

Financial liabilities:
2019 Convertible Notes $ 187,433
$ 189,150
$ —
$ 189,150
$ —
2024 Convertible Notes 105,858
180,399
—
180,399
—
2025 Convertible Notes 119,736
161,253
—
161,253
—
8.5% unsecured notes due 2024 1,304
1,304
—
—
1,304

~~Based primarily on~~We estimate that the ~~short-term nature~~carrying value of our cash and cash equivalents, pawn loans, pawn service charges receivable, current consumer loans, fees and interest receivable and other debt ~~we estimate that their carrying value approximates~~approximate fair value. We consider our cash and cash equivalents to be measured using Level 1 inputs and our pawn loans, pawn service charges receivable, consumer loans, fees and interest 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.

We measured the fair value of the remaining deferred compensation fee due in fiscal 2020 from the sale of Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. ("Grupo Finmart") to Alpha Holding, S.A. de C.V. (“AlphaCredit”) in September 2016 as of December 31, 2019 under a discounted cash flow approach considering the estimated credit ratings for Grupo Finmart and AlphaCredit, with discount rates of primarily 7%. Certain of the significant inputs used for the valuation were not observable in the market. Significant increases or decreases in the underlying assumptions used to value the notes receivable could significantly increase or decrease these fair value estimates. We remain obligated to indemnify AlphaCredit for any tax obligations arising from the Grupo Finmart business that are attributable to periods prior to the completion of the sale in September 2016, referred to as “pre-closing taxes.” Those obligations continue until the expiration of the statute of limitations applicable to the pre-closing periods. In ~~March~~August 2019, ~~we deconsolidated~~AlphaCredit notified us of a potential indemnity claim for certain pre-closing taxes, but the nature, extent and validity of such claim has yet to be determined. We review the financial statements of Grupo Finmart and AlphaCredit including the calculation of synthetic credit spreads as described above in making our determination that the Parent Loan Notes are collectible on an ongoing basis.

The equity method of accounting is followed for our 13% ownership in a previously consolidated variable interest entity ("RDC") over which we no longer have the power to direct the activities that most significantly affect its economic performance. ~~After the deconsolidation, we continue to hold the following interests in RDC:~~

~~A 5% equity interest and a call option to repurchase an additional 43% equity interest for $1 in September 2019 in the event~~We believe that RDC has not received a qualified third party investment. These interests were recorded at a combined fair value of $2.8 million and included in "Investment in unconsolidated affiliates" in our condensed consolidated balance sheets.

A $9.1 million non-interest bearing convertible promissory note due January 2021, which is automatically convertible into a 10% equity interest when RDC has received a qualified third party investment. This note was recorded at its fair value ~~of $6.8 million in "Notes receivable, net" in our condensed consolidated balance sheets.~~

In conjunction with the deconsolidation and recording of the above amounts, we recognized a loss of $0.3 million, included in "Other expense (income)" in our condensed consolidated statements of operations included in our "Other International" segment and in "Other adjustments" in our condensed consolidated statements of cash flows. The retained equity interest, call option and convertible promissory note were valued using a weighted discounted cash flow and market approach using Level 3 inputs. Significant increases or decreases in the underlying assumptions used toapproximates carrying value ~~these interests could significantly increase or decrease the~~although such fair value ~~estimate.~~

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. Subsequent to quarter end, 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~~is highly variable 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.~~

Subsequent to the sale of Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. ("Grupo Finmart") to Alpha Holding, S.A. de C.V. (“AlphaCredit”) in September 2016, we determined that we retained a variable interest in Grupo Finmart including notes receivable. We determined that we are not the primary beneficiary of Grupo Finmart subsequent to its disposition as we lack a controlling financial interest in Grupo Finmart. We measured the fair value of the notes receivable as of March 31, 2019 under a discounted cash flow approach considering the estimated credit ratings for Grupo Finmart and AlphaCredit and as determined with external consultation, with discount rates of primarily 7%. Certain of theincludes significant inputs used for the valuation were not observable in the market. Included in the fair value of the notes receivable is the estimated fair value of the deferred compensation fee negotiated in September 2017, of which the ultimate amount to be received is dependent upon the timing of payment of the notes receivable. Significant increases or decreases in the underlying assumptions used to value the notes receivable could significantly increase or decrease these fair value estimates.

~~The inputs used to measure the fair value of the investment in unconsolidated affiliate Cash Converters International were considered Level 1~~unobservable inputs. These inputs are comprised of (a) the quoted stock price on the 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.

We measured the fair value of the ~~2019 Convertible Notes,~~ 2024 ~~Convertible Notes~~ and 2025 Convertible Notes using quoted price inputs. The ~~2019 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes~~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.

NOTE 6:7: DEBT

The following tables present our debt instruments outstanding, ~~as well as future principal payments due,~~ contractual maturities and interest expense:


	March 31, 2019							March 31, 2018							September 30, 2018							December 31, 2019								December 31, 2018							September 30, 2019
	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		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)																					(in thousands)
2019 Convertible Notes	$	195,000	$	(2,312	)	$	192,688	$	195,000	$	(12,704	)	$	182,296	$	195,000	$	(7,567	)	$	187,433	$	—	$	—		$	—		$	195,000	$	(4,924	)	$	190,076	$	—	$	—		$	—
2019 Convertible Notes Embedded Derivative	—		—			—		16,042		—			16,042		2,552		—			2,552		—		—			—			21		—			21		—		—			—
2024 Convertible Notes	143,750		(35,217		)	108,533		143,750		(40,463		)	103,287		143,750		(37,892		)	105,858		143,750		(31,010		)	112,740			143,750		(36,568		)	107,182		143,750		(32,439		)	111,311
2025 Convertible Notes	172,500		(49,582		)	122,918		—		—			—		172,500		(52,764		)	119,736		172,500		(44,598		)	127,902			172,500		(51,184		)	121,316		172,500		(46,290		)	126,210
8.5% unsecured notes due 2024*	1,191		—			1,191		—		—			—		1,304		—			1,304
8.5% unsecured debt due 2024*																						1,042		—			1,042			1,237		—			1,237		1,092		—			1,092
CASHMAX secured borrowing facility*	1,105		(801		)	304		—		—			—		—		—			—		404		(664		)	(260		)	1,160		(826		)	334		634		(653		)	(19		)
Total	$	513,546	$	(87,912	)	$	425,634	$	354,792	$	(53,167	)	$	301,625	$	515,106	$	(98,223	)	$	416,883	$	317,696	$	(76,272	)	$	241,424		$	513,668	$	(93,502	)	$	420,166	$	317,976	$	(79,382	)	$	238,594
Less current portion	195,213		(2,312		)	192,901		143,750		(40,463		)	103,287		197,748		(7,567		)	190,181		215		—			215			195,162		(4,924		)	190,238		214		—			214
Total long-term debt	$	318,333	$	(85,600	)	$	232,733	$	211,042	$	(12,704	)	$	198,338	$	317,358	$	(90,656	)	$	226,702	$	317,481	$	(76,272	)	$	241,209		$	318,506	$	(88,578	)	$	229,928	$	317,762	$	(79,382	)	$	238,380



*	Amount translated from Guatemalan quetzals and Canadian dollars as of applicable period end. Certain disclosures omitted due to materiality considerations.


	Schedule of Contractual Maturities										Schedule of Contractual Maturities
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years

	(in thousands)										(in thousands)
2019 Convertible Notes*	$	195,000	$	195,000	$	—	$	—	$	—
2024 Convertible Notes*	143,750		—		—		—		143,750		143,750		—		—		143,750		—
2025 Convertible Notes*	172,500		—		—		—		172,500		172,500		—		—		172,500		—
8.5% unsecured notes due 2024	1,191		213		424		424		130
8.5% unsecured debt due 2024											1,042		215		431		396		—
CASHMAX secured borrowing facility	1,105		—		1,105		—		—		404		—		404		—		—
	$	513,546	$	195,213	$	1,529	$	424	$	316,380	$	317,696	$	215	$	835	$	316,646	$	—



*	Excludes the potential impact of embedded derivatives.


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended December 31,
	2019		2018		2019		2018		2019		2018

	(in thousands)								(in thousands)
2019 Convertible Notes:
Contractual interest expense	$	1,069	$	1,069	$	2,138	$	2,138	$	—	$	1,076
Amortization of debt discount and deferred financing costs	2,610		2,455		5,253		4,943		—		2,643
Total interest expense	$	3,679	$	3,524	$	7,391	$	7,081	$	—	$	3,719

2024 Convertible Notes:
Contractual interest expense	$	1,033	$	1,033	$	2,066	$	2,066	$	1,033	$	1,033
Amortization of debt discount and deferred financing costs	1,350		1,250		2,675		2,481		1,429		1,325
Total interest expense	$	2,383	$	2,283	$	4,741	$	4,547	$	2,462	$	2,358

2025 Convertible Notes:
Contractual interest expense	$	1,024	$	—	$	2,048	$	—	$	1,024	$	1,024
Amortization of debt discount and deferred financing costs	1,602		—		3,176		—		1,691		1,573
Total interest expense	$	2,626	$	—	$	5,224	$	—	$	2,715	$	2,597

2.375% 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 us and Wells Fargo Bank, National Association, as the original trustee. 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 their 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 of ~~March~~December 31, 2019 was $39.0 million. The effective interest rate for the three ~~and six~~ months ended ~~March~~December 31, 2019 was approximately 9%. As of ~~March~~December 31, 2019, the remaining unamortized debt discount and issuance costs will be amortized through the 2025 Maturity Date assuming no early conversion.

The 2025 Convertible Notes are convertible into cash or shares of Class A ~~Non-Voting~~Non-voting Common Stock ("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 of our Class A Common Stock). We account for the Class A Common Stock issuable upon conversion under the treasury stock method. To the extent our average share price is over $15.90 per share for any fiscal quarter or year-to-date period, we are required to recognize incremental dilution of our earnings per share.

If, among other triggers described in the 2018 Indenture, the market price of our Class A Common Stock meets the threshold based on at least 20 of the final 30 trading days of the quarter for the 2025 Convertible Notes to become convertible at 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. The stock trading price condition

and other triggers are measured on a quarter-by-quarter basis and were not met as of ~~March~~December 31, 2019. As of ~~March~~December 31, 2019, the if-converted value of the 2025 Convertible Notes did not exceed the principal amount.

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 us and Wells Fargo Bank, National Association, as the original trustee. 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 their terms prior to such date. 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 of ~~March~~December 31, 2019 was $25.3 million. The effective interest rate for the three ~~and six~~ months ended ~~March~~December 31, 2019 was approximately 9%. As of ~~March~~December 31, 2019, the remaining unamortized debt discount and issuance costs will be amortized 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 of our Class A Common Stock). We account for the Class A Common Stock issuable upon conversion under the treasury stock method. To the extent our average share price is over $10.00 per share for any fiscal quarter, we are required to recognize incremental dilution of our earnings per share.

If, among other triggers described in the 2017 Indenture, the market price of our Class A Common Stock meets the threshold based on at least 20 of the final 30 trading days of the quarter for the 2024 Convertible Notes to become convertible at 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. The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of ~~March~~December 31, 2019. As of ~~March~~December 31, 2019, the if-converted value of the 2024 Convertible Notes did not exceed the principal amount.

2.125% Cash Convertible Senior Notes Due 2019

In June 2014, we issued $200 million aggregate principal amount of 2.125% Cash Convertible Senior Notes Due 2019 (the "2019 Convertible Notes"), with an additional $30 million principal amount of 2019 Convertible Notes issued in July 2014. In July 2017, we used $34.4 million of net proceeds from the 2024 Convertible Notes offering to repurchase and retire $35.0 million aggregate principal amount of 2019 Convertible Notes. ~~The 2019 Convertible Notes were issued~~ pursuant to an indenture dated June 23, 2014 (the "2014 Indenture") by and between us and Wells Fargo Bank, National Association, as the trustee. The 2019 Convertible Notes were issued in a private offering ~~and resold under Rule 144A under the Securities Act of 1933.~~ The 2019 Convertible Notes ~~pay~~paid interest semi-annually in arrears at a rate of 2.125% per annum on June 15 and December 15 of each ~~year and mature~~year. The 2019 Convertible Notes matured on June 15, 2019 (the "2019 Maturity Date"), ~~unless converted, redeemed or repurchased in accordance with their terms prior to such date~~. ~~The effective interest rate for the three~~ and ~~six months ended March 31, 2019 was approximately 8%. As of March 31, 2019,~~ the remaining ~~unamortized debt discount and issuance costs will be amortized through the 2019 Maturity Date assuming no early conversion.~~

The 2019 Convertible Notes are convertible into cash, subject to satisfaction of certain conditions and during the periods described in the 2014 Indenture, based on an initial conversion rate of 62.2471 shares of Class A Common Stock per $1,000$195.0 million aggregate principal amount of 2019 Convertible Notes (equivalent to an initial conversion price of approximately $16.065 per share of our Class A Common Stock). As of March 31, 2019, the if-converted value of the 2019 Convertible Notes did not exceed the principal amount.

~~2019 Convertible Notes Hedges~~

In connection with the issuance of the 2019 Convertible Notes, we purchased cash-settled call options (the “2019 Convertible Notes Hedges”) in privately negotiated transactions with certain of the initial purchasers or their affiliates (in this capacity, the “Option Counterparties”). The 2019 Convertible Notes Hedges provide us with the option to acquire,outstanding plus accrued interest was repaid using cash on a net settlement basis, approximately 12.1 million shares of our Class A Common Stock at a strike price of $16.065, which is equal to the number of shares of our Class A Common Stock that notionally underlie the 2019 Convertible Notes and corresponds to the conversion price of the 2019 Convertible Notes. hand.~~If we exercise the 2019 Convertible Notes~~ ~~Hedges, the aggregate amount of cash we will~~

receive from the Option Counterparties will cover the aggregate amount of cash that we would be required to pay to the holders of the converted 2019 Convertible Notes, less the principal amount thereof.

2019 Convertible Notes Warrants

In connection with the issuance of the 2019 Convertible Notes, we also sold net-share-settled warrants (the “2019 Convertible Notes Warrants”) ~~in privately negotiated transactions with the Option Counterparties.~~. The 2019 Convertible Notes Warrants allow for the purchase of up to approximately ~~12.1~~14.3 million shares of our Class A Common Stock at a strike price of $20.83 per share. We account for the Class A Common Stock issuable upon exercise under the treasury stock method. As a result of the 2019 Convertible Notes Warrants, ~~and related transactions,~~ we ~~are required~~will experience dilution to ~~recognize incremental dilution of~~ our diluted earnings per share ~~to the extent~~if our average ~~share~~closing stock price ~~is over~~exceeds $20.83 for any fiscal ~~quarter.~~quarter before expiration of the warrants. The unexpired 2019 Convertible Notes Warrants expire on various dates from ~~September 2019~~January 2020 through ~~February~~April 2020 and, if exercised, must be settled in net shares of our Class A Common Stock. Therefore, upon expiration of the 2019 Convertible Notes Warrants, we would issue shares of Class A Common Stock to the purchasers of the 2019 Convertible Notes Warrants that represent the value by which the price of the Class A Common Stock exceeds the strike price stipulated within the particular warrant agreement, if any. As of December 31, 2019, there were a maximum of 5.0 million shares of Class A Common Stock issuable under the 2019 Convertible Notes Warrants outstanding.

CASHMAX Secured Borrowing Facility

In November 2018, we entered into a receivables securitization facility with a third-party lender (the "lender") to provide funding for installment loan originations in our Canadian CASHMAX business. Under the facility, ~~an unconsolidated~~a variable interest entity (the "trust") has the right, subject to various conditions, to borrow up to CAD $25 million from the lender (the "third-party loan") and use the proceeds to purchase interests in installment loan receivables generated by CASHMAX. The trust uses collections on the transferred receivables to pay various amounts in accordance with an agreed priority arrangement, including expenses, its obligations under the third-party loan and, to the extent available, amounts owned to CASHMAX with respect to the purchase price of the transferred receivables and CASHMAX's retained interest in the receivables. CASHMAX has no obligation with respect to the third-party loan or the transferred receivables except to (a) service the underlying installment loans on behalf of the trust and (b) pay amounts owing under or repurchase the underlying installment loans in the event of a breach by CASHMAX or in certain other limited circumstances. The facility is ~~generally~~ nonrecourse to ~~EZCORP. The amount outstanding~~EZCORP, allowed borrowing through November 2019, and fully matures in November 2021. Our obligation under the facility as of ~~March~~December 31, 2019 was ~~$1.1~~$0.4 million.

NOTE 7:8: COMMON STOCK AND STOCK COMPENSATION

~~On May 1, 2010~~Common Stock Repurchase Program

In December 2019, our Board of Directors ~~approved~~authorized the ~~adoption~~repurchase of up to $60.0 million of our Class A Common Stock over three years. During the current quarter, we repurchased and retired 142,409 shares of our Class A Common Stock for $963,000, which amount was allocated between "Additional paid-in capital" and "Retained earnings" in our condensed consolidated balance sheets.

Stock Compensation

As of September 30, 2019, the EZCORP, Inc. 2010 Long-Term Incentive Plan, ~~(the “2010 Plan”). As~~which has been approved by our Board of ~~September 30, 2018, the 2010 Plan~~Directors, permitted grants of options, restricted stock awards and stock appreciation rights covering up to ~~5,085,649~~5,485,649 shares of our Class A Common Stock. ~~In November 2018, the Board of Directors and the voting stockholder approved the addition of 400,000 shares to the 2010 Plan.~~

In ~~April 2019,~~the current quarter, we granted ~~our six new non-employee directors~~ a total of ~~51,504 restricted stock awards. In November 2018, we granted 1,008,998 restricted stock unit awards to employees and 59,812~~222,912 restricted stock awards to our 9 non-employee ~~directors with a grant date fair value of primarily $9.18 per share.~~ directors. These awards vest on September 30, 2020 and are subject only to service conditions.

The number of long-term incentive award shares and units granted are generally determined based on our share price as of ~~October 1 each~~the beginning of the fiscal year, which was ~~$10.51~~$6.46 for ~~these~~ fiscal ~~2019~~2020 awards. The awards granted to employees vest on September 30, 2021, subject to the achievement of certain adjusted net income and adjusted diluted earnings per share performance targets. As of December 31, 2018, we considered the achievement of these performance targets probable. The awards granted to non-employee directors vest on September 30, 2019 and are subject only to service conditions.

NOTE 8:9: CONTINGENCIES

WeCurrently and from time to time, we are involved in various claims, suits, investigations and legal proceedings, including ~~those~~the lawsuit described below. WeWhile we are unable to determine the ultimate outcome of any current litigation or regulatory ~~actions. An unfavorable outcome could~~actions (except as noted below), we believe their resolution will not have a material adverse effect on our financial condition, results of operations or liquidity. We have not recorded a liability for any of these matters as of March 31, 2019 because we do not believe at this time that any loss is probable or that the amount of any probable loss can be reasonably estimated. The following is a description of significant proceedings.

Federal Securities Litigation — OnIn July ~~20,~~ 2015 ~~Wu Winfred Huang, a purported holder of Class A Common Stock, for himself~~ and ~~on behalf of other similarly situated holders of Class A Common Stock,~~August 2015, 2 substantially identical lawsuits were filed ~~a lawsuit~~ in the United States District Court for the Western District of ~~Texas styled~~Texas. Those lawsuits were subsequently consolidated into a single action under the caption ~~Huang v.~~In re EZCORP, Inc.~~, et al.~~ Securities Litigation ~~(Case~~(Master File No. 1:15-cv-00608-SS). The complaint names as defendants EZCORP, Inc., Stuart I. Grimshaw (our chief executive officer) and Mark E. Kuchenrither (our former chief financial officer) and asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The original complaint related to the Company’s announcement on July 17, 2015 that it will restate ~~the~~its financial statements for fiscal 2014 and the first quarter of fiscal 2015, and alleged generally that the Company issued materially false or misleading statements concerning the Company, its finances, business operations and prospects and that the Company misrepresented the financial performance of the Grupo Finmart business.

~~On August 14, 2015, a substantially identical lawsuit, styled~~ ~~Rooney v. EZCORP, Inc., et al.~~ (Case No. 1:15-cv-00700-SS) was also filed in the United States District Court for the Western District of Texas. On September 28, 2015, the plaintiffs in these two lawsuits filed an agreed stipulation to be appointed co-lead plaintiffs and agreed that their two actions should be consolidated. On November 3, 2015, the Court entered an order consolidating the two actions under the caption In ~~re EZCORP, Inc. Securities Litigation~~ ~~(Master File No. 1:15-cv-00608-SS), and appointed the two plaintiffs as co-lead plaintiffs, with their respective counsel appointed as co-lead counsel.~~

On January ~~11,~~ 2016, the plaintiffs filed an Amended Class Action Complaint (the "Amended Complaint")~~. In the Amended Complaint, the plaintiffs seek to represent a class of purchasers of our Class A Common Stock between November 6, 2012 and October 20, 2015. The Amended Complaint asserts~~, which asserted that the Company and ~~Mr.~~Mark E. Kuchenrither, our former Chief Financial Officer, violated Section 10(b) of the Securities Exchange Act and Rule 10b-5, issued materially false or misleading statements ~~throughout the proposed class period~~ concerning the Company and its internal controls, specifically regarding the financial performance of Grupo Finmart. The plaintiffs also allege that Mr. Kuchenrither, as a controlling person of the Company, violated Section 20(a) of the Securities Exchange Act. The Amended Complaint does not assert any claims against Mr. Grimshaw. On February 25, 2016, defendants filed a motion to dismiss the lawsuit. The plaintiff filed an opposition to the motion to dismiss on April 11, 2016, and the defendants filed their reply on May 11, 2016. The Court held a hearing on the motion to dismiss on June 22, 2016.

OnIn October ~~18,~~ 2016, the Court granted the defendants’ motion to dismiss and dismissed the Amended Complaint without prejudice. ~~The Court gave the plaintiffs 20 days (until~~In November ~~7, 2016) to file a further amended complaint. On November 4,~~ 2016, the plaintiffs filed a Second Amended Consolidated Class Action Complaint (“Second Amended Complaint”)~~. The Second Amended Complaint raises~~, raising the same claims previously dismissed by the Court, ~~on October 18, 2016, except plaintiffs now seek to represent a~~but reducing the class ~~of purchasers of EZCORP’s Class A Common Stock between November~~period (November 7, 2013 ~~and~~to October 20, 2015 ~~(instead~~instead of ~~between~~ November 6, 2012 ~~and~~to October 20, 2015). On December 5, 2016, defendants filed a motion to dismiss the Second Amended Compliant. The plaintiffs filed their opposition to the motion to dismiss on January 6, 2017, and the defendants filed their reply brief on January 20, 2017.

OnIn May 8, 2017, the Court granted the defendants’ motion to dismiss with regard to claims related to accounting errors relating to Grupo Finmart’s bad debt reserve calculations for ~~“nonperforming”~~

“nonperforming” loans, but denied the motion to dismiss with regard to claims relating to accounting errors related to certain sales of loan portfolios to third parties.

Following discovery on the surviving claims, the plaintiff filed a Motion for Leave to File a Third Amended Complaint, seeking to revive the "nonperforming" loan claims that the Court previously ~~dismissed. We opposed that motion,~~dismissed, and on ~~May 14, 2018, the Court heard oral arguments on the motion, as well as plaintiff's Motion for Class Certification and Appointment of Class Representative and Class Counsel, which was also pending.~~

On July 26, 2018, the Court granted the plaintiff's motion for leave to amend, thus accepting the Third Amended Consolidated Class Action Complaint, and we filed our answer on August 3, 2018. On August 31, 2018, the plaintiff filed an Amended Motion for Class Certification and Appointment of Class Representative and Class Counsel, and we filed our opposition on September 28, 2018. On February 19, 2019, theComplaint. The Court issued an order certifying the class and approving the class representative and class ~~counsel. On March 5,~~counsel in February 2019, and we ~~requested an appeal of~~appealed that order to the U.S. Fifth Circuit Court of Appeals, which appeal was granted in March 2019.

On May 30, 2019, the parties agreed to a mediated settlement of all remaining claims, and on ~~March 25,~~June 18, 2019 entered into a Stipulation and Agreement of Settlement reflecting the terms of the agreed settlement, which called for the payment of $4.9 million by the defendants. Following a settlement fairness hearing on December 6, 2019, the ~~Fifth Circuit~~ Court ~~of Appeals granted the appeal.~~

~~We cannot predict the outcome of the litigation, but we intend to continue to defend vigorously against all allegations and claims.~~

~~SEC Investigation~~ ~~— On October 23, 2014, we received~~entered a notice from the Fort Worth Regional Office of the SEC that it was conducting an investigation into certain matters involving EZCORP, Inc. The notice was accompanied by a subpoena, directing us to produce a variety of documents, including all minutes and materials related to Board of Directors and Board committee meetings since January 1, 2009 and all documents and communications relating to our historical advisory services relationship with Madison Park (the business advisory firm owned by Mr. Cohen) and LPG Limited (a business advisory firm owned by Lachlan P. Given, our current Executive Chairman of the Board). The SEC also issued subpoenas to current and former members of our Board of Directors requesting production of similar documents, as well as to certain third parties, and conducted interviews with certain individuals.

On March 1, 2019, the SEC issued an order imposing sanctions against Mark Kuchenrither, our former Chief Financial Officer, for allegedly misrepresenting certain financial projections that formed the basis of a fairness opinion that the Audit Committee relied on injudgment approving the ~~compensation to be paid to Madison Park for fiscal 2014.~~agreed settlement and dismissing the claims asserted against the defendants. The ~~SEC alleged that Mr. Kuchenrither's conduct constituted negligence~~settlement amount (which was covered by applicable directors' and ~~violated, among other things, Section 17(a)(3) of~~officers' liability insurance) has been disbursed as provided in the Securities Act of 1933 and Rule 13a-14 of the Securities Exchange Act of 1934. Mr. Kuchenrither, without admitting or denying the SEC's allegations or findings, consented to the entry of the order in order to settle the proceedings, and agreed to pay a civil money penalty of $50,000. Theapproved settlement.

~~SEC has not raised any claims against the Company or any of its current or former directors and officers, other than Mr. Kuchenrither.~~

NOTE 9:10: SEGMENT INFORMATION

During the first quarter of fiscal 2020, we revised the financial information our chief operating decision maker (currently our chief executive officer) reviews for operational decision-making purposes and for allocation of capital to include the separate financial results of our Lana business. 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; Lana — our differentiated customer-centric engagement platform; and Other International — primarily our equity interest in the net income of Cash Converters International and consumer finance activities in Canada. 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. While we expect the operations of the Lana segment to have a positive impact on our pawn loan redemption rates and therefore our pawn service charges and yield, the pawn service charges will all be reported in our pawn segments rather than allocated to the Lana segment. Only discrete revenues related to the Lana segment will be reported in the Lana segment results.



	Three Months Ended December 31, 2019
	U.S. Pawn		Latin America Pawn			Lana			Other International			Total Segments			Corporate Items			Consolidated

	(in thousands)
Revenues:
Merchandise sales	$	95,354	$	31,374		$	—		$	—		$	126,728		$	—		$	126,728
Jewelry scrapping sales	6,117		3,411			—			—			9,528			—			9,528
Pawn service charges	64,090		20,635			—			—			84,725			—			84,725
Other revenues	36		25			1			1,392			1,454			—			1,454
Total revenues	165,597		55,445			1			1,392			222,435			—			222,435
Merchandise cost of goods sold	61,364		22,712			—			—			84,076			—			84,076
Jewelry scrapping cost of goods sold	4,755		2,999			—			—			7,754			—			7,754
Other cost of revenues	—		—			—			536			536			—			536
Net revenues	99,478		29,734			1			856			130,069			—			130,069
Segment and corporate expenses (income):
Operations	68,059		19,983			1,350			1,233			90,625			—			90,625
Administrative	—		—			—			—			—			17,489			17,489
Depreciation and amortization	2,865		1,889			12			34			4,800			2,933			7,733
Loss on sale or disposal of assets and other	—		28			—			—			28			716			744
Interest expense	—		28			(36		)	170			162			5,167			5,329
Interest income	—		(388		)	—			—			(388		)	(455		)	(843		)
Equity in net loss of unconsolidated affiliates	—		—			—			5,897			5,897			—			5,897
Other expense (income)	—		67			—			(1		)	66			5			71
Segment contribution (loss)	$	28,554	$	8,127		$	(1,325	)	$	(6,477	)	$	28,879
Income from continuing operations before income taxes												$	28,879		$	(25,855	)	$	3,024

Three Months Ended March 31, 2019

U.S. Pawn Latin America Pawn Other
International Total Segments Corporate Items Consolidated

(in thousands)
Revenues:
Merchandise sales $ 96,632
$ 24,628
$ —
$ 121,260
$ —
$ 121,260
Jewelry scrapping sales 7,916
2,464
—
10,380
—
10,380
Pawn service charges 61,798
20,001
—
81,799
—
81,799
Other revenues 43
25
1,223
1,291
—
1,291
Total revenues 166,389
47,118
1,223
214,730
—
214,730
Merchandise cost of goods sold 60,928
16,872
—
77,800
—
77,800
Jewelry scrapping cost of goods sold 6,571
2,262
—
8,833
—
8,833
Other cost of revenues —
—
407
407
—
407
Net revenues 98,890
27,984
816
127,690
—
127,690
Segment and corporate expenses (income):
Operations 67,475
18,223
2,545
88,243
—
88,243
Administrative —
—
—
—
16,487
16,487
Depreciation and amortization 2,982
1,495
77
4,554
2,458
7,012
(Gain) loss on sale or disposal of assets and other —
(839 ) 16
(823 ) —
(823 )
Interest expense —
50
132
182
8,407
8,589
Interest income —
(431 ) —
(431 ) (2,695 ) (3,126 )
Equity in net income of unconsolidated affiliates —
—
(431 ) (431 ) —
(431 )
Impairment of investment in unconsolidated affiliates —
—
6,451
6,451
—
6,451
Other expense (income) —
29
262
291
(22 ) 269
Segment contribution (loss) $ 28,433
$ 9,457
$ (8,236 ) $ 29,654

Income from continuing operations before income taxes $ 29,654
$ (24,635 ) $ 5,019

Three Months Ended March 31, 2018

U.S. Pawn Latin America Pawn Other
International Total Segments Corporate Items Consolidated

(in thousands)
Revenues:
Merchandise sales $ 94,753
$ 20,192
$ —
$ 114,945
$ —
$ 114,945
Jewelry scrapping sales 8,177
3,348
—
11,525
—
11,525
Pawn service charges 59,027
15,004
—
74,031
—
74,031
Other revenues 76
174
1,647
1,897
—
1,897
Total revenues 162,033
38,718
1,647
202,398
—
202,398
Merchandise cost of goods sold 58,537
13,683
—
72,220
—
72,220
Jewelry scrapping cost of goods sold 6,512
3,062
—
9,574
—
9,574
Other cost of revenues —
—
347
347
—
347
Net revenues 96,984
21,973
1,300
120,257
—
120,257
Segment and corporate expenses (income):
Operations 65,190
15,015
1,975
82,180
—
82,180
Administrative —
—
—
—
13,341
13,341
Depreciation and amortization 3,531
916
47
4,494
1,957
6,451
Loss (gain) on sale or disposal of assets 107
(5 ) —
102
(2 ) 100
Interest expense —
2
—
2
5,827
5,829
Interest income —
(763 ) —
(763 ) (3,505 ) (4,268 )
Equity in net income of unconsolidated affiliates —
—
(876 ) (876 ) —
(876 )
Other (income) expense
1
(1 ) (35 ) (35 ) 31
(4 )
Segment contribution $ 28,155
$ 6,809
$ 189
$ 35,153

Income from continuing operations before income taxes $ 35,153
$ (17,649 ) $ 17,504

Six Months Ended March 31, 2019

U.S. Pawn Latin America Pawn Other
International Total Segments Corporate Items Consolidated

(in thousands)
Revenues:
Merchandise sales $ 191,735
$ 50,549
$ —
$ 242,284
$ —
$ 242,284
Jewelry scrapping sales 14,468
5,193
—
19,661
—
19,661
Pawn service charges 126,023
39,295
—
165,318
—
165,318
Other revenues 91
67
3,004
3,162
—
3,162
Total revenues 332,317
95,104
3,004
430,425
—
430,425
Merchandise cost of goods sold 120,076
34,836
—
154,912
—
154,912
Jewelry scrapping cost of goods sold 12,081
4,802
—
16,883
—
16,883
Other cost of revenues —
—
891
891
—
891
Net revenues 200,160
55,466
2,113
257,739
—
257,739
Segment and corporate expenses (income):
Operations 135,435
36,419
5,175
177,029
—
177,029
Administrative —
—
—
—
31,742
31,742
Depreciation and amortization 6,017
2,917
118
9,052
4,808
13,860
Loss on sale or disposal of assets and other 2,852
751
16
3,619
—
3,619
Interest expense —
79
204
283
17,097
17,380
Interest income —
(850 ) —
(850 ) (5,615 ) (6,465 )
Equity in net loss of unconsolidated affiliates —
—
688
688
—
688
Impairment of investment in unconsolidated affiliates —
—
19,725
19,725
—
19,725
Other (income) expense —
(97 ) 284
187
(304 ) (117 )
Segment contribution (loss) $ 55,856
$ 16,247
$ (24,097 ) $ 48,006

Income from continuing operations before income taxes $ 48,006
$ (47,728 ) $ 278


	Six Months Ended March 31, 2018																		Three Months Ended December 31, 2018
	U.S. Pawn			Latin America Pawn			Other International			Total Segments			Corporate Items			Consolidated			U.S. Pawn		Latin America Pawn			Lana			Other International			Total Segments			Corporate Items			Consolidated

	(in thousands)																		(in thousands)
Revenues:
Merchandise sales	$	186,247		$	42,286		$	—		$	228,533		$	—		$	228,533		$	95,103	$	25,921		$	—		$	—		$	121,024		$	—		$	121,024
Jewelry scrapping sales	16,702			7,036			—			23,738			—			23,738			6,552		2,729			—			—			9,281			—			9,281
Pawn service charges	118,644			31,409			—			150,053			—			150,053			64,225		19,294			—			—			83,519			—			83,519
Other revenues	150			343			3,751			4,244			—			4,244			48		42			—			1,781			1,871			—			1,871
Total revenues	321,743			81,074			3,751			406,568			—			406,568			165,928		47,986			—			1,781			215,695			—			215,695
Merchandise cost of goods sold	114,625			28,762			—			143,387			—			143,387			59,148		17,964			—			—			77,112			—			77,112
Jewelry scrapping cost of goods sold	13,354			6,557			—			19,911			—			19,911			5,510		2,540			—			—			8,050			—			8,050
Other cost of revenues	—			—			924			924			—			924			—		—			—			484			484			—			484
Net revenues	193,764			45,755			2,827			242,346			—			242,346			101,270		27,482			—			1,297			130,049			—			130,049
Segment and corporate expenses (income):
Operations	131,378			29,850			4,598			165,826			—			165,826			67,937		18,196			2,090			2,630			90,853			—			90,853
Administrative	—			—			—			—			26,420			26,420			—		—			—			—			—			13,165			13,165
Depreciation and amortization	6,330			1,761			94			8,185			3,989			12,174			3,035		1,422			—			41			4,498			2,350			6,848
Loss on sale or disposal of assets	123			5			—			128			11			139
Loss on sale or disposal of assets and other																			2,853		1,589			—			—			4,442			—			4,442
Interest expense	—			3			—			3			11,673			11,676			—		29			—			72			101			8,690			8,791
Interest income	—			(1,400		)	—			(1,400		)	(7,138		)	(8,538		)	—		(419		)	—			—			(419		)	(2,920		)	(3,339		)
Equity in net income of unconsolidated affiliates	—			—			(2,326		)	(2,326		)	—			(2,326		)
Equity in net loss of unconsolidated affiliates																			—		—			—			1,119			1,119			—			1,119
Impairment of investments in unconsolidated affiliates																			—		—			—			13,274			13,274			—			13,274
Other (income) expense	(3		)	114			(118		)	(7		)	(179		)	(186		)	—		(126		)	—			22			(104		)	(282		)	(386		)
Segment contribution	$	55,936		$	15,422		$	579		$	71,937
Income from continuing operations before income taxes										$	71,937		$	(34,776	)	$	37,161
Segment contribution (loss)																			$	27,445	$	6,791		$	(2,090	)	$	(15,861	)	$	16,285
Loss from continuing operations before income taxes																														$	16,285		$	(21,003	)	$	(4,718	)

NOTE ~~10:~~11: SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION ~~AND OTHER~~

Supplemental Consolidated Financial Information

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


	March 31, 2019			March 31, 2018			September 30, 2018			December 31, 2019			December 31, 2018			September 30, 2019

										(in thousands)
Cash and cash equivalents										$	143,141		$	297,031		$	157,567
Restricted cash										—			255			4,875
Cash and cash equivalents and restricted cash										$	143,141		$	297,286		$	162,442
	(in thousands)
Gross pawn service charges receivable	$	34,320		$	31,213		$	40,719		$	40,887		$	40,016		$	41,838
Allowance for uncollectible pawn service charges receivable	(7,223		)	(7,083		)	(9,760		)	(8,637		)	(8,458		)	(10,036		)
Pawn service charges receivable, net	$	27,097		$	24,130		$	30,959		$	32,250		$	31,558		$	31,802

Gross inventory	$	182,295		$	166,802		$	176,198		$	197,519		$	185,706		$	189,092
Inventory reserves	(8,947		)	(8,160		)	(9,201		)	(10,150		)	(10,284		)	(9,737		)
Inventory, net	$	173,348		$	158,642		$	166,997		$	187,369		$	175,422		$	179,355

Prepaid expenses and other	$	11,647		$	12,026		$	9,705		$	12,463		$	11,720		$	4,784
Accounts receivable and other	15,974			17,234			18,901			12,257			14,126			10,889
Income taxes receivable	5,363			—			2,031			11,422			5,361			10,248
Restricted cash	—			273			267			—			255			4,875
2019 Convertible Notes Hedges	—			—			2,552			—			21			—
Prepaid expenses and other current assets	$	32,984		$	29,533		$	33,456		$	36,142		$	31,483		$	30,796

Property and equipment, gross	$	256,411		$	239,954		$	253,022		$	270,335		$	253,336		$	265,922
Accumulated depreciation	(188,893		)	(175,121		)	(179,373		)	(205,089		)	(183,566		)	(198,565		)
Property and equipment, net	$	67,518		$	64,833		$	73,649		$	65,246		$	69,770		$	67,357

Other assets	$	4,395		$	3,731		$	3,863
2019 Convertible Notes Hedges	—			16,042			—
Other assets	$	4,395		$	19,773		$	3,863

Accounts payable	$	13,134		$	10,544		$	10,500		$	12,534		$	15,141		$	25,946
Accrued expenses and other	45,562			49,994			47,458			39,087			42,239			52,011
Accounts payable, accrued expenses and other current liabilities	$	58,696		$	60,538		$	57,958		$	51,621		$	57,380		$	77,957

~~Jewelry Scrap Receivable~~

In November 2018, our principal refiner that processed our scrap jewelry announced Chapter 11 bankruptcy restructuring proceedings in the U.S. As of March 31, 2019, we had potential exposure from this refiner of $3.6 million on our balance sheet. In the first quarter of fiscal 2019, we recorded a full reserve of $4.4 million which is included in "(Gain) loss on sale or disposal of assets and other" and "Reserve on jewelry scrap receivable" in our condensed consolidated statements of operations and cash flows, respectively. In the second quarter of fiscal 2019, we recovered $0.8 million of the amount initially reserved which is included in "(Gain) loss on sale or disposal of assets and other" and "Reserve on jewelry scrap receivable" in our condensed consolidated statements of operations and cash flows, respectively. We continue to monitor the bankruptcy process and may record recoveries of such reserved amounts in a future period as we gather more information. At this point, the balance of $3.6 million remains fully reserved.

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

The discussion in this section contains forward-looking statements that are based on our current expectations. Actual results could differ materially from those expressed or implied by the forward-looking statements due to a number of risks, uncertainties and other factors, including those identified in "Part I, Item 1A — Risk Factors" of our Annual Report on Form 10-K for the year ended September 30, ~~2018~~2019, as supplemented by the information set forth in “Part I, Item 3 — Quantitative and Qualitative Disclosures about Market ~~Risk” and "Part II, Item 1 — Legal Proceedings" of this Quarterly Report.~~Risk.”

Overview and Financial Highlights

EZCORP is a Delaware corporation headquartered in Austin, Texas. We are a leading provider of pawn loans in the United States and Latin America.

Our vision is to be the market leader in North America in responsibly and respectfully meeting our customers' desire for access to cash when they want it. That vision is supported by four key imperatives:

Market Leading Customer Satisfaction;

Exceptional Staff Engagement;

Most Efficient Provider of Cash; and

Attractive Shareholder Returns.

At our pawn stores, we offer pawn loans, which are nonrecourse loans collateralized by tangible personal property, and sell merchandise to customers looking for good value. The merchandise we sell consists of second-hand collateral forfeited from our pawn lending activities or purchased from customers.

We remain focused on ~~growing~~optimizing our balance of pawn loans outstanding (“PLO”) and the resulting higher pawn service charges (“PSC”). The following charts present sources of net revenues, including PSC, merchandise sales gross profit ("Merchandise sales GP") and jewelry scrapping gross profit ("Jewelry scrapping GP"):

The following charts present sources of net revenues by geographic disbursement:

The following charts present store counts by geographic disbursement:

Pawn Activities

At our pawn stores, we offer pawn loans, which are typically small, nonrecourse loans collateralized by tangible personal property. We earn pawn service charges on our pawn loans, which varies by state and loan size. Collateral for our pawn loans consists of tangible personal property, generally jewelry, consumer electronics, tools, sporting goods and musical instruments. Security for our pawn loans is provided via the estimated resale value of the collateral and the perceived probability of the loan’s redemption.

Our ability to offer quality 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 or purchase value at the time the property is either accepted as loan collateral or ~~purchased.~~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 heavily influenced by the market price of gold.

Growth and Expansion

We plan to expand the number of locations we operate through opening new (“de novo”) locations and through acquisitions in both Latin America and the United States and potential new markets. Our ability to add new stores 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.

Seasonality and Quarterly Results

Historically, pawn service charges are highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season in the United States and lowest in our third fiscal quarter (April through June) following the tax refund season in the United States. Merchandise sales are highest in our first and second fiscal quarters (October through March) due to the holiday season, jewelry sales in the United States surrounding Valentine’s Day and the availability of tax refunds in the United States. Most of our customers in Latin America receive additional compensation from their employers in December, and many ~~also~~ 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 fiscal quarter (April through June).

Segments

activities in Mexico and other parts of Latin America; Lana - our customer-centric digital engagement platform; and Other International - primarily our equity interest in the net income of Cash Converters International and consumer finance activities in Canada. While we expect the operations of the Lana segment to have a positive impact on our pawn loan redemption rates and therefore our pawn service charges and yield, the pawn service charges will all be reported in our pawn segments rather than allocated to the Lana segment. Only discrete revenues related to the Lana segment will be reported in the Lana segment results. As a digital offering, Lana has no separate physical store locations.

Leases

As of October 1, 2019, we adopted Accounting Standards Update ("ASU"), Leases (Topic 842). This ASU required companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. We recorded a net right-of-use asset of $237.5 million and a net lease liability of $246.0 million.

Store Data by Segment

Three Months Ended March 31, 2019
U.S. Pawn Latin America Pawn Other International Consolidated

As of December 31, 2018 508
462
27
997
New locations opened —
4
—
4
Locations sold, combined or closed —
—
(3 ) (3 )
As of March 31, 2019 508
466
24
998



	Three Months Ended December 31, 2019
	U.S. Pawn	Latin America Pawn	Other International	Consolidated

As of September 30, 2019	512	480	22	1,014
New locations opened	—	4	—	4
As of December 31, 2019	512	484	22	1,018

Three Months Ended March 31, 2018
U.S. Pawn Latin America Pawn Other International Consolidated

As of December 31, 2017 513
383

27
923
New locations opened —
4
—
4
Locations sold, combined or closed (3 ) —
—
(3 )
As of March 31, 2018 510
387
27
924



	Three Months Ended December 31, 2018
	U.S. Pawn	Latin America Pawn	Other International	Consolidated

As of September 30, 2018	508	453	27	988
New locations opened	—	4	—	4
Locations acquired	—	5	—	5
As of December 31, 2018	508	462	27	997

Six Months Ended March 31, 2019
U.S. Pawn Latin America Pawn Other International Consolidated

As of September 30, 2018 508
453
27
988
New locations opened —
8
—
8
Locations acquired —
5
—
5
Locations sold, combined or closed —
—
(3 ) (3 )
As of March 31, 2019 508
466
24
998

Six Months Ended March 31, 2018
U.S. Pawn Latin America Pawn Other International Consolidated

As of September 30, 2017 513
246
27
786
New locations opened —
8
—
8
Locations acquired —
133
—
133
Locations sold, combined or closed (3 ) —
—
(3 )
As of March 31, 2018 510
387
27
924

Results of Operations

Three Months Ended ~~March~~December 31, 2019 vs. Three Months Ended ~~March~~December 31, 2018

These tables, as well as the discussion that follows, should be read with the accompanying condensed consolidated financial statements and related notes. All comparisons, unless otherwise noted, are to the prior-year quarter. Prior period results have been corrected for certain out-of-period items identified in the current quarter but not material to any prior period, as described under "Corrections to Prior Period Financial Statements" in Note 1 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."

U.S. Pawn

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


	Three Months Ended March 31,						Change	Three Months Ended December 31,						Change
	2019			2018				2019			2018

	(in thousands)							(in thousands)
Net revenues:
Pawn service charges	$	61,798		$	59,027		5%	$	64,090		$	64,225		—%

Merchandise sales	96,632			94,753			2%	95,354			95,103			—%
Merchandise sales gross profit	35,704			36,216			(1)%	33,990			35,955			(5)%
Gross margin on merchandise sales	37		%	38		%	(100)bps	36		%	38		%	(200)bps

Jewelry scrapping sales	7,916			8,177			(3)%	6,117			6,552			(7)%
Jewelry scrapping sales gross profit	1,345			1,665			(19)%	1,362			1,042			31%
Gross margin on jewelry scrapping sales	17		%	20		%	(300)bps	22		%	16		%	600bps

Other revenues	43			76			(43)%	36			48			(25)%
Net revenues	98,890			96,984			2%	99,478			101,270			(2)%

Segment operating expenses:
Operations	67,475			65,190			4%	68,059			67,937			—%
Depreciation and amortization	2,982			3,531			(16)%	2,865			3,035			(6)%
Segment operating contribution	28,433			28,263			1%	28,554			30,298			(6)%

Other segment expense	—			108			*	—			2,853			(100)%
Segment contribution	$	28,433		$	28,155		1%	$	28,554		$	27,445		4%

Other data:
Net earning assets (a)	$	267,998		$	256,587		4%	$	305,336		$	299,160		2%
Inventory turnover	1.9			1.9			—%	1.8			1.8			—%
Average monthly ending pawn loan balance per store (b)	$	280		$	264		6%	$	301		$	304		(1)%
Monthly average yield on pawn loans outstanding	14		%	15		%	(100)bps	14		%	14		%	—
Pawn loan redemption rate	86		%	85		%	100bps	84		%	83		%	100bps



*	~~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.

~~Net revenue~~Segment contribution increased $1.1 million, or 4%, to $28.6 million. While net revenues decreased $1.8 million, or 2%, ~~or $1.9~~to $99.5 million, total expenses decreased $2.9 million to $70.9 million due primarily ~~due~~ to a ~~5%, or $2.8~~$2.9 million ~~increase~~prior-period recognition of an uncollectible receivable balance from a bankrupt refining partner with no comparable charge in ~~pawn service charges, offset by~~the current period. Operations expense was flat to the prior-year quarter, with a ~~1%, or $0.5 million, decrease~~slight improvement in ~~merchandise sales gross profit~~depreciation and ~~a 19%, or $0.3 million, decrease~~amortization.

The change in ~~jewelry scrapping sales gross profit. With no~~net revenue attributable to same stores and new stores added since the prior-year quarter ~~the change in net revenue was attributable to same stores.~~is summarized as follows:



	Change in Net Revenue
	Pawn Service Charges			Merchandise Sales Gross Profit			Total

	(in millions)
Same stores	$	(0.5	)	$	(2.3	)	$	(2.8	)
New stores and other	0.4			0.3			0.7
Total	$	(0.1	)	$	(2.0	)	$	(2.1	)
Change in jewelry scrapping sales gross profit and other revenues							0.3
Total change in net revenue							$	(1.8	)

Pawn service charges ~~increased 5%, or $2.8 million, due to~~were flat as acquired stores offset a ~~6% increase~~1% decrease in average ending monthly pawn loan balances outstanding during the current quarter. The higher average loan balance was driven by growth in new loan originations from our continued focus on meeting customers’ desire for cash better than our competitors. A disciplined lending approach resulted in maintaining PLO yield and redemption rates compared to the prior-year quarter.

Merchandise sales ~~increased 2%~~were flat with gross margin on merchandise sales down 200 basis points to 36%, the low end of ~~37%, a 100 basis point~~our target range. The decline ~~over~~in gross margin was due to holiday sales promotions and our continued efforts to reduce general merchandise inventory aged greater than 360 days, which ended the quarter at 6.8% of total general merchandise inventory, improved from 8.9% at the end of the prior-year quarter. ~~Delayed receipt of customers’ tax refunds appeared to suppress sales demand during the quarter and placed pressure on merchandise margins.~~ As a result, merchandise sales gross profit decreased 1%5% to ~~$35.7~~$34.0 million. ~~We expect sales gross margin for the full fiscal year to remain within our target range of 35-38%.~~

Jewelry scrapping sales gross profit ~~remained relatively flat at 1%~~increased 31% to $1.4 million due primarily to higher scrapping margins as a result of ~~current quarter net revenues, in line with our strategy~~increased gold market prices. Scrap sales margins increased 600 basis points to ~~sell rather than scrap~~22%. Scrap volume decreased year-over-year as we continue to focus on retail sales for jewelry ~~with a 300 basis point decline in gross margin to 17% which includes a nominal decline in gold prices.~~

Operations expense increased 4% primarily due to increases in personnel costs in meeting the loan demand of our customers, while depreciation and amortization expense decreased 16% due to a one-time charge of $0.5 million for the retirement of certain assets in the prior-year quarter.disposition.

Non-GAAP Financial Information

In addition to the financial information prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), we provide certain other non-GAAP financial information on a constant currency basis ("constant currency"). We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzals and other Latin American currencies. We believe that presentation of constant currency 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 more complete understanding 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 instead of 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. 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 six months ended March 31, 2019 and 2018 were as follows:

March 31, Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018 2019 2018

Mexican peso 19.4
18.3
19.2
18.7
19.5
18.8
Guatemalan quetzal 7.6
7.3
7.6
7.3
7.6
7.2
Honduran lempira 24.3
23.5
24.2
23.5
24.1
23.4
Peruvian sol 3.3
3.2
3.3
3.2
3.3
3.2

Our statement of operations constant currency results reflect the monthly exchange rate fluctuations and so are not directly calculable from the above rates. 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 months ended December 31 were as follows:



	December 31,		Three Months Ended December 31,
	2019	2018	2019	2018

Mexican peso	18.9	19.6	19.2	19.8
Guatemalan quetzal	7.5	7.7	7.5	7.6
Honduran lempira	24.4	24.2	24.3	24.0
Peruvian sol	3.3	3.4	3.3	3.3

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 March 31,											Three Months Ended December 31,
	2019 (GAAP)			2018 (GAAP)			Change (GAAP)	2019 (Constant Currency)			Change (Constant Currency)	2019 (GAAP)			2018 (GAAP)			Change (GAAP)	2019 (Constant Currency)			Change (Constant Currency)

	(in USD thousands)							(in USD thousands)				(in USD thousands)							(in USD thousands)
Net revenues:
Pawn service charges	$	20,001		$	15,004		33%	$	20,578		37%	$	20,635		$	19,294		7%	$	20,197		5%

Merchandise sales	24,628			20,192			22%	25,303			25%	31,374			25,921			21%	30,526			18%
Merchandise sales gross profit	7,756			6,509			19%	7,967			22%	8,662			7,957			9%	8,434			6%
Gross margin on merchandise sales	31		%	32		%	(100)bps	31		%	(100)bps	28		%	31		%	(300)bps	28		%	(300)bps

Jewelry scrapping sales	2,464			3,348			(26)%	2,546			(24)%	3,411			2,729			25%	3,366			23%
Jewelry scrapping sales gross profit	202			286			(29)%	208			(27)%	412			189			118%	407			115%
Gross margin on jewelry scrapping sales	8		%	9		%	(100)bps	8		%	(100)bps	12		%	7		%	500bps	12		%	500bps

Other revenues	25			174			(86)%	26			(85)%	25			42			(40)%	24			(43)%
Net revenues	27,984			21,973			27%	28,779			31%	29,734			27,482			8%	29,062			6%

Segment operating expenses:
Operations	18,223			15,015			21%	18,749			25%	19,983			18,196			10%	19,573			8%
Depreciation and amortization	1,495			916			63%	1,536			68%	1,889			1,422			33%	1,844			30%
Segment operating contribution	8,266			6,042			37%	8,494			41%	7,862			7,864			—%	7,645			(3)%

Other segment income (a)	(1,191		)	(767		)	55%	(1,246		)	62%
Other segment (income) expense (a)												(265		)	1,073			*	(202		)	*
Segment contribution	$	9,457		$	6,809		39%	$	9,740		43%	$	8,127		$	6,791		20%	$	7,847		16%

Other data:
Net earning assets (b)	$	78,488		$	61,438		28%	$	82,489		34%	$	77,619		$	70,246		10%	$	75,327		7%
Inventory turnover	2.3			2.7			(15)%	2.3			(15)%	2.7			2.6			4%	2.7			4%
Average monthly ending pawn loan balance per store (c)	$	90		$	88		2%	$	93		6%	$	119		$	121		(2)%	$	116		(4)%
Monthly average yield on pawn loans outstanding	16		%	15		%	100bps	16		%	100bps	16		%	15		%	100bps	16		%	100bps
Pawn loan redemption rate(d)	79		%	80		%	(100)bps	79		%	(100)bps	79		%	78		%	100bps	79		%	100bps



*	Represents a percentage computation that is not mathematically meaningful.
(a)	Fiscal ~~2019~~2020 constant currency amount excludes ~~nominal~~ net GAAP basis foreign currency transaction ~~losses~~gains of $0.1 million resulting from movement in exchange rates. The net foreign currency transaction gains for fiscal ~~2018 were nominal and~~2019 of $0.1 million are included in the above results.
(b)	Balance includes pawn loans and inventory.
(c)	Balance is calculated based upon the average of the monthly ending balances during the applicable period.
(d)	Rate is solely inclusive of results from Mexico Pawn.

We opened four stores in the current quarter. We see opportunity for further expansion in Latin America through de novo openings and acquisitions, and plan to open more stores in Latin America during the remainder of fiscal 2019.

~~Net revenue~~Segment contribution increased ~~$6.0~~$1.3 million, or ~~27% ($6.8~~20%, to $8.1 million (16% on a constant currency basis) with net revenue growth of $2.3 million, or ~~31%~~8% ($1.6 million, or 6%, on a constant currency basis), ~~primarily due~~ to ~~a 33% increase (37%~~$29.7 million. Operations expense increased $1.8 million, or 10% ($1.4 million, or 8% on a constant currency basis) ~~in pawn service charges~~, to $20.0 million due primarily to 22 new store openings, along with relocations and ~~a 19% increase (22% on a constant currency basis) in merchandise sales gross profit.~~ expansions of existing stores.

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


	Change in Net Revenue							Change in Net Revenue
	Pawn Service Charges		Merchandise Sales Gross Profit		Total			Pawn Service Charges		Merchandise Sales Gross Profit		Total

	(in millions)							(in millions)
Same stores	$	1.8	$	0.4	$	2.2		$	0.9	$	0.5	$	1.4
New stores and other	3.2		0.8		4.0			0.4		0.3		0.7
Total	$	5.0	$	1.2	$	6.2		$	1.3	$	0.8	$	2.1
Change in jewelry scrapping sales gross profit and other revenues					(0.2		)					0.2
Total change in net revenue					$	6.0						$	2.3


	Change in Net Revenue (Constant Currency)							Change in Net Revenue (Constant Currency)
	Pawn Service Charges		Merchandise Sales Gross Profit		Total			Pawn Service Charges		Merchandise Sales Gross Profit		Total

	(in millions)							(in millions)
Same stores	$	2.4	$	0.5	$	2.9		$	0.5	$	0.3	$	0.8
New stores and other	3.2		0.9		4.1			0.4		0.2		0.6
Total	$	5.6	$	1.4	$	7		$	0.9	$	0.5	$	1.4
Change in jewelry scrapping sales gross profit and other revenues					(0.2		)					0.2
Total change in net revenue					$	6.8						$	1.6

Pawn service charges increased ~~33% (37%~~7% (5% on a constant currency basis) ~~primarily from newly acquired stores.~~. The average ending monthly pawn loan balance outstanding during the current quarter was updown 2% ~~(up 6%~~(4% on a constant currency basis). Pawn service charges further include $1.1 million in revenue attributable to receipt of previously escrowed seller funds as a result of settling certain indemnification claims with the sellers of GPMX. Subsequent to quarter end, 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, offset by the ~~seller~~addition of 22 new stores since the end of the prior-year quarter. Pawn loan yield and ~~held in a U.S. brokerage account. All principal~~redemption rates improved 100 basis points each, to 16% and ~~accrued interest is due and payable in April 2024.~~79%, respectively, reflecting improved lending guidance from our point-of-sale system.

Merchandise sales increased ~~22% (25%~~21% (18% on a constant currency basis) ~~primarily from newly acquired stores, although same~~, largely attributable to a revised incentive program for store ~~sales were up 9%. Gross margin on merchandise sales was 31%, or 100~~team members implemented in fiscal 2020, with an offsetting 300 basis ~~points below the prior-year quarter.~~point decline in margins. As a result of these factors and foreign currency impacts, merchandise sales gross profit was up ~~19%~~9% to ~~$7.8~~$8.7 million ~~(up 22%~~(6% to ~~$8.0~~$8.4 million on a constant currency basis).

Social welfare programs recently implemented in Mexico have provided additional cash to a portion of our customers, contributing to the lower loan demand and increased sales volume. These programs are directed towards a variety of citizens such as the elderly, disabled, single mothers, certain farmers, micro-businesses and certain students. Based on government announcements, we anticipate these programs will continue on an ongoing basis, but expect our customers’ needs to return to more traditional patterns in six to twelve months.

Jewelry scrapping sales ~~decreased 26% (24%~~increased 25% (23% on a constant currency basis) on greater volume, with a ~~100~~500 basis point increase in margin to 12% as we benefited from an overall increase in ~~line with our strategy to sell rather than scrap jewelry.~~commodity gold prices.

~~Net revenue~~Other segment expenses compared favorably as a result of a prior-year quarter reserve of $1.5 million against a receivable balance deemed uncollectible from a refiner.

Operations expense increased ~~27% (31%~~10% (8% on a constant currency basis). ~~Operations~~Same store operations expense increased ~~21% (25%~~7%, with the remainder of the increase attributable to a 5% increase in ending store count over the prior-year quarter and costs to open de novo stores. Depreciation and amortization increased 33% (30% on a constant currency basis), from the addition of stores and ~~depreciation~~capital investment in existing and ~~amortization increased 63% (68% on a constant currency basis), both primarily~~acquired operations.

Lana

The following table presents selected financial data for the Lana segment:



	Three Months Ended December 31,						Percentage Change
	2019			2018			Percentage Change

	(in thousands)
Operations expense and other	$	1,325		$	2,090		(37)%
Segment loss	$	(1,325	)	$	(2,090	)	(37)%

We launched our customer-centric digital engagement platform (“Lana”) in the current quarter, initially serving customers in select Florida locations. This platform currently offers the ability for customers at select locations to remotely extend their pawn loans through digital payments using their Lana account, and will allow us to leverage our existing store and pawn customer base to expand customer acquisition and retention and enable rapid deployment of new products. Discrete revenues to date are minimal as ~~a result of newly acquired stores. These factors, as well as a $0.8 million recovery~~the product offering launched late in the current quarter, and all fees from ~~a previously reserved receivable from a bankrupt refiner, resulted~~pawn loan extensions, including those made through the Lana platform, are reported in ~~an increase in segment contribution of 39% (43% on a constant currency basis).~~the pawn segments.

Other International

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

Three Months Ended March 31, Percentage Change
2019 2018

(in thousands)
Net revenues:
Consumer loan fees, interest and other $ 1,223
$ 1,647
(26)%
Consumer loan bad debt (407 ) (347 ) 17%
Net revenues 816
1,300
(37)%

Segment operating expenses (income):
Operating expenses 2,622
2,022
30%
Equity in net income of unconsolidated affiliates (431 ) (876 ) (51)%
Segment operating (loss) contribution (1,375 ) 154
*

Impairment of investment in unconsolidated affiliates 6,451
—
*
Other segment expense (income) 410
(35 ) *
Segment (loss) contribution $ (8,236 ) $ 189
*



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



	Three Months Ended December 31,						Percentage Change
	2019			2018			Percentage Change

	(in thousands)
Net revenues:
Consumer loan fees, interest and other	$	1,392		$	1,781		(22)%
Consumer loan bad debt	(536		)	(484		)	11%
Net revenues	856			1,297			(34)%

Segment operating expenses:
Operating expenses	1,267			2,671			(53)%
Equity in net loss of unconsolidated affiliates	5,897			1,119			427%
Segment operating loss	(6,308		)	(2,493		)	153%

Other segment expense	169			13,368			(99)%
Segment loss	$	(6,477	)	$	(15,861	)	(59)%

Segment loss was ~~$8.2~~$6.5 million, ~~a decrease~~an improvement of ~~$8.4~~$9.4 million from the prior-year quarter primarily due ~~to the~~to:

A $13.3 million impairment of ~~our investment in~~ Cash Converters International in the ~~amount~~prior-year quarter with no impairment in the current quarter; and

A decrease in operating expenses of ~~$6.5 million.~~$1.4 million subsequent to the deconsolidation of a previously consolidated variable interest entity ("RDC") in mid-fiscal 2019; partially offset by

~~Due partly to regulatory changes that became effective January 1, 2018, we added installment loan products~~A $7.1 million charge, ($10.1 million, net of a $3.0 million tax benefit) in the first quarter of fiscal 2020 for our ~~Canada CASHMAX business to meet~~share of the ~~needs~~Cash Converters International settlement of ~~our customers. In addition to payday loans, all CASHMAX stores are now offering installment loans with terms ranging from six to 18 months and average yields of 47% per annum. We entered into~~ a secured borrowing arrangement in November 2018 to provide up to CAD $25.0 million to fund originations of installment loans through November 2019 and have obtained $1.5 million in proceeds from the facility through March 31, 2019. See Note 6 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."Queensland, Australia class action lawsuit.

Other Items

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


	Three Months Ended March 31,						Percentage Change	Three Months Ended December 31,						Percentage Change
	2019			2018				2019			2018

	(in thousands)							(in thousands)
Segment contribution	$	29,654		$	35,153		(16)%	$	28,879		$	16,285		77%
Corporate expenses (income):
Administrative	16,487			13,341			24%	17,489			13,165			33%
Depreciation and amortization	2,458			1,957			26%	2,933			2,350			25%
Gain on sale or disposal of assets	—			(2		)	(100)%
Loss on sale or disposal of assets and other								716			—			*
Interest expense	8,407			5,827			44%	5,167			8,690			(41)%
Interest income	(2,695		)	(3,505		)	(23)%	(455		)	(2,920		)	(84)%
Other (income) expense	(22		)	31			*
Income from continuing operations before income taxes	5,019			17,504			(71)%
Income tax expense	2,360			5,797			(59)%
Income from continuing operations, net of tax	2,659			11,707			(77)%
Other expense (income)								5			(282		)	*
Income (loss) from continuing operations before income taxes								3,024			(4,718		)	*
Income tax expense (benefit)								1,759			(1,058		)	*
Income (loss) from continuing operations, net of tax								1,265			(3,660		)	*
Loss from discontinued operations, net of tax	(18		)	(500		)	(96)%	(27		)	(183		)	(85)%
Net income	2,641			11,207			(76)%
Net income (loss)								1,238			(3,843		)	*
Net loss attributable to noncontrolling interest	(753		)	(374		)	101%	—			(477		)	(100)%
Net income attributable to EZCORP, Inc.	$	3,394		$	11,581		(71)%
Net income (loss) attributable to EZCORP, Inc.								$	1,238		$	(3,366	)	*



*	Represents a percentage computation that is not mathematically meaningful.

Segment contribution ~~decreased primarily due~~increased 77% over the prior-year quarter, including positive developments in our Latin America and US Pawn segments as well as favorable comparisons against prior-year quarter expenses related to ~~the impairment of~~a refiner’s bankruptcy and our investment in Cash Converters ~~International of $6.5 million.~~International.

Administrative expenses increased ~~$3.1~~$4.3 million primarily as a result of higher labor, cloud computing costs and professional fees. Professional fees include costs related to the remediation of the material weakness in our information technology general controls, fess related to the current quarter adoption of a new lease accounting standard, severance fees pursuant to cost reduction strategies and other smaller items.

Loss on sale or disposal of assets and other includes a $0.6 million charge in the current quarter due to termination of a non-core software project.

Interest expense decreased $3.5 million, or ~~24%~~41%, primarily due to ~~costs associated with~~ the ~~strategic investment in a new digital platform and other professional fees.~~

~~Depreciation and amortization increased $0.5 million, or 26%, primarily due to additional capitalized software costs, including development~~reduction of ~~our new point of sale system.~~

~~Interest~~interest expense ~~increased $2.6 million, or 44%, primarily due to an increase in debt outstanding during the current quarter compared to the prior-year quarter. Effective interest rates~~ on our ~~outstanding convertible debt~~2.125% Cash Convertible Senior Notes Due 2019 ("2019 Convertible Notes") which were ~~approximately 8%~~repaid June 17, 2019. Prior to ~~9%.~~repayment, the principal amount of these notes was $195.0 million.

Interest income decreased ~~$0.8~~$2.5 million, or ~~23%~~84%, primarily due to the declining principal balance on the Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. ("Grupo ~~Finmart~~Finmart") notes receivable as they are repaid in accordance with their agreed amortization ~~schedule.~~schedule, in addition to the reduction of interest earned on outstanding cash balances after our 2019 Convertible Notes were repaid in June 2019.

Income tax expense ~~decreased $3.6~~increased $2.8 million due primarily to:

A ~~$12.5~~$7.7 million ~~decrease~~increase in income from continuing operations before income taxes; and

A ~~lower maximum U.S. corporate rate~~$0.7 million reduction in tax benefit from the December 2019 vesting of ~~21% in the current quarter~~restricted stock units compared to ~~24.5% in~~ the ~~prior-year quarter; partially offset by~~

~~A prior-year quarter charge~~prior estimates of the related tax benefit that was recorded over their 3-year vesting period. The lower than expected tax benefit relates to the ~~impacts of~~lower related share price upon vesting compared to the ~~U.S. Tax Cuts and Jobs Act of 2017.~~grant date value.

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.

~~Six Months Ended March 31, 2019 vs. Six Months Ended March 31, 2018~~

~~U.S. Pawn~~

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

Six Months Ended March 31, Change
2019 2018

(in thousands)
Net revenues:
Pawn service charges $ 126,023
$ 118,644
6%

Merchandise sales 191,735
186,247
3%
Merchandise sales gross profit 71,659
71,622
—%
Gross margin on merchandise sales 37 % 38 % (100)bps

Jewelry scrapping sales 14,468
16,702
(13)%
Jewelry scrapping sales gross profit 2,387
3,348
(29)%
Gross margin on jewelry scrapping sales 16 % 20 % (400)bps

Other revenues 91
150
(39)%
Net revenues 200,160
193,764
3%

Segment operating expenses:
Operations 135,435
131,378
3%
Depreciation and amortization 6,017
6,330
(5)%
Segment operating contribution 58,708
56,056
5%

Other segment expense 2,852
120
2,277%
Segment contribution $ 55,856
$ 55,936
—%

Other data:
Average monthly ending pawn loan balance per store (a) $ 292
$ 273
7%
Monthly average yield on pawn loans outstanding 14 % 14 % —
Pawn loan redemption rate 84 % 84 % —



~~(a)~~	~~Balance is calculated based upon the average of the monthly ending balances during the applicable period.~~

Net revenue increased $6.4 million, or 3%, primarily due to a 6%, or $7.4 million, increase in pawn service charges, offset by a 29%, or $1.0 million, decrease in jewelry scrapping sales gross profit. The change in net revenue attributable to same stores and new stores added since the prior-year six-months is summarized as follows:

Change in Net Revenue
Pawn Service Charges Merchandise Sales Gross Profit Total

(in millions)
Same stores $ 7.6
$ 0.3
$ 7.9
New stores and other (0.2 ) (0.3 ) (0.5 )
Total $ 7.4
$ —
$ 7.4
Change in jewelry scrapping sales gross profit and other revenues (1.0 )
Total change in net revenue $ 6.4

Pawn service charges increased 6% primarily due to a 7% increase in average ending monthly pawn loan balances outstanding during the current six-months. The higher average loan balance was driven by disciplined lending practices, a focus on meeting customers' need for cash, a delay in receipt of tax refunds and stronger performance from stores affected by hurricanes in the prior-year six-months.

Merchandise sales increased 3% with gross margin on merchandise sales of 37%, a 100 basis point decline over the prior-year six-months. As a result, merchandise sales gross profit was flat at $71.7 million. A portion of the year-over-year improvement is due to the impacts of hurricanes in the prior-year six-months. We expect sales gross margin for the full fiscal year to be within our target range of 35-38%.

Jewelry scrapping sales gross profit remained relatively flat at 1% of net revenues, in line with our strategy to sell rather than scrap jewelry, with a 400 basis point decline in gross margin to 16% which includes a nominal decline in gold prices.

A 3% increase in net revenue turned into a flat segment contribution primarily as a result of a $2.9 million reserve against a receivable balance from a gold refiner deemed uncollectible due to the refiner's Chapter 11 bankruptcy, in addition to a 3% increase in operations expense primarily due to wage inflation and increases to staffing levels in meeting the loan demand of our customers.

~~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 functional currencies. See “Results of Operations — Non-GAAP Financial Information” above.

Six Months Ended March 31,
2019 (GAAP) 2018 (GAAP) Change (GAAP) 2019 (Constant Currency) Change (Constant Currency)

(in USD thousands) (in USD thousands)

Net revenues:
Pawn service charges $ 39,295
$ 31,409
25% $ 40,755
30%

Merchandise sales 50,549
42,286
20% 52,419
24%
Merchandise sales gross profit 15,713
13,524
16% 16,289
20%
Gross margin on merchandise sales 31 % 32 % (100)bps 31 % (100)bps

Jewelry scrapping sales 5,193
7,036
(26)% 5,398
(23)%
Jewelry scrapping sales gross profit 391
479
(18)% 404
(16)%
Gross margin on jewelry scrapping sales 8 % 7 % 100bps 7 % —

Other revenues 67
343
(80)% 70
(80)%
Net revenues 55,466
45,755
21% 57,518
26%

Segment operating expenses:
Operations 36,419
29,850
22% 37,768
27%
Depreciation and amortization 2,917
1,761
66% 3,023
72%
Segment operating contribution 16,130
14,144
14% 16,727
18%

Other segment income (a) (117 ) (1,278 ) (91)% (45 ) (96)%
Segment contribution $ 16,247
$ 15,422
5% $ 16,772
9%

Other data:
Average monthly ending pawn loan balance per store (b) $ 90
$ 89
1% $ 94
6%
Monthly average yield on pawn loans outstanding 16 % 16 % — 16 % —
Pawn loan redemption rate 79 % 79 % — 79 % —



~~(a)~~	Fiscal 2019 constant currency amount excludes nominal net GAAP basis foreign currency transaction gains resulting from movement in exchange rates. The net foreign currency transaction gains for fiscal 2018 were 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.~~

~~Our Latin America business continues to grow rapidly. In the current six-months, we acquired five pawn stores and opened eight de novo stores.~~

Net revenue increased $9.7 million, or 21% ($11.8 million, or 26%, on a constant currency basis), primarily due to a 25% increase (30% on a constant currency basis) in pawn service charges and a 16% increase (20% on a constant currency basis) in merchandise sales gross profit. The increase in net revenue attributable to same stores and new stores added since the prior-year six-months is summarized as follows:

Change in Net Revenue
Pawn Service Charges Merchandise Sales Gross Profit Total

(in millions)
Same stores $ 2.4
$ 0.3
$ 2.7
New stores and other 5.5
1.9
7.4
Total $ 7.9
$ 2.2
$ 10.1
Change in jewelry scrapping sales gross profit and other revenues (0.4 )
Total change in net revenue $ 9.7

Change in Net Revenue (Constant Currency)
Pawn Service Charges Merchandise Sales Gross Profit Total

(in millions)
Same stores $ 3.7
$ 0.9
$ 4.6
New stores and other 5.6
1.9
7.5
Total $ 9.3
$ 2.8
$ 12.1
Change in jewelry scrapping sales gross profit and other revenues (0.3 )
Total change in net revenue $ 11.8

Pawn service charges increased 25% (30% on a constant currency basis) primarily from newly acquired stores, although same store growth was 6%. The average ending monthly pawn loan balance outstanding during the current six-months was up 1% (up 6% on a constant currency basis). Pawn service charges further include $1.1 million in revenue attributable to receipt of previously escrowed seller funds as a result of settling certain indemnification claims with the sellers of GPMX.

Merchandise sales increased 20% (24% on a constant currency basis) primarily from newly acquired stores. Gross margin on merchandise sales was 31%, or 100 basis points below the prior-year six-months. As a result of these factors, merchandise sales gross profit was up 16% to $15.7 million (20% to $16.3 million on a constant currency basis).

~~Jewelry scrapping sales decreased 26% (23% on a constant currency basis) with a 100 basis point increase in margin, in line with our strategy to sell rather than scrap jewelry.~~

Net revenue increased 21% (26% on a constant currency basis). Operations expense increased 22% (27% on a constant currency basis) primarily as a result of newly acquired stores. Additionally, we recorded a $0.7 million reserve against a receivable and inventory balance deemed uncollectible from a refiner, consisting of a $1.5 million reserve recorded in the first quarter ended December 31, 2018 and a subsequent $0.8 million recovery in the current quarter. These factors resulted in a decrease in segment contribution of 5% (9% on a constant currency basis).

~~Other International~~

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

Six Months Ended March 31, Percentage Change
2019 2018

(in thousands)
Net revenues:
Consumer loan fees, interest and other $ 3,004
$ 3,751
(20)%
Consumer loan bad debt 891
924
(4)%
Net revenues 2,113
2,827
(25)%

Segment operating expenses (income):
Operating expenses 5,293
4,692
13%
Equity in net loss (income) of unconsolidated affiliates 688
(2,326 ) *
Segment operating (loss) contribution (3,868 ) 461
*

Impairment of investment in unconsolidated affiliates 19,725
—
*
Other segment expense (income) 504
(118 ) *
Segment (loss) contribution $ (24,097 ) $ 579
*



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

~~Segment loss was $24.1 million compared to $0.6 million in income in the prior-year six-months, primarily due to:~~

~~Impairment of our investment in Cash Converters International in the amount of $19.7 million; and~~

A charge of $2.9 million included in our ordinary estimated share of earnings for the current-year six-months from Cash Converters International for charges relating to settlement of Queensland class action litigation in October 2018.

Due partly to regulatory changes that became effective January 1, 2018, we added installment loan products in our Canada CASHMAX business to meet the needs of our customers. In addition to payday loans, all CASHMAX stores are now offering installment loans with terms ranging from six to 18 months and average yields of 47% per annum. We entered into a secured borrowing arrangement in November 2018 to provide up to CAD $25.0 million to fund originations of installment loans through November 2019 and have obtained $1.5 million in proceeds from the facility through March 31, 2019. See Note 6 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."

~~We closed three under-performing CASHMAX stores in the current six-months.~~

~~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:

Six Months Ended March 31, Percentage Change
2019 2018

(in thousands)
Segment contribution $ 48,006
$ 71,937
(33)%
Corporate expenses (income):
Administrative 31,742
26,420
20%
Depreciation and amortization 4,808
3,989
21%
Loss on sale or disposal of assets —
11
(100)%
Interest expense 17,097
11,673
46%
Interest income (5,615 ) (7,138 ) (21)%
Other income (304 ) (179 ) 70%
Income from continuing operations before income taxes 278
37,161
(99)%
Income tax expense 1,279
13,208
(90)%
(Loss) income from continuing operations, net of tax (1,001 ) 23,953
*
Loss from discontinued operations, net of tax (201 ) (722 ) (72)%
Net (loss) income (1,202 ) 23,231
*
Net loss attributable to noncontrolling interest (1,230 ) (989 ) 24%
Net income attributable to EZCORP, Inc. $ 28
$ 24,220
(100)%



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

Segment contribution decreased primarily due to a $19.7 million impairment of our investment in Cash Converters International and a $2.9 million charge included in our ordinary estimated share of earnings from Cash Converters International for charges relating to settlement of a Queensland class action litigation in October 2018.

Administrative expenses increased $5.3 million, or 20%, in the current six-months primarily due to costs of $3.6 million associated with a strategic investment in a new digital platform and other professional fees.

~~Depreciation and amortization increased $0.8 million, or 21%, primarily due to additional capitalized software costs, including development of a new point of sale system.~~

Interest expense increased $5.4 million, or 46%, primarily due to an increase in debt outstanding during the current six-months compared to the prior-year six-months. Effective interest rates on our outstanding convertible debt were approximately 8% to 9%.

Interest income decreased $1.5 million, or 21%, primarily due to the declining principal balance on the Grupo Finmart notes receivable as they are repaid in accordance with their agreed amortization schedule.

~~Income tax expense decreased $12.1 million due primarily to:~~

~~A $36.9 million decrease in income from continuing operations before income taxes; and~~

~~A lower maximum U.S. corporate rate of 21% in the current six-months compared to a higher blended rate in the prior-year six-months; partially offset by~~

~~A first quarter of fiscal 2018 charge related to the impacts of the U.S. Tax Cuts and Jobs Act of 2017; and~~

~~A non-recurring benefit in the first quarter of fiscal 2018 for the expiration of statute of limitations on an uncertain tax position.~~

Liquidity and Capital Resources

Cash Flows

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


	Six Months Ended March 31,						Percentage Change	Three Months Ended December 31,						Percentage Change
	2019			2018			Percentage Change	2019			2018			Percentage Change

	(in thousands)							(in thousands)
Cash flows from operating activities	$	50,623		$	45,644		11%	$	(10,918	)	$	23,381		*
Cash flows from investing activities	14,915			(49,474		)	*	(6,798		)	(8,279		)	18%
Cash flows from financing activities	(2,731		)	(311		)	(778)%	(2,934		)	(2,612		)	(12)%
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(599		)	(238		)	(152)%	1,349			(782		)	*
Net increase (decrease) in cash, cash equivalents and restricted cash	$	62,208		$	(4,379	)	*
Net (decrease) increase in cash, cash equivalents and restricted cash								$	(19,301	)	$	11,708		*



*	Represents a percentage computation that is not mathematically meaningful.

Change in Cash and Cash Equivalents and Restricted Cash for the ~~Six~~Three Months Ended ~~March~~December 31, 2019 vs. ~~Six~~Three Months Ended ~~March~~December 31, 2018

The ~~increase~~decrease in cash flows from operating activities year-over-year was due to $37.3 million of changes in working capital, offset by a ~~$6.9~~$3.1 million increase in net income, exclusive of non-cash items. Changes in working capital included certain required prepayments and payments of accounts payable, including certain discrete items, ~~operational results and stores acquired in the prior year, offset by a $1.9 million decrease from changes in operating assets and liabilities.~~accrued as of September 30, 2019. We continue to refine efforts to most efficiently manage working capital.

The increase in cash flows from investing activities year-over-year was primarily due to ~~a $63.2~~an $8.1 million net decrease in ~~cash paid for acquisitions,~~investment in customer loan growth, partially offset by a ~~$5.4~~$7.3 million net decrease ~~in additions to property and equipment and a $5.4 million increase~~ in principal collections on notes ~~receivable, offset by a $9.6 million net investment in customer loan growth.~~receivable.

The decrease in cash flows from financing activities year-over-year was primarily due to $1.0 million in common stock repurchases and a ~~$3.0~~net $1.1 million ~~increase~~reduction in debt proceeds, offset by a $1.9 million decrease in cash paid for employee net share settlement of individual tax liabilities on vested share-based ~~awards, offset by $0.6 million in net proceeds from borrowings.~~awards.

The net effect of these and other smaller items was a ~~$62.2~~$19.3 million ~~increase~~decrease in cash on hand during the current ~~six-months,~~year-to-date period, resulting in a ~~$347.8~~$143.1 million ending cash ~~balance compared to $159.2 million as of March 31, 2018.~~balance. Of the ending cash balance ~~as of March~~at December 31, 2019, ~~$25.0~~$39.9 million was not ~~available~~unavailable to fund domestic operations as we intend to permanently reinvest those funds in our foreign operations.

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. The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows, and corporate 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 current quarter, we repurchased and retired 142,409 shares of our Class A Common Stock for $963,000. Through January 29, 2020, we have repurchased and retired an additional 234,394 shares of our Class A Common Stock for $1,504,000, bringing our total repurchases to date (as of January 29, 2020) to 376,803 shares for $2,467,000.

We anticipate that cash flow from operations and cash on hand will be adequate to fund anticipated stock repurchases, our contractual obligations, planned de novo store growth, capital expenditures and working capital requirements ~~as well as a limited amount of acquisitions,~~ through fiscal ~~2019. We currently intend to retire the $195.0 million of 2.125% Cash Convertible Senior Notes Due 2019 at maturity (June 15, 2019) using cash on hand.~~2020. We continue to explore accretive 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. Depending on the level of acquisition activity and other factors, our ability to repay our longer term debt obligations, including the convertible 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, ~~2018~~2019, we reported that we had ~~$795.8~~$631.7 million in total contractual obligations as of September 30, ~~2018.~~2019. There have been no material changes to this total obligation since September 30, ~~2018.~~2019, 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, ~~2018,~~2019, these collectively amounted to ~~$22.4~~$22.5 million.

Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements

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

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, ~~2018~~2019~~, supplemented by those described in "Part II, Item 1A — Risk Factors" of this Quarterly 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, ~~2018~~2019. There have been no material changes to our exposure to market risks since September 30, ~~2018.~~2019.

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.

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 ~~March~~December 31, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of ~~March~~December 31, 2019 due to the continuing existence of a material weakness in internal control over financial reporting described below (which we view as an integral part of our disclosure controls and procedures). Based on the performance of additional procedures designed to ensure the reliability of our financial reporting, we believe that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods, presented, in conformity with ~~GAAP.~~accounting principles generally accepted in the United States (“GAAP”).

Changes in Internal Control over Financial Reporting

~~During~~We implemented internal controls to ensure we adequately evaluated our leases and properly assessed the ~~quarter ended March 31, 2019, we experienced~~impact of Topic 842 on our financial statements upon adoption on October 1, 2019. There were no significant changes ~~in our internal control environment that have materially affected, or are reasonably likely~~ to ~~materially affect,~~ our internal control over financial ~~reporting. Specifically,~~reporting due to the adoption of the new standard.

During the second quarter of fiscal 2019, we ~~have certain~~identified deficiencies in our information technology general controls ~~(ITGC)~~(ITGCs) that are designed to prevent or detect unauthorized access

or changes to certain information technology (IT) systems that support our ~~operating system~~financial reporting processes. Our related IT dependent manual and databases. Prior to the quarter ended March 31, 2019, we maintained a separate logging system that mitigated the potential impact of those ITGC deficiencies. During the quarter, however, we deemed it necessary to discontinue the separate logging system in order to maintain acceptable system performance at the store level, which eliminated compensatingapplication controls that ~~mitigated~~are impacted by the ~~potential impact of~~affected ITGCs were also deemed ineffective as they rely on reports generated by the ~~ITGC deficiencies. We believe~~IT systems subject to ITGCs, resulting in our inability to place reliance on internal controls over related financial statement accounts and assertions. At that ~~without those IT compensating controls and given~~time, we determined that the ~~lack of sufficiently designed non-IT compensating controls, the underlying~~ ITGC deficiencies represent a material weakness in our internal control over financial ~~reporting.~~

~~As of the date of this~~reporting and reported that material weakness in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. Because we have ~~hired~~not fully remediated that material weakness as of December 31, 2019, we have concluded that our internal control over financial reporting was not effective as of that date.

As of December 31, 2019, we have continued to implement, manage and monitor a Chief Information Security Officer, whose primary responsibility is to assist us with the design, implementation and maintenance of appropriate controls to safeguard the confidentiality, integrity and availability of our IT operating and reporting systems. We areremediation plan focused on ~~remediating~~IT control enhancements across our logical access and change management processes, including the evaluation of automation tools, where applicable, and database monitoring activities. Management believes it is taking the appropriate steps to remediate the underlying ITGC deficiencies, ~~and we are in~~including allowing the process of improving our control environment to adequately prevent or detect unauthorized access or changes to our operating systems and databases, including the implementation of a new separate logging system that is expectedcontrols to operate ~~without sacrificing system performance at the store level. See "Part II, Item 1A — Risk Factors."~~for a time period to produce sufficient testing sample sizes.

Inherent Limitations on Internal Controls

Notwithstanding the foregoing, management does not expect that our disclosure controls and procedures or our internal control over financial reporting 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 objectives of the control system will be met. Limitations inherent in any control system include the following:

Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes.

Controls can be circumvented by individuals, acting alone or in collusion with others, or by management override.

The design of any system of controls is based in part on 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.

The design of a control system must reflect the fact that resources are constrained, and the benefits of controls must be considered relative to their costs.

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, have been detected.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 89 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. 2018~~30, 2019~~, as supplemented by the~~.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below provides certain information ~~set forth in~~ ~~"Part II, Item 1A — Risk Factors"~~about our repurchase of ~~our Quarterly Report on Form 10-Q for~~shares of Class A Non-voting Common Stock during the quarter ended December 31, ~~2018~~2019. All such repurchases were made in open market transactions at prevailing market prices and were executed pursuant to a trading plan adopted by the ~~information set forth below.~~

~~We have identified a material weakness in our internal control over financial reporting that, if not effectively remediated, could result in material misstatements in our financial statements.~~

As described in "Part I, Item 4 — Controls and Procedures," we have identified and evaluated certain deficiencies in our IT general controls, and have concluded that those deficiencies, collectively, represent a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of this material weakness, management has concluded that our disclosure controls and procedures were not effective as of March 31, 2019.

~~As described in "Part I, Item 4 — Controls and Procedures," we are in the process of implementing a remediation plan~~Company pursuant to address the underlying ITGC deficiencies. If our remediation efforts are insufficient, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business, results of operations and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the deficiencies, subject us to fines, penalties or judgments, harm our reputation or otherwise cause a decline in investor confidence.

~~Our ability to recover our investment in RDC is heavily dependent on RDC's success and performance, including its ability to obtain further debt or equity financing.~~

We have certain interests in RDC, a previously consolidated variable interest entity, including a $9.1 million non-interest bearing convertible promissory note due January 2021. See Note 5 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — "Financial Statements." Our ability to recover our investment in RDC, including the amount owedRule 10b5-1 under the convertible promissory note or any value attributable to additional equity interest that we would receive on conversion, is heavily dependent on RDC's success and performance, including its ability to obtain further debt or equity financing. To the extent that RDC is not successful, we may be required in future periods to impair our investment and recognize related investment losses.Securities Exchange Act of 1934.



	Total Number of Shares Purchased	Total Price Paid for Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)

	(in thousands, except average price paid per share data)
October 1, 2019 through October 31, 2019	—	$	—	$	—	—	$	—
November 1, 2019 through November 30, 2019	—	—		—		—	—
December 1, 2019 through December 31, 2019	142	963		6.76		142	59,037
Total	142	$	963	$	6.76	142	$	59,037



(1)	On December 2, 2019, our Board of Directors approved a program to repurchase up to $60.0 million of our Class A Non-voting Common Stock over three years. Under the stock repurchase program, we may purchase Class A Non-voting common stock from time to time at management's discretion in accordance with applicable securities laws, including through open market transactions, block or privately negotiated transactions, or any combination thereof. In addition, we may purchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934. The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows, and corporate considerations determined by management and the Board of Directors, 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.

ITEM 6. EXHIBITS

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



Exhibit No.		Description of Exhibit

31.1†		Certification of Stuart I. Grimshaw, Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2†		Certification of Daniel M. Chism, Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1††		Certifications of Stuart I. Grimshaw, Chief Executive Officer, and Daniel M. Chism, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†††		XBRL Instance Document
101.SCH†††		XBRL Taxonomy Extension Schema Document
101.CAL†††		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†††		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†††		XBRL Taxonomy Label Linkbase Document
101.PRE†††		XBRL Taxonomy Extension Presentation Linkbase Document



†	Filed herewith.
††	Furnished herewith.
†††	Filed herewith as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2019, ~~March~~December 31, 2018 and September 30, ~~2018;~~2019; (ii) Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~March~~December 31, 2018; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~March~~December 31, 2018; (iv) Condensed Consolidated Statements of Stockholders' Equity for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~March~~December 31, 2018; (v) Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~March~~December 31, 2019 and ~~March~~December 31, 2018; and (vi) Notes to Interim Condensed Consolidated Financial Statements.

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:	~~May 8, 2019~~February 3, 2020	/s/ ~~David McGuire~~Daniel M. Chism
		~~David McGuire,~~ Daniel M. Chism, ~~Deputy~~ Chief Financial Officer ~~and Chief Accounting Officer~~ ~~(principal accounting officer)~~

4630



	March 31, 2018
	As Previously Reported			Corrections			As Corrected

Cash and cash equivalents	$	159,912		$	(696	)	$	159,216
Pawn service charges receivable, net	30,493			(6,363		)	24,130
Prepaid expenses and other current assets	29,222			311			29,533
Goodwill	289,438			1,446			290,884
Deferred tax asset, net	13,842			1,245			15,087
Accounts payable, accrued expenses and other current liabilities	60,689			(151		)	60,538
Retained earnings	377,682			(4,122		)	373,560
Accumulated other comprehensive loss	(40,463		)	216			(40,247		)



	Three Months Ended March 31, 2018
	As Previously Reported		Corrections			As Corrected

Pawn service charges	$	74,367	$	(336	)	$	74,031
Operations expense	82,160		20			82,180
Income from continuing operations before income taxes	17,860		(356		)	17,504
Income tax expense	5,921		(124		)	5,797
Income from continuing operations, net of tax	11,939		(232		)	11,707
Basic earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.23	$	(0.01	)	$	0.22
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.21	$	—		$	0.21



Financial Assets (Liabilities)	Balance Sheet Location	March 31, 2019		March 31, 2018			September 30, 2018

		(in thousands)
2019 Convertible Notes Hedges — Level 2	Prepaid expenses and other current assets	$	—	$	—		$	2,552
2019 Convertible Notes Hedges — Level 2	Other assets	—		16,042			—
2019 Convertible Notes Embedded Derivative — Level 2	Current maturities of long-term debt, net	—		—			(2,552		)
2019 Convertible Notes Embedded Derivative — Level 2	Long-term debt, net	—		(16,042		)	—



	Three Months Ended March 31, 2019
	U.S. Pawn		Latin America Pawn			Other International			Total Segments			Corporate Items			Consolidated

	(in thousands)
Revenues:
Merchandise sales	$	96,632	$	24,628		$	—		$	121,260		$	—		$	121,260
Jewelry scrapping sales	7,916		2,464			—			10,380			—			10,380
Pawn service charges	61,798		20,001			—			81,799			—			81,799
Other revenues	43		25			1,223			1,291			—			1,291
Total revenues	166,389		47,118			1,223			214,730			—			214,730
Merchandise cost of goods sold	60,928		16,872			—			77,800			—			77,800
Jewelry scrapping cost of goods sold	6,571		2,262			—			8,833			—			8,833
Other cost of revenues	—		—			407			407			—			407
Net revenues	98,890		27,984			816			127,690			—			127,690
Segment and corporate expenses (income):
Operations	67,475		18,223			2,545			88,243			—			88,243
Administrative	—		—			—			—			16,487			16,487
Depreciation and amortization	2,982		1,495			77			4,554			2,458			7,012
(Gain) loss on sale or disposal of assets and other	—		(839		)	16			(823		)	—			(823		)
Interest expense	—		50			132			182			8,407			8,589
Interest income	—		(431		)	—			(431		)	(2,695		)	(3,126		)
Equity in net income of unconsolidated affiliates	—		—			(431		)	(431		)	—			(431		)
Impairment of investment in unconsolidated affiliates	—		—			6,451			6,451			—			6,451
Other expense (income)	—		29			262			291			(22		)	269
Segment contribution (loss)	$	28,433	$	9,457		$	(8,236	)	$	29,654
Income from continuing operations before income taxes									$	29,654		$	(24,635	)	$	5,019



	Six Months Ended March 31, 2019
	U.S. Pawn		Latin America Pawn			Other International			Total Segments			Corporate Items			Consolidated

	(in thousands)
Revenues:
Merchandise sales	$	191,735	$	50,549		$	—		$	242,284		$	—		$	242,284
Jewelry scrapping sales	14,468		5,193			—			19,661			—			19,661
Pawn service charges	126,023		39,295			—			165,318			—			165,318
Other revenues	91		67			3,004			3,162			—			3,162
Total revenues	332,317		95,104			3,004			430,425			—			430,425
Merchandise cost of goods sold	120,076		34,836			—			154,912			—			154,912
Jewelry scrapping cost of goods sold	12,081		4,802			—			16,883			—			16,883
Other cost of revenues	—		—			891			891			—			891
Net revenues	200,160		55,466			2,113			257,739			—			257,739
Segment and corporate expenses (income):
Operations	135,435		36,419			5,175			177,029			—			177,029
Administrative	—		—			—			—			31,742			31,742
Depreciation and amortization	6,017		2,917			118			9,052			4,808			13,860
Loss on sale or disposal of assets and other	2,852		751			16			3,619			—			3,619
Interest expense	—		79			204			283			17,097			17,380
Interest income	—		(850		)	—			(850		)	(5,615		)	(6,465		)
Equity in net loss of unconsolidated affiliates	—		—			688			688			—			688
Impairment of investment in unconsolidated affiliates	—		—			19,725			19,725			—			19,725
Other (income) expense	—		(97		)	284			187			(304		)	(117		)
Segment contribution (loss)	$	55,856	$	16,247		$	(24,097	)	$	48,006
Income from continuing operations before income taxes									$	48,006		$	(47,728	)	$	278



	March 31,		Three Months Ended March 31,		Six Months Ended March 31,
	2019	2018	2019	2018	2019	2018

Mexican peso	19.4	18.3	19.2	18.7	19.5	18.8
Guatemalan quetzal	7.6	7.3	7.6	7.3	7.6	7.2
Honduran lempira	24.3	23.5	24.2	23.5	24.1	23.4
Peruvian sol	3.3	3.2	3.3	3.2	3.3	3.2