UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q



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

For the quarterly period ended ~~June 30,~~December 31, 2019 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	TX	78746
(Address of principal executive offices)					(Zip Code)

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

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Class A Non-voting Common Stock, par value $.01 per share	EZPW	NASDAQ Stock Market	(NASDAQ Global Select Market)

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

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

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



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

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

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

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 ~~July 22, 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 ~~June 30,~~December 31, 2019 and 2018 and September 30, ~~2018~~2019 (Unaudited)	1

Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~June 30,~~December 31, 2019 and 2018 (Unaudited)	2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Nine~~ Months Ended ~~June 30,~~December 31, 2019 and 2018 (Unaudited)	3

Condensed Consolidated Statements of Stockholders’ Equity for the Periods Ended ~~June 30,~~December 31, 2019 and 2018 (Unaudited)	3

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~June 30,~~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~~	2012

Note 10: Segment Information	14

Note 11: Supplemental Consolidated Financial Information ~~and Other~~	2416

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2416

Item 3. Quantitative and Qualitative Disclosures about Market Risk	4227

Item 4. Controls and Procedures	4227

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	4328

Item 1A. Risk Factors	4428

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

Item 6. Exhibits	4429

SIGNATURES	4530

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)

	June 30, 2019			June 30, 2018			September 30, 2018			December 31, 2019			December 31, 2018			September 30, 2019

	(Unaudited)									(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	138,922		$	284,493		$	285,311		$	143,141		$	297,031		$	157,567
Pawn loans	190,299			183,054			198,463			195,586			193,984			199,058
Pawn service charges receivable, net	29,847			26,439			30,959			32,250			31,558			31,802
Inventory, net	175,802			151,145			166,997			187,369			175,422			179,355
Notes receivable, net	16,166			37,906			34,199			7,450			26,711			7,182
Prepaid expenses and other current assets	37,365			43,708			33,456			36,142			31,483			30,796
Total current assets	588,401			726,745			749,385			601,938			756,189			605,760
Investments in unconsolidated affiliates	30,922			61,056			49,500			29,272			35,511			34,516
Property and equipment, net	66,214			71,587			73,649			65,246			69,770			67,357
Lease right-of-use asset										225,950			—			—
Goodwill	300,700			294,335			299,248			301,282			296,638			300,527
Intangible assets, net	63,646			59,678			54,923			68,995			55,956			68,044
Notes receivable, net	10,912			13,432			3,226			1,124			4,599			1,117
Deferred tax asset, net	3,956			6,146			7,986			2,123			10,104			1,998
Other assets	4,472			3,575			3,863			5,012			4,442			4,383
Total assets	$	1,069,223		$	1,236,554		$	1,241,780		$	1,300,942		$	1,233,209		$	1,083,702

Liabilities and equity:
Current liabilities:
Current maturities of long-term debt, net	$	215		$	195,796		$	190,181		$	215		$	190,238		$	214
Accounts payable, accrued expenses and other current liabilities	59,981			61,595			57,958			51,621			57,380			77,957
Customer layaway deposits	12,750			11,938			11,824			12,548			11,747			12,915
Lease liability										48,052			—			—
Total current liabilities	72,946			269,329			259,963			112,436			259,365			91,086
Long-term debt, net	235,449			222,897			226,702			241,209			229,928			238,380
Deferred tax liability, net	7,522			4,285			8,817			2,119			9,617			1,985
Lease liability										186,352			—			—
Other long-term liabilities	5,990			7,458			6,890			7,226			6,150			7,302
Total liabilities	321,907			503,969			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 June 30, 2019; 51,494,246 as of June 30, 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	404,880			395,428			397,927			407,440			400,081			407,628
Retained earnings	389,808			388,014			386,622			389,928			383,256			389,163
Accumulated other comprehensive loss	(47,926		)	(47,712		)	(42,356		)	(46,327		)	(48,739		)	(52,398		)
EZCORP, Inc. stockholders’ equity	747,316			736,275			742,739			751,600			735,152			744,949
Noncontrolling interest	—			(3,690		)	(3,331		)	—			(7,003		)	—
Total equity	747,316			732,585			739,408			751,600			728,149			744,949
Total liabilities and equity	$	1,069,223		$	1,236,554		$	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 June 30,						Nine Months Ended June 30,						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	$	103,902		$	104,737		$	346,186		$	333,270		$	126,728		$	121,024
Jewelry scrapping sales	18,212			20,428			37,873			44,166			9,528			9,281
Pawn service charges	78,980			72,544			244,298			222,597			84,725			83,519
Other revenues	1,371			1,903			4,533			6,147			1,454			1,871
Total revenues	202,465			199,612			632,890			606,180			222,435			215,695
Merchandise cost of goods sold	70,271			66,896			225,183			210,283			84,076			77,112
Jewelry scrapping cost of goods sold	15,765			17,625			32,648			37,536			7,754			8,050
Other cost of revenues	576			349			1,467			1,273			536			484
Net revenues	115,853			114,742			373,592			357,088			130,069			130,049
Operating expenses:
Operations	84,727			82,932			261,756			248,758			90,625			90,853
Administrative	15,053			13,268			46,795			39,688			17,489			13,165
Depreciation and amortization	7,254			6,124			21,114			18,298			7,733			6,848
Loss on sale or disposal of assets and other	24			314			3,643			453			744			4,442
Total operating expenses	107,058			102,638			333,308			307,197			116,591			115,308
Operating income	8,795			12,104			40,284			49,891			13,478			14,741
Interest expense	9,832			7,394			27,212			19,070			5,329			8,791
Interest income	(3,172		)	(4,358		)	(9,637		)	(12,896		)	(843		)	(3,339		)
Equity in net income of unconsolidated affiliates	(1,320		)	(1,151		)	(632		)	(3,477		)
Equity in net loss of unconsolidated affiliates													5,897			1,119
Impairment of investment in unconsolidated affiliates	—			—			19,725			—			—			13,274
Other income	(4		)	(5,287		)	(121		)	(5,473		)
Income from continuing operations before income taxes	3,459			15,506			3,737			52,667
Income tax expense	98			1,502			1,377			14,710
Income from continuing operations, net of tax	3,361			14,004			2,360			37,957
(Loss) income from discontinued operations, net of tax	(203		)	91			(404		)	(631		)
Net income	3,158			14,095			1,956			37,326
Other expense (income)													71			(386		)
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													(27		)	(183		)
Net income (loss)													1,238			(3,843		)
Net loss attributable to noncontrolling interest	—			(359		)	(1,230		)	(1,348		)	—			(477		)
Net income attributable to EZCORP, Inc.	$	3,158		$	14,454		$	3,186		$	38,674
Net income (loss) attributable to EZCORP, Inc.													$	1,238		$	(3,366	)

Basic earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.06		$	0.26		$	0.06		$	0.72
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.06		$	0.25		$	0.06		$	0.69
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			55,306			54,453			55,666			55,032
Weighted-average diluted shares outstanding	55,487			57,954			55,327			57,080			55,687			55,032

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended June 30, Nine Months Ended June 30,
2019 2018 2019 2018

(Unaudited)
(in thousands)
Net income $ 3,158
$ 14,095
$ 1,956
$ 37,326
Other comprehensive gain (loss):
Foreign currency translation gain (loss), net of income tax expense (benefit) for our investment in unconsolidated affiliate of $45 and ($470) for the three and nine months ended June 30, 2019 respectively, and ($135) and $76 for the three and nine months ended June 30, 2018, respectively. 2,024
(7,464 ) (5,570 ) (7,993 )
Comprehensive income 5,182
6,631
(3,614 ) 29,333
Comprehensive loss attributable to noncontrolling interest —

(358 ) (1,230 )
(1,241 )
Comprehensive income attributable to EZCORP, Inc. $ 5,182
$ 6,989
$ (2,384 ) $ 30,574

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

	Three Months Ended December 31,
	2019		2018

	(Unaudited)
	(in thousands)
Net income (loss)	$	1,238	$	(3,843	)
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)	7,309		(10,226		)
Comprehensive loss attributable to noncontrolling interest	—		(477		)
Comprehensive income (loss) attributable to EZCORP, Inc.	$	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
Stock compensation —
—
2,673
—
—
—
2,673
Foreign currency translation (loss) gain —
—
—
—
(7,465 ) 1
(7,464 )
Equity portion of convertible notes —
—
39,057
—
—
—
39,057
Net income (loss) —
—
—
14,454
—
(359 ) 14,095
Balances as of June 30, 2018 54,464
$ 545
$ 395,428
$ 388,014
$ (47,712 ) $ (3,690 ) $ 732,585

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
Stock compensation —
—
2,375
—
—
—
2,375
Foreign currency translation gain —
—
—
—
2,024
—
2,024
Net income —
—
—
3,158
—
—
3,158
Balances as of June 30, 2019 55,445
$ 554
$ 404,880
$ 389,808
$ (47,926 ) $ —
$ 747,316



	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

	Nine Months Ended June 30,						Three Months Ended December 31,
	2019			2018			2019			2018

	(Unaudited)						(Unaudited)
	(in thousands)						(in thousands)
Operating activities:
Net income	$	1,956		$	37,326
Adjustments to reconcile net 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	21,114			18,298			7,733			6,848
Amortization of debt discount and deferred financing costs	16,613			12,126			3,229			5,585
Amortization of lease right-of-use asset							11,474			—
Accretion of notes receivable discount and deferred compensation fee	(3,788		)	(7,222		)	(275		)	(1,376		)
Deferred income taxes	5,003			3,135			10			352
Impairment of investment in unconsolidated affiliate	19,725			—			—			13,274
Other adjustments	1,875			1,948			1,298			5,052
Reserve on jewelry scrap receivable	3,646			—
Stock compensation expense	7,036			8,216			1,695			2,238
Income from investment in unconsolidated affiliates	(632		)	(3,477		)
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	1,301			2,609			(355		)	(726		)
Inventory	1,377			988			(1,592		)	685
Prepaid expenses, other current assets and other assets	(4,194		)	(3,356		)	(9,649		)	(1,564		)
Accounts payable, accrued expenses and other liabilities	(1,477		)	(4,624		)	(29,966		)	(836		)
Customer layaway deposits	949			935			(467		)	18
Income taxes, net of excess tax benefit from stock compensation	(5,527		)	2,419
Net cash provided by operating activities	64,977			69,321
Income taxes							(1,188		)	(3,445		)
Net cash (used in) provided by operating activities							(10,918		)	23,381
Investing activities:
Loans made	(542,512		)	(512,914		)	(187,362		)	(186,588		)
Loans repaid	328,079			318,636			109,623			106,643
Recovery of pawn loan principal through sale of forfeited collateral	211,979			202,078			76,515			70,594
Additions to property and equipment, net	(24,568		)	(33,917		)	(5,574		)	(5,880		)
Acquisitions, net of cash acquired	(8,116		)	(93,165		)	—			(332		)
Investment in unconsolidated affiliate	—			(14,036		)
Principal collections on notes receivable	21,900			16,210			—			7,284
Net cash used in investing activities	(13,238		)	(117,108		)	(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	1,064			170,496			(109		)	743
Payments on borrowings	(195,877		)	(28		)	(292		)	(67		)
Net cash (used in) provided by financing activities	(198,101		)	170,157
Repurchase of common stock							(963		)	—
Net cash used in financing activities							(2,934		)	(2,612		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(294		)	(1,493		)	1,349			(782		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(146,656		)	120,877			(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	$	138,922		$	284,745		$	143,141		$	297,286

Non-cash investing and financing activities:
Pawn loans forfeited and transferred to inventory	$	221,940		$	197,163		$	82,878		$	80,301

See accompanying notes to unaudited interim condensed consolidated financial statements.

EZCORP, Inc.

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

~~June 30,~~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 nine~~ months ended ~~June 30,~~December 31, 2019 and 2018 (the "current quarter" and ~~"current year-to-date period" and~~ "prior-year ~~quarter" and "prior-year nine-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 second quarter of fiscal 2019, 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 related 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~~

June 30, 2018
As Previously Reported Corrections As Corrected

Cash and cash equivalents $ 285,031
$ (538 ) $ 284,493
Pawn service charges receivable, net 33,388
(6,949 ) 26,439
Prepaid expenses and other current assets 43,448
260
43,708
Goodwill 292,544
1,791
294,335
Deferred tax asset, net 616
1,245
1,861
Accounts payable, accrued expenses and other current liabilities 61,813
(218 ) 61,595
Retained earnings 392,315
(4,301 ) 388,014
Accumulated other comprehensive loss (48,040 ) 328
(47,712 )

~~Condensed Consolidated Statements of Operations~~

Three Months Ended June 30, 2018
As Previously Reported Corrections As Corrected

Pawn service charges $ 72,874
$ (330 ) $ 72,544
Operations expense 83,032
(100 ) 82,932
Income from continuing operations before income taxes 15,736
(230 ) 15,506
Income tax expense 1,553
(51 ) 1,502
Income from continuing operations, net of tax 14,183
(179 ) 14,004
Basic earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.27
$ (0.01 ) $ 0.26
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.25
$ —
$ 0.25

Nine Months Ended June 30, 2018
As Previously Reported Corrections As Corrected

Pawn service charges $ 223,601
$ (1,004 ) $ 222,597
Operations expense 248,802
(44 ) 248,758
Administrative expense 39,927
(239 ) 39,688
Income from continuing operations before income taxes 53,388
(721 ) 52,667
Income tax expense 14,911
(201 ) 14,710
Income from continuing operations, net of tax 38,477
(520 ) 37,957
Basic earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.73
$ (0.01 ) $ 0.72
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations $ 0.70
$ (0.01 ) $ 0.69

~~Condensed Consolidated Statements of Cash Flows~~

Nine Months Ended June 30, 2018
As Previously Reported Corrections As Corrected

Net income $ 37,846
$ (520 ) $ 37,326
Service charges and fees receivable 1,601
1,008
2,609
Accounts payable, accrued expenses and other liabilities (4,245 ) (379 ) (4,624 )
Income taxes, net of excess tax benefit from stock compensation 2,586
(167 ) 2,419
Net cash provided by operating activities* 69,379
(58 ) 69,321
Effect of exchange rate changes on cash and cash equivalents and restricted cash (1,541 ) 48
(1,493 )


*	~~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 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 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 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 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 limited period of time to return merchandise for a refund or exchange, and actual returns for refunds are insignificant. Sales and value added 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 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 2019 Acquisitions~~

In June 2019, we acquired assets related to ~~seven~~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 ~~$3.6~~$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 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 current year-to-date period 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 June 30, 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 current year-to-date period 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 June 30, 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 June 30,					Nine Months Ended June 30,						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)	$	3,361		$	14,363	$	3,590		$	39,305
(Loss) income from discontinued operations, net of tax (B)	(203		)	91		(404		)	(631		)
Net income attributable to EZCORP (C)	$	3,158		$	14,454	$	3,186		$	38,674
Net income (loss) from continuing operations attributable to EZCORP (A)												$	1,265		$	(3,183	)
Loss from discontinued operations, net of tax (B)												(27		)	(183		)
Net income (loss) attributable to EZCORP (C)												$	1,238		$	(3,366	)

Weighted-average outstanding shares of common stock (D)	55,445			54,464		55,306			54,453			55,666			55,032
Dilutive effect of restricted stock and 2024 Convertible Notes*	42			3,490		21			2,627
Dilutive effect of restricted stock*												21			—
Weighted-average common stock and common stock equivalents (E)	55,487			57,954		55,327			57,080			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		$	0.26	$	0.06		$	0.72		$	0.02		$	(0.06	)
Discontinued operations (B / D)	—			—		—			(0.01		)	—			—
Basic earnings per share (C / D)	$	0.06		$	0.26	$	0.06		$	0.71
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		$	0.25	$	0.06		$	0.69		$	0.02		$	(0.06	)
Discontinued operations (B / E)	—			—		—			(0.01		)	—			—
Diluted earnings per share (C / E)	$	0.06		$	0.25	$	0.06		$	0.68
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**	2,891			3,569		2,804			3,375			2,216			2,626


*	See Note 67 for discussion of the terms and conditions of the potential impact of the 2019 Convertible 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 ~~June 30,~~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 three 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 the remaining Queensland, Australia ~~class action lawsuit. As a result, we recognized "other-than-temporary" impairments 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. As of~~ June 30, 2019, we determined that our investment was impaired by $3.8 million and that such impairment was not "other-than-temporary." In reaching this conclusion, we considered all available evidence including primarily the time and extent to which our investment was impaired during the current quarter. Should the value of our investment continue to decline further, we may record additional impairments.

~~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~~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 June 30, 2019 June 30, 2018 September 30, 2018

(in thousands)
2019 Convertible Notes Hedges — Level 2 Prepaid expenses and other current assets $ —
$ 7,491
$ 2,552
2019 Convertible Notes Embedded Derivative — Level 2 Current maturities of long-term debt, net —
(7,491 ) (2,552 )

~~We repaid our outstanding~~ ~~2.125% Cash Convertible Senior~~ Notes Due 2019 in June 2019 with expiration of the associated cash-settled call options (the “2019 Convertible Notes Hedges”) and the 2019 Convertible Notes derivative instrument (the “2019 Convertible Notes Embedded Derivative”).

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

~~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
	June 30, 2019		June 30, 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	$	18,744	$	19,517	$	—	$	—	$	19,517	$	7,450		$	7,729	$	—	$	—	$	7,729
Zero-coupon convertible promissory note due January 2021	7,226		7,226		—		—		7,226
2.89% promissory note receivable due April 2024	1,108		1,108		—		—		1,108		1,124			1,124		—		—		1,124
Investments in unconsolidated affiliates	30,922		27,158		24,464		—		2,694		29,272			42,460		34,555		—		7,905

Financial liabilities:
2024 Convertible Notes	$	109,909	$	161,719	$	—	$	161,719	$	—	$	112,740		$	136,634	$	—	$	136,634	$	—
2025 Convertible Notes	124,542		159,873		—		159,873		—		127,902			136,965		—		136,965		—
8.5% unsecured debt due 2024	1,148		1,148		—		—		1,148		1,042			1,042		—		—		1,042
CASHMAX secured borrowing facility	65		804		—		—		804		(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
June 30, 2018 June 30, 2018 Fair Value Measurement Using
Level 1 Level 2 Level 3

(in thousands)
Financial assets:
Notes receivable from Grupo Finmart, net $ 51,338
$ 57,116
$ —
$ —
$ 57,116
Investments in unconsolidated affiliates 61,056
49,205
49,205
—
—

Financial liabilities:
2019 Convertible Notes $ 184,823
$ 197,925
$ —
$ 197,925
$ —
2024 Convertible Notes 104,562
195,974
—
195,974
—
2025 Convertible Notes 118,335
168,464
—
168,464
—

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
Investments 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 debt 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 and will accrete to par~~approximates carrying value ~~through maturity unless converted.~~

In conjunction with the deconsolidation and recording of the above amounts, we recognized a loss of $0.3 million, included in "Other 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 for the current year-to-date period. The retained equity interest, call option and convertible promissory note are valued using weighted discounted cash flow and market approaches using Level 3 inputs. Significant increases or decreases in the underlying assumptions used to value these interests could significantly increase or decrease thealthough 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. In April 2019, we loaned the $1.1 million back to the seller of GPMX in exchange for a promissory note. The note bears interest at the rate of 2.89% per annumis 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 June 30, 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. 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 2024 and 2025 Convertible Notes using quoted price inputs. The notes are not actively traded, and thus the price inputs represent a Level 2 measurement. As the quoted price inputs are highly variable from day to day, the fair value estimates disclosed above could significantly increase or decrease.

NOTE 6:7: DEBT

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


	June 30, 2019							June 30, 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	$	(10,177	)	$	184,823	$	195,000	$	(7,567	)	$	187,433	$	—	$	—		$	—		$	195,000	$	(4,924	)	$	190,076	$	—	$	—		$	—
2019 Convertible Notes Embedded Derivative	—		—			—		7,491		—			7,491		2,552		—			2,552		—		—			—			21		—			21		—		—			—
2024 Convertible Notes	143,750		(33,841		)	109,909		143,750		(39,188		)	104,562		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		(47,958		)	124,542		172,500		(54,165		)	118,335		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 debt due 2024*	1,148		—			1,148		—		—			—		1,304		—			1,304		1,042		—			1,042			1,237		—			1,237		1,092		—			1,092
Other debt	—		—			—		3,482		—			3,482		—		—			—
CASHMAX secured borrowing facility*	804		(739		)	65		—		—			—		—		—			—		404		(664		)	(260		)	1,160		(826		)	334		634		(653		)	(19		)
Total	$	318,202	$	(82,538	)	$	235,664	$	522,223	$	(103,530	)	$	418,693	$	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	215		—			215		205,973		(10,177		)	195,796		197,748		(7,567		)	190,181		215		—			215			195,162		(4,924		)	190,238		214		—			214
Total long-term debt	$	317,987	$	(82,538	)	$	235,449	$	316,250	$	(93,353	)	$	222,897	$	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)
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 debt due 2024	1,148		215		430		430		73		1,042		215		431		396		—
CASHMAX secured borrowing facility	804		—		804		—		—		404		—		404		—		—
	$	318,202	$	215	$	1,234	$	316,680	$	73	$	317,696	$	215	$	835	$	316,646	$	—



*	Excludes the potential impact of embedded derivatives.


	Three Months Ended June 30,				Nine Months Ended June 30,				Three Months Ended December 31,
	2019		2018		2019		2018		2019		2018

	(in thousands)								(in thousands)
2019 Convertible Notes:
Contractual interest expense	$	896	$	1,069	$	3,034	$	3,207	$	—	$	1,076
Amortization of debt discount and deferred financing costs	2,314		2,527		7,567		7,470		—		2,643
Total interest expense	$	3,210	$	3,596	$	10,601	$	10,677	$	—	$	3,719

2024 Convertible Notes:
Contractual interest expense	$	1,033	$	1,033	$	3,099	$	3,099	$	1,033	$	1,033
Amortization of debt discount and deferred financing costs	1,376		1,275		4,051		3,756		1,429		1,325
Total interest expense	$	2,409	$	2,308	$	7,150	$	6,855	$	2,462	$	2,358

2025 Convertible Notes:
Contractual interest expense	$	1,024	$	535	$	3,072	$	535	$	1,024	$	1,024
Amortization of debt discount and deferred financing costs	1,630		836		4,806		836		1,691		1,573
Total interest expense	$	2,654	$	1,371	$	7,878	$	1,371	$	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 ~~June 30,~~December 31, 2019 was $39.0 million. The effective interest rate for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 was approximately 9%. As of ~~June 30,~~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 ~~June 30,~~December 31, 2019. As of ~~June 30,~~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 ~~June 30,~~December 31, 2019 was $25.3 million. The effective interest rate for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 was approximately 9%. As of ~~June 30,~~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 ~~June 30,~~December 31, 2019. As of ~~June 30,~~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 paid interest semi-annually in arrears at a rate of 2.125% per annum on June 15 and December 15 of each year. The 2019 Convertible Notes matured on June 15, 2019 (the "2019 Maturity Date"), and the remaining $195.0 million aggregate principal amount outstanding plus accrued interest was repaid using cash on hand.The effective interest rate for the three and nine months ended June 30, 2019 was approximately 8%. The cash-settled call options (the “2019 Convertible Notes Hedges”) purchased in conjunction with the issuance of the 2019 Convertible Notes expired worthless.

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”). 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, 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, ~~allows~~allowed borrowing through November 2019, and fully matures in November 2021. ~~The amount outstanding~~Our obligation under the facility as of ~~June 30,~~December 31, 2019 was ~~$0.8~~$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 the current quarter, we granted ~~our seven new non-employee directors~~ a total of ~~60,088 restricted stock awards with a grant date fair value of primarily $10.64 per share. In November 2018, we granted 59,812~~222,912 restricted stock awards to our 9 non-employee ~~directors with a grant date fair value of $9.18 per share. The~~directors. These awards ~~granted to non-employee directors~~ vest on September 30, ~~2019~~2020 and are subject only to service conditions.

In November 2018, we granted 971,615 restricted stock unit awards to employees with a grant date fair value of primarily $9.18 per share. 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 June 30, 2019, we considered the achievement of these performance targets probable.

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.

NOTE 8:9: CONTINGENCIES

Currently and from time to time, we are involved in various claims, suits, investigations and legal proceedings, including the lawsuit described below. While we are unable to determine the ultimate outcome of any current litigation or regulatory 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.

Federal Securities Litigation — In July 2015 and August 2015, ~~two~~2 substantially identical lawsuits were filed in the United States District Court for the Western District of Texas. Those lawsuits were subsequently consolidated into a single action under the caption In re EZCORP, Inc. Securities Litigation (Master File No. 1:15-cv-00608-SS). The original complaint related to the Company’s announcement on July 17, 2015 that it will restate 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.

In January 2016, the plaintiffs filed an Amended Class Action Complaint (the "Amended Complaint"), which asserted that the Company and 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 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.

In October 2016, the Court granted the defendants’ motion to dismiss and dismissed the Amended Complaint without prejudice. In November 2016, the plaintiffs filed a Second Amended Consolidated Class Action Complaint (“Second Amended Complaint”), raising the same claims previously dismissed by the Court, but reducing the class period (November 7, 2013 to October 20, 2015 instead of November 6, 2012 to October 20, 2015). In May 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” 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, and on July 26, 2018, the Court granted the plaintiff's motion for leave to amend, thus accepting the Third Amended Consolidated Class Action Complaint. The Court issued an order certifying the class and approving the class representative and class counsel in February 2019, and we 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 entered into a Memorandum of Understanding regarding that settlement. The proposed settlement provides for the payment of $4.875 million by the defendants (which will be covered by applicable directors' and officers' liability insurance). The accrued settlement and offsetting insurance receivable are included in "Accounts payable, accrued expenses and other current liabilities" and "Prepaid expenses and other current assets" in our condensed consolidated balance sheets as ofon June ~~30, 2019. On July~~ 18, 2019 ~~the parties~~ entered into a Stipulation and Agreement of Settlement reflecting the terms of the agreed settlement, ~~and~~which called for the ~~lead plaintiff filed an unopposed motion requesting~~payment of $4.9 million by the ~~Court to preliminarily approve the proposed settlement and set~~defendants. Following a settlement fairness ~~hearing.~~hearing on December 6, 2019, the Court entered a judgment approving the agreed settlement and dismissing the claims asserted against the defendants. The ~~parties are awaiting~~settlement amount (which was covered by applicable directors' and officers' liability insurance) has been disbursed as provided in the ~~Court's action on that motion. The proposed settlement remains subject to several conditions, including Court approval.~~approved settlement.

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 June 30, 2019

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

(in thousands)
Revenues:
Merchandise sales $ 83,904
$ 19,998
$ —
$ 103,902
$ —
$ 103,902
Jewelry scrapping sales 13,889
4,323
—
18,212
—
18,212
Pawn service charges 58,635
20,345
—
78,980
—
78,980
Other revenues 34
67
1,270
1,371
—
1,371
Total revenues 156,462
44,733
1,270
202,465
—
202,465
Merchandise cost of goods sold 52,855
17,416
—
70,271
—
70,271
Jewelry scrapping cost of goods sold 11,599
4,166
—
15,765
—
15,765
Other cost of revenues —
—
576
576
—
576
Net revenues 92,008
23,151
694
115,853
—
115,853
Segment and corporate expenses (income):
Operations 65,449
18,284
994
84,727
—
84,727
Administrative —
—
—
—
15,053
15,053
Depreciation and amortization 2,934
1,626
72
4,632
2,622
7,254
Loss (gain) on sale or disposal of assets and other 4
(8 ) 6
2
22
24
Interest expense —
1,491
76
1,567
8,265
9,832
Interest income —
(376 ) —
(376 ) (2,796 ) (3,172 )
Equity in net income of unconsolidated affiliates —
—
(1,320 ) (1,320 ) —
(1,320 )
Other (income) expense —
34
6
40
(44 ) (4 )
Segment contribution $ 23,621
$ 2,100
$ 860
$ 26,581

Income from continuing operations before income taxes $ 26,581
$ (23,122 ) $ 3,459

Three Months Ended June 30, 2018

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

(in thousands)
Revenues:
Merchandise sales $ 83,898
$ 20,839
$ —
$ 104,737
$ —
$ 104,737
Jewelry scrapping sales 17,813
2,615
—
20,428
—
20,428
Pawn service charges 55,536
17,008
—
72,544
—
72,544
Other revenues 55
245
1,603
1,903
—
1,903
Total revenues 157,302
40,707
1,603
199,612
—
199,612
Merchandise cost of goods sold 52,340
14,556
—
66,896
—
66,896
Jewelry scrapping cost of goods sold 15,329
2,296
—
17,625
—
17,625
Other cost of revenues —
—
349
349
—
349
Net revenues 89,633
23,855
1,254
114,742
—
114,742
Segment and corporate expenses (income):
Operations 65,257
14,997
2,678
82,932
—
82,932
Administrative —
—
—
—
13,268
13,268
Depreciation and amortization 3,010
951
48
4,009
2,115
6,124
Loss on sale or disposal of assets and other 74
26
—
100
214
314
Interest expense —
3
—
3
7,391
7,394
Interest income —
(672 ) —
(672 ) (3,686 ) (4,358 )
Equity in net income of unconsolidated affiliates —
—
(1,151 ) (1,151 ) —
(1,151 )
Other income
—
(103 ) —
(103 ) (5,184 ) (5,287 )
Segment contribution (loss) $ 21,292
$ 8,653
$ (321 ) $ 29,624

Income from continuing operations before income taxes $ 29,624
$ (14,118 ) $ 15,506

Nine Months Ended June 30, 2019

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

(in thousands)
Revenues:
Merchandise sales $ 275,639
$ 70,547
$ —
$ 346,186
$ —
$ 346,186
Jewelry scrapping sales 28,357
9,516
—
37,873
—
37,873
Pawn service charges 184,658
59,640
—
244,298
—
244,298
Other revenues 125
134
4,274
4,533
—
4,533
Total revenues 488,779
139,837
4,274
632,890
—
632,890
Merchandise cost of goods sold 172,931
52,252
—
225,183
—
225,183
Jewelry scrapping cost of goods sold 23,680
8,968
—
32,648
—
32,648
Other cost of revenues —
—
1,467
1,467
—
1,467
Net revenues 292,168
78,617
2,807
373,592
—
373,592
Segment and corporate expenses (income):
Operations 200,884
54,703
6,169
261,756
—
261,756
Administrative —
—
—
—
46,795
46,795
Depreciation and amortization 8,951
4,543
190
13,684
7,430
21,114
Loss on sale or disposal of assets and other 2,856
743
22
3,621
22
3,643
Interest expense —
1,570
280
1,850
25,362
27,212
Interest income —
(1,226 ) —
(1,226 ) (8,411 ) (9,637 )
Equity in net income of unconsolidated affiliates —
—
(632 ) (632 ) —
(632 )
Impairment of investment in unconsolidated affiliates —
—
19,725
19,725
—
19,725
Other (income) expense —
(63 ) 290
227
(348 ) (121 )
Segment contribution (loss) $ 79,477
$ 18,347
$ (23,237 ) $ 74,587

Income from continuing operations before income taxes $ 74,587
$ (70,850 ) $ 3,737


	Nine Months Ended June 30, 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	$	270,145		$	63,125		$	—		$	333,270		$	—		$	333,270		$	95,103	$	25,921		$	—		$	—		$	121,024		$	—		$	121,024
Jewelry scrapping sales	34,515			9,651			—			44,166			—			44,166			6,552		2,729			—			—			9,281			—			9,281
Pawn service charges	174,180			48,417			—			222,597			—			222,597			64,225		19,294			—			—			83,519			—			83,519
Other revenues	205			588			5,354			6,147			—			6,147			48		42			—			1,781			1,871			—			1,871
Total revenues	479,045			121,781			5,354			606,180			—			606,180			165,928		47,986			—			1,781			215,695			—			215,695
Merchandise cost of goods sold	166,965			43,318			—			210,283			—			210,283			59,148		17,964			—			—			77,112			—			77,112
Jewelry scrapping cost of goods sold	28,683			8,853			—			37,536			—			37,536			5,510		2,540			—			—			8,050			—			8,050
Other cost of revenues	—			—			1,273			1,273			—			1,273			—		—			—			484			484			—			484
Net revenues	283,397			69,610			4,081			357,088			—			357,088			101,270		27,482			—			1,297			130,049			—			130,049
Segment and corporate expenses (income):
Operations	196,635			44,847			7,276			248,758			—			248,758			67,937		18,196			2,090			2,630			90,853			—			90,853
Administrative	—			—			—			—			39,688			39,688			—		—			—			—			—			13,165			13,165
Depreciation and amortization	9,340			2,712			142			12,194			6,104			18,298			3,035		1,422			—			41			4,498			2,350			6,848
Loss on sale or disposal of assets and other	197			31			—			228			225			453			2,853		1,589			—			—			4,442			—			4,442
Interest expense	—			6			—			6			19,064			19,070			—		29			—			72			101			8,690			8,791
Interest income	—			(2,072		)	—			(2,072		)	(10,824		)	(12,896		)	—		(419		)	—			—			(419		)	(2,920		)	(3,339		)
Equity in net income of unconsolidated affiliates	—			—			(3,477		)	(3,477		)	—			(3,477		)
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		)	11			(118		)	(110		)	(5,363		)	(5,473		)	—		(126		)	—			22			(104		)	(282		)	(386		)
Segment contribution	$	77,228		$	24,075		$	258		$	101,561
Income from continuing operations before income taxes										$	101,561		$	(48,894	)	$	52,667
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:


	June 30, 2019			June 30, 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	$	39,443		$	36,079		$	40,719		$	40,887		$	40,016		$	41,838
Allowance for uncollectible pawn service charges receivable	(9,596		)	(9,640		)	(9,760		)	(8,637		)	(8,458		)	(10,036		)
Pawn service charges receivable, net	$	29,847		$	26,439		$	30,959		$	32,250		$	31,558		$	31,802

Gross inventory	$	184,886		$	160,159		$	176,198		$	197,519		$	185,706		$	189,092
Inventory reserves	(9,084		)	(9,014		)	(9,201		)	(10,150		)	(10,284		)	(9,737		)
Inventory, net	$	175,802		$	151,145		$	166,997		$	187,369		$	175,422		$	179,355

Prepaid expenses and other	$	13,189		$	10,836		$	9,705		$	12,463		$	11,720		$	4,784
Accounts receivable and other	20,335			25,129			18,901			12,257			14,126			10,889
Income taxes receivable	3,841			—			2,031			11,422			5,361			10,248
Restricted cash	—			252			267			—			255			4,875
2019 Convertible Notes Hedges	—			7,491			2,552			—			21			—
Prepaid expenses and other current assets	$	37,365		$	43,708		$	33,456		$	36,142		$	31,483		$	30,796

Property and equipment, gross	$	260,216		$	248,880		$	253,022		$	270,335		$	253,336		$	265,922
Accumulated depreciation	(194,002		)	(177,293		)	(179,373		)	(205,089		)	(183,566		)	(198,565		)
Property and equipment, net	$	66,214		$	71,587		$	73,649		$	65,246		$	69,770		$	67,357

Accounts payable	$	18,329		$	12,381		$	10,500		$	12,534		$	15,141		$	25,946
Accrued expenses and other	41,652			49,214			47,458			39,087			42,239			52,011
Accounts payable, accrued expenses and other current liabilities	$	59,981		$	61,595		$	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 June 30, 2019, we had a reserve against receivables from this refiner of $3.6 million which is included in "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 for the current year-to-date period. We continue to monitor the bankruptcy process and may record recoveries of such reserved amounts in a future period as we gather more information.

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 1A — Risk Factors" 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 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 June 30, 2019
U.S. Pawn Latin America Pawn Other International Consolidated

As of March 31, 2019 508
466
24
998
New locations opened —
4
—
4
Locations acquired 7
—
—
7
Locations sold, combined or closed (1 ) —
(2 ) (3 )
As of June 30, 2019 514
470
22
1,006



	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 June 30, 2018
U.S. Pawn Latin America Pawn Other International Consolidated

As of March 31, 2018 510
387
27
924
New locations opened —
2
—
2
Locations acquired —
63
—
63
Locations sold, combined or closed —
(1 ) —
(1 )
As of June 30, 2018 510
451
27
988



	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

Nine Months Ended June 30, 2019
U.S. Pawn Latin America Pawn Other International Consolidated

As of September 30, 2018 508
453
27
988
New locations opened —
12
—
12
Locations acquired 7
5
—
12
Locations sold, combined or closed (1 ) —
(5 ) (6 )
As of June 30, 2019 514
470
22
1,006

Nine Months Ended June 30, 2018
U.S. Pawn Latin America Pawn Other International Consolidated

As of September 30, 2017 513
246
27
786
New locations opened —
10
—
10
Locations acquired —
196
—
196
Locations sold, combined or closed (3 ) (1 ) —
(4 )
As of June 30, 2018 510
451
27
988

Results of Operations

Three Months Ended ~~June 30,~~December 31, 2019 vs. Three Months Ended ~~June 30,~~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 second quarter ended March 31, 2019 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 June 30,						Change	Three Months Ended December 31,						Change
	2019			2018				2019			2018

	(in thousands)							(in thousands)
Net revenues:
Pawn service charges	$	58,635		$	55,536		6%	$	64,090		$	64,225		—%

Merchandise sales	83,904			83,898			—%	95,354			95,103			—%
Merchandise sales gross profit	31,049			31,558			(2)%	33,990			35,955			(5)%
Gross margin on merchandise sales	37		%	38		%	(100)bps	36		%	38		%	(200)bps

Jewelry scrapping sales	13,889			17,813			(22)%	6,117			6,552			(7)%
Jewelry scrapping sales gross profit	2,290			2,484			(8)%	1,362			1,042			31%
Gross margin on jewelry scrapping sales	16		%	14		%	200bps	22		%	16		%	600bps

Other revenues	34			55			(38)%	36			48			(25)%
Net revenues	92,008			89,633			3%	99,478			101,270			(2)%

Segment operating expenses:
Operations	65,449			65,257			—%	68,059			67,937			—%
Depreciation and amortization	2,934			3,010			(3)%	2,865			3,035			(6)%
Segment operating contribution	23,625			21,366			11%	28,554			30,298			(6)%

Other segment expense	4			74			(95)%	—			2,853			(100)%
Segment contribution	$	23,621		$	21,292		11%	$	28,554		$	27,445		4%

Other data:
Net earning assets (a)	$	283,781		$	267,104		6%	$	305,336		$	299,160		2%
Inventory turnover	1.9			2.1			(10)%	1.8			1.8			—%
Average monthly ending pawn loan balance per store (b)	$	280		$	270		4%	$	301		$	304		(1)%
Monthly average yield on pawn loans outstanding	14		%	14		%	—	14		%	14		%	—
Pawn loan redemption rate	86		%	86		%	—	84		%	83		%	100bps



(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 3%$1.1 million, or 4%, to $28.6 million. While net revenues decreased $1.8 million, or ~~$2.4~~2%, to $99.5 million, total expenses decreased $2.9 million to $70.9 million due primarily ~~due~~ to a ~~6%, or $3.1~~$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, partially offset by~~the current period. Operations expense was flat to the prior-year quarter, with a ~~2%, or $0.5 million, decrease~~slight improvement in ~~merchandise sales gross profit~~depreciation and ~~an 8%, or $0.2 million, decrease in jewelry scrapping sales gross profit.~~ amortization.

The change in net revenue ~~was~~ attributable to same ~~stores.~~stores and new stores added since the prior-year quarter 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 6%, or $3.1 million, due primarily to~~were flat as acquired stores offset a ~~4% 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 a slight increase in PLO yield and redemption rates compared to the prior-year quarter.

Merchandise sales ~~remained~~were flat with gross margin on merchandise sales ~~of 37%~~down 200 basis points to 36%, ~~a 100 basis point decline over~~ the ~~prior-year quarter, but within~~low end of our target range. ~~Margins were down as we continue~~The decline in gross margin was due to holiday sales promotions and our continued efforts to reduce general merchandise inventory aged greater than 360 days, ~~ending~~which ended the quarter at ~~6%.~~6.8% of total general merchandise inventory, improved from 8.9% at the end of the prior-year quarter. As a result, merchandise sales gross profit decreased 2%5% to ~~$31.0~~$34.0 million.

Jewelry scrapping sales gross profit ~~remained relatively flat at 2% of current quarter net revenues, in line with our strategy~~increased 31% to ~~sell rather than scrap jewelry, with a 200 basis point increase in gross margin~~$1.4 million due primarily to ~~16%.~~

Higher store labor costs and rent, primarily reflecting inflation, were offset by savings in other store expenses and reduction in administrative costs resulting in flat segment expenses compared to the prior-year quarter. Ashigher scrapping margins as a result of increased gold market prices. Scrap sales margins increased 600 basis points to 22%. Scrap volume decreased year-over-year as we ~~leveraged a 3% increase in net revenue into an 11% increase in segment contribution.~~continue to focus on retail sales for jewelry 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 nine months ended June 30, 2019 and 2018 were as follows:

June 30, Three Months Ended June 30, Nine Months Ended June 30,
2019 2018 2019 2018 2019 2018

Mexican peso 19.2
19.9
19.1
19.4
19.4
19.0
Guatemalan quetzal 7.5
7.4
7.5
7.3
7.6
7.3
Honduran lempira 24.3
23.9
24.2
23.6
24.1
23.5
Peruvian sol 3.3
3.3
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 June 30,											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	$	20,345		$	17,008		20%	$	20,340		20%	$	20,635		$	19,294		7%	$	20,197		5%

Merchandise sales	19,998			20,839			(4)%	20,059			(4)%	31,374			25,921			21%	30,526			18%
Merchandise sales gross profit	2,582			6,283			(59)%	2,757			(56)%	8,662			7,957			9%	8,434			6%
Gross margin on merchandise sales	13		%	30		%	(1,700)bps	14		%	(1,600)bps	28		%	31		%	(300)bps	28		%	(300)bps

Jewelry scrapping sales	4,323			2,615			65%	4,339			66%	3,411			2,729			25%	3,366			23%
Jewelry scrapping sales gross profit	157			319			(51)%	158			(50)%	412			189			118%	407			115%
Gross margin on jewelry scrapping sales	4		%	12		%	(800)bps	4		%	(800)bps	12		%	7		%	500bps	12		%	500bps

Other revenues	67			245			(73)%	67			(73)%	25			42			(40)%	24			(43)%
Net revenues	23,151			23,855			(3)%	23,322			(2)%	29,734			27,482			8%	29,062			6%

Segment operating expenses:
Operations	18,284			14,997			22%	18,242			22%	19,983			18,196			10%	19,573			8%
Depreciation and amortization	1,626			951			71%	1,615			70%	1,889			1,422			33%	1,844			30%
Segment operating contribution	3,241			7,907			(59)%	3,465			(56)%	7,862			7,864			—%	7,645			(3)%

Other segment expense (income) (a)	1,141			(746		)	*	1,049			*
Other segment (income) expense (a)												(265		)	1,073			*	(202		)	*
Segment contribution	$	2,100		$	8,653		(76)%	$	2,416		(72)%	$	8,127		$	6,791		20%	$	7,847		16%

Other data:
Net earning assets (b)	$	82,320		$	67,090		23%	$	80,703		20%	$	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)	$	93		$	90		3%	$	93		3%	$	119		$	121		(2)%	$	116		(4)%
Monthly average yield on pawn loans outstanding	16		%	16		%	—	16		%	—	16		%	15		%	100bps	16		%	100bps
Pawn loan redemption rate(d)	77		%	79		%	(200)bps	77		%	(200)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~~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.

~~Net revenue decreased $0.7~~Segment contribution increased $1.3 million, or ~~3% ($0.5~~20%, to $8.1 million (16% on a constant currency basis) with net revenue growth of $2.3 million, or 2%8% ($1.6 million, or 6%, on a constant currency basis), ~~primarily due~~ to ~~a 59% decrease (56%~~$29.7 million. Operations expense increased $1.8 million, or 10% ($1.4 million, or 8% on a constant currency basis) ~~in merchandise sales gross profit, mostly offset by a 20% increase (20% on a constant currency basis) in pawn service charges. During the quarter, we recorded a discrete $6.1~~, to $20.0 million ~~adjustment in Latin America~~due primarily to ~~correct the calculation~~22 new store openings, along with relocations and expansions of ~~certain transaction tax liabilities in prior periods. Of that total, $4.6 million reduced merchandise sales and $1.5 million increased interest expense.~~ existing stores.

The 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	$	1.5	$	0.1		$	1.6		$	0.9	$	0.5	$	1.4
New stores and other	1.8		0.8			2.6			0.4		0.3		0.7
Discrete transaction tax adjustment	—		(4.6		)	(4.6		)
Total	$	3.3	$	(3.7	)	$	(0.4	)	$	1.3	$	0.8	$	2.1
Change in jewelry scrapping sales gross profit and other revenues						(0.3		)					0.2
Total change in net revenue						$	(0.7	)					$	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	$	1.5	$	0.1		$	1.6		$	0.5	$	0.3	$	0.8
New stores and other	1.8		0.7			2.5			0.4		0.2		0.6
Discrete transaction tax adjustment	—		(4.3		)	(4.3		)
Total	$	3.3	$	(3.5	)	$	(0.2	)	$	0.9	$	0.5	$	1.4
Change in jewelry scrapping sales gross profit and other revenues						(0.3		)					0.2
Total change in net revenue						$	(0.5	)					$	1.6

Pawn service charges increased ~~20% (20%~~7% (5% on a constant currency basis)~~, with same store growth of 9%~~. The average ending monthly pawn loan balance outstanding during the current quarter was ~~up 3% (up 3% on a constant currency basis).~~

~~Merchandise sales decreased 4%~~down 2% (4% on a constant currency basis), ~~with same store~~offset by the addition of 22 new stores since the end of the prior-year quarter. Pawn loan yield and redemption rates improved 100 basis points each, to 16% and 79%, respectively, reflecting improved lending guidance from our point-of-sale system.

Merchandise sales ~~up 7% (6%~~increased 21% (18% on a constant currency basis)~~. Excluding the discrete transaction tax adjustment, gross margin on merchandise sales was 29%~~, ~~or 100~~largely attributable to a revised incentive program for store 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 ~~down 59%~~up 9% to ~~$2.6~~$8.7 million ~~(56%~~(6% to ~~$2.8 million on a constant currency basis). Excluding the adjustment, merchandise sales gross profit increased 14% to $7.1 million (up 13% to $7.1~~$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 increased ~~65% (66%~~25% (23% on a constant currency basis) on greater volume, with ~~an 800~~a 500 basis point ~~decrease~~increase in margin to ~~4%. The lower scrap margin reflects higher processing fees~~12% as we benefited from ~~a new refiner, as well as our stores’ efforts to merchandise higher value jewelry~~an overall increase in ~~store rather than scrapping, to obtain a higher overall gross profit.~~commodity gold prices.

Other segment ~~expense in the current quarter included interest of $1.5 million related to the previously discussed discrete transaction tax adjustment.~~

~~Net revenues decreased 3% (2% on a constant currency basis)~~expenses compared favorably as a result of ~~the transaction tax adjustment. The remaining revenues and expenses~~a prior-year quarter reserve of $1.5 million against a receivable balance deemed uncollectible from a refiner.

Operations expense increased primarily as a result of acquired and newly opened stores. At new stores, net revenue growth typically trails the growth in expenses until new stores begin to mature and until acquired stores are fully integrated and migrated to our operating metrics. Excluding the discrete transaction tax adjustment, net revenue increased 16% (16%10% (8% on a constant currency basis). ~~Reflecting more stores, higher labor, energy and robbery/security costs, as well as increases in operating supplies,~~Same store operations expense increased ~~22% (22% on~~7%, with the remainder of the increase attributable to a ~~constant currency basis).~~5% increase in ending store count over the prior-year quarter and costs to open de novo stores. Depreciation and amortization increased ~~71% (70%~~33% (30% on a constant currency basis) from the addition of stores and ~~additional~~ capital investment in existing and acquired operations. ~~The net result was a decrease in segment contribution of $6.6 million or 76% ($6.2 million or 72% on a constant currency basis), including the $6.1 million discrete transaction tax adjustment.~~

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 the product offering launched late in the current quarter, and all fees from pawn loan extensions, including those made through the Lana platform, are reported in 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 June 30, Percentage Change
2019 2018

(in thousands)
Net revenues:
Consumer loan fees, interest and other $ 1,270
$ 1,603
(21)%
Consumer loan bad debt (576 ) (349 ) 65%
Net revenues 694
1,254
(45)%

Segment operating expenses (income):
Operating expenses 1,066
2,726
(61)%
Equity in net income of unconsolidated affiliates (1,320 ) (1,151 ) 15%
Segment operating contribution (loss) 948
(321 ) *

Other segment expense 88
—
*
Segment contribution (loss) $ 860
$ (321 ) *



	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 $6.5 million, an improvement of $9.4 million from the prior-year quarter primarily due to:

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

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

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 share of the Cash Converters International settlement of a 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 December 31,						Percentage Change
	2019			2018			Percentage Change

	(in thousands)
Segment contribution	$	28,879		$	16,285		77%
Corporate expenses (income):
Administrative	17,489			13,165			33%
Depreciation and amortization	2,933			2,350			25%
Loss on sale or disposal of assets and other	716			—			*
Interest expense	5,167			8,690			(41)%
Interest income	(455		)	(2,920		)	(84)%
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	(27		)	(183		)	(85)%
Net income (loss)	1,238			(3,843		)	*
Net loss attributable to noncontrolling interest	—			(477		)	(100)%
Net income (loss) attributable to EZCORP, Inc.	$	1,238		$	(3,366	)	*



*	Represents a percentage computation that is not mathematically meaningful.

Segment contribution ~~was $0.9 million, an increase of $1.2 million from~~increased 77% over the prior-year quarter, ~~primarily due~~including positive developments in our Latin America and US Pawn segments as well as favorable comparisons against prior-year quarter expenses related to a decrease in operating expenses of $1.7 million, partially offset by a decrease in net revenue of $0.6 million as we closed two under-performing CASHMAX stores in the current quarter, consolidating their loan balances into nearby stores. Operating expenses decreased as a result of the deconsolidation of a previously consolidated variable interest entity ("RDC"). As of June 30, 2019, we determined thatrefiner’s bankruptcy and our investment in Cash Converters International was impaired by $3.8 million but that such impairment was not "other-than-temporary." In reaching this conclusion, we considered all available evidence including primarily the time and extent to which our investment was impaired during the current quarter. Should the value of our investment decline further, we may record additional impairments.

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 single-pay 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 June 30, 2019. See Note 6 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements."

~~Other Items~~

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

Three Months Ended June 30, Percentage Change
2019 2018

(in thousands)
Segment contribution $ 26,581
$ 29,624
(10)%
Corporate expenses (income):
Administrative 15,053
13,268
13%
Depreciation and amortization 2,622
2,115
24%
Gain on sale or disposal of assets 22
214
(90)%
Interest expense 8,265
7,391
12%
Interest income (2,796 ) (3,686 ) (24)%
Other income (44 ) (5,184 ) (99)%
Income from continuing operations before income taxes 3,459
15,506
(78)%
Income tax expense 98
1,502
(93)%
Income from continuing operations, net of tax 3,361
14,004
(76)%
(Loss) income from discontinued operations, net of tax (203 ) 91
*
Net income 3,158
14,095
(78)%
Net loss attributable to noncontrolling interest —
(359 ) (100)%
Net income attributable to EZCORP, Inc. $ 3,158
$ 14,454
(78)%



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

Segment contribution decreased primarily due to the impact of a $6.1 million discrete transaction tax adjustment in our Latin America Pawn segment, offsetting our improved operating performance and leverage in our U.S. Pawn segment and a $1.2 million improved contribution from our Other International segment.International.

Administrative expenses increased ~~$1.8~~$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 ~~13%~~41%, primarily due to ~~costs of $1.3 million associated with the strategic investment in a new digital platform and other professional fees.~~

~~Depreciation and amortization increased $0.5 million, or 24%, primarily due to additional capitalized software costs, including the costs to develop our new point of sale system.~~

~~Interest expense increased $0.9 million, or 12%, primarily due to an increase in debt outstanding during the current quarter compared to the prior-year quarter, offset by~~ the reduction of interest expense on our 2.125% Cash Convertible Senior Notes Due 2019 ("2019 Convertible Notes") which were repaid June 17, 2019. ~~Effective interest rates on our outstanding convertible debt were approximately 8%~~Prior to ~~9%. We expect interest expense to decrease in future periods due to the June 2019~~ repayment, ~~of the 2019 Convertible Notes,~~ the principal amount of ~~which~~these notes was $195.0 million.

Interest income decreased ~~$0.9~~$2.5 million, or ~~24%~~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") notes receivable as they are repaid in accordance with their agreed amortization schedule, in addition to the reduction of interest earned on outstanding cash balances after our 2019 Convertible Notes were repaid in June 2019. The remainder of principal outstanding on the Grupo Finmart notes receivable and the first installment of the deferred compensation fee are expected to be received through September 2019, reducing the amount of interest income recognized in the fourth quarter of fiscal 2019 and forward.

~~Other income in the prior-year quarter was comprised primarily of $5.2 million in net recoveries pertaining to a legal settlement.~~

Income tax expense ~~decreased $1.4~~increased $2.8 million due primarily to:

A ~~$12.0~~$7.7 million ~~decrease~~increase in income from continuing operations before income taxes; and

A ~~discrete transaction tax adjustment with a tax benefit of $1.8 million in the current quarter; and~~

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

~~A $1.5~~$0.7 million reduction in ~~benefits associated with the expiration of a statute of limitations on uncertain~~ tax ~~positions.~~

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

~~Nine Months Ended June 30, 2019 vs. Nine Months Ended June 30, 2018~~

~~U.S. Pawn~~

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

Nine Months Ended June 30, Change
2019 2018

(in thousands)
Net revenues:
Pawn service charges $ 184,658
$ 174,180
6%

Merchandise sales 275,639
270,145
2%
Merchandise sales gross profit 102,708
103,180
—%
Gross margin on merchandise sales 37 % 38 % (100)bps

Jewelry scrapping sales 28,357
34,515
(18)%
Jewelry scrapping sales gross profit 4,677
5,832
(20)%
Gross margin on jewelry scrapping sales 16 % 17 % (100)bps

Other revenues 125
205
(39)%
Net revenues 292,168
283,397
3%

Segment operating expenses:
Operations 200,884
196,635
2%
Depreciation and amortization 8,951
9,340
(4)%
Segment operating contribution 82,333
77,422
6%

Other segment expense 2,856
194
1,372%
Segment contribution $ 79,477
$ 77,228
3%

Other data:
Average monthly ending pawn loan balance per store (a) $ 288
$ 272
6%
Monthly average yield on pawn loans outstanding 14 % 14 % —
Pawn loan redemption rate 85 % 85 % —



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

Net revenue increased $8.8 million, or 3%, primarily due to a 6%, or $10.5 million, increase in pawn service charges, partially offset by a 20%, or $1.2 million, decrease in jewelry scrapping sales gross profit on less scrap volume. The change in net revenue was attributable to same stores.

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

Merchandise sales increased 2% with gross margin on merchandise sales of 37%, a 100 basis point decline over the prior year-to-date period, but within our target range. As a result, merchandise sales gross profit was flat at $102.7 million. A portion of the year-over-year improvement is due to the impacts of hurricanes in the prior year-to-date period. 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 2% of net revenues, but down 20%~~benefit from the ~~prior year-to-date period, in line with our strategy to sell rather than scrap jewelry, with a 100 basis point decline in gross margin to 16%.~~

~~A 3% increase in net revenue resulted in a 3% increase in segment contribution primarily as a result~~December 2019 vesting of a $2.9 million reserve against a receivable balance from a gold refiner deemed uncollectible due to the refiner's Chapter 11 bankruptcy, offset by cost control initiatives in segment operating expenses.

~~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.

Nine Months Ended June 30,
2019 (GAAP) 2018 (GAAP) Change (GAAP) 2019 (Constant Currency) Change (Constant Currency)

(in USD thousands) (in USD thousands)

Net revenues:
Pawn service charges $ 59,640
$ 48,417
23% $ 61,095
26%

Merchandise sales 70,547
63,125
12% 72,478
15%
Merchandise sales gross profit 18,295
19,807
(8)% 19,045
(4)%
Gross margin on merchandise sales 26 % 31 % (500)bps 26 % (500)bps

Jewelry scrapping sales 9,516
9,651
(1)% 9,737
1%
Jewelry scrapping sales gross profit 548
798
(31)% 561
(30)%
Gross margin on jewelry scrapping sales 6 % 8 % (200)bps 6 % (200)bps

Other revenues 134
588
(77)% 138
(77)%
Net revenues 78,617
69,610
13% 80,839
16%

Segment operating expenses:
Operations 54,703
44,847
22% 56,010
25%
Depreciation and amortization 4,543
2,712
68% 4,638
71%
Segment operating contribution 19,371
22,051
(12)% 20,191
(8)%

Other segment expense (income) (a) 1,024
(2,024 ) * 1,004
*
Segment contribution $ 18,347
$ 24,075
(24)% $ 19,187
(20)%

Other data:
Average monthly ending pawn loan balance per store (b) $ 91
$ 90
1% $ 93
3%
Monthly average yield on pawn loans outstanding 16 % 16 % — 16 % —
Pawn loan redemption rate 78 % 79 % (100)bps 78 % (100)bps



*	~~Represents a percentage computation that is not mathematically meaningful.~~
~~(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 $0.1 million and are included in the above results.
~~(b)~~	~~Balance is calculated based upon the average of the monthly ending balances during the applicable period.~~

~~In the current year-to-date period, our Latin America pawn segment acquired five pawn stores and opened twelve de novo stores.~~

Net revenue increased $9.0 million, or 13% ($11.2 million, or 16%, on a constant currency basis), primarily due to a 23% increase (26% on a constant currency basis) in pawn service charges, offset by an 8% decrease (4% on a constant currency basis) in merchandise sales gross profit, inclusive of a discrete tax adjustment of $4.6 million relating to prior periods. The change in net revenue attributable to same stores and new stores added since the prior year-to-date period is summarized as follows:

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

(in millions)
Same stores $ 3.9
$ 0.5
$ 4.4
New stores and other 7.3
2.6
9.9
Discrete transaction tax adjustment —
(4.6 ) (4.6 )
Total $ 11.2
$ (1.5 ) $ 9.7
Change in jewelry scrapping sales gross profit and other revenues (0.7 )
Total change in net revenue $ 9.0

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

(in millions)
Same stores $ 5.1
$ 1.0
$ 6.1
New stores and other 7.6
2.6
10.2
Discrete transaction tax adjustment —
(4.4 ) (4.4 )
Total $ 12.7
$ (0.8 ) $ 11.9
Change in jewelry scrapping sales gross profit and other revenues (0.7 )
Total change in net revenue $ 11.2

Pawn service charges increased 23% (26% on a constant currency basis), with same store growth of 8%. The average ending monthly pawn loan balance per store outstanding during the current year-to-date period was up 1% (up 3% on a constant currency basis), with the average total pawn loan balance outstanding up 22%. Pawn service charges further include $1.1 million in revenue attributable to the receipt of previously escrowed seller funds as a result of settling certain indemnification claims with the sellers of Camira Administration Corp. and subsidiaries (“GPMX”). In the current year-to-date period, we loaned the $1.1 million back to the seller of GPMX in exchange for a promissory note. The note bears interest at the rate of 2.89% per annum and is secured by certain marketable securities owned by the seller and held in a U.S. brokerage account. All principal and accrued interest is due and payable in April 2024.

Merchandise sales increased 12% (15% on a constant currency basis) primarily from newly acquired stores, reduced by a discrete transaction tax adjustment of $4.6 million relating to prior periods. Excluding the discrete transaction tax adjustment, gross margin on merchandise sales was 30%, or 100 basis points below the prior year-to-date period. As a result of these factors, merchandise sales gross profit was down 8% to $18.3 million (4% to $19.0 million on a constant currency basis). Excluding the discrete transaction tax adjustment, merchandise sales gross profit increased 15% to $22.8 million (up 18% to $23.4 million on a constant currency basis).

~~Jewelry scrapping sales decreased 1% (increased 1% on a constant currency basis) in line with our strategy to sell rather than scrap jewelry, with a 200 basis point decrease in margin.~~

~~Other segment expense included interest of $1.5 million related to the previously discussed discrete transaction tax adjustment.~~

Net revenues and expenses increased primarily as a result of acquired and newly opened stores. At new stores, net revenue growth typically trails the growth in expenses until new stores begin to mature and until acquired stores are fully integrated and migrated to our operating metrics.

Net revenue increased 13% (16% on a constant currency basis) in the current year-to-date period. Excluding the discrete transaction tax adjustment, net revenues increased 19% (22% on a constant currency basis). Reflecting more stores, higher labor, energy and robbery/security costs, as well as increases in operating supplies, operations expense increased at a slightly faster pace of 22% (25% on a constant currency basis). Depreciation and amortization increased 68% (71% on a constant currency basis) from the addition of stores and additional capital investment in existing and acquired operations. 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 second quarter of fiscal 2019. These factors resulted in a decrease in segment contribution of $5.7 million or 24% ($4.9 million or 20% on a constant currency basis), including the impact of a $6.1 million discrete transaction tax adjustment.

~~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:

Nine Months Ended June 30, Percentage Change
2019 2018

(in thousands)
Net revenues:
Consumer loan fees, interest and other $ 4,274
$ 5,354
(20)%
Consumer loan bad debt (1,467 ) (1,273 ) 15%
Net revenues 2,807
4,081
(31)%

Segment operating expenses (income):
Operating expenses 6,359
7,418
(14)%
Equity in net income of unconsolidated affiliates (632 ) (3,477 ) (82)%
Segment operating (loss) contribution (2,920 ) 140
*

Impairment of investment in unconsolidated affiliates 19,725
—
*
Other segment expense (income) 592
(118 ) *
Segment (loss) contribution $ (23,237 ) $ 258
*



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

~~Segment loss was $23.2 million compared to $0.3 million in income in the prior year-to-date period, primarily due to:~~

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

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

~~A decrease in net revenue of $1.3 million as we closed or consolidated five under-performing CASHMAX stores in the current year-to-date period; partially offset by~~

~~A decrease in operating expenses of $1.1 million as a result of the deconsolidation of RDC.~~

As of June 30, 2019, we determined that our investment in Cash Converters International was impaired by $3.8 million and that such impairment was not "other-than-temporary." In reaching this conclusion, we considered all available evidence including primarily the time and extent to which our investment was impaired during the current quarter. Should the value of our investment decline further, we may record additional impairments.

~~Other Items~~

Nine Months Ended June 30, Percentage Change
2019 2018

(in thousands)
Segment contribution $ 74,587
$ 101,561
(27)%
Corporate expenses (income):
Administrative 46,795
39,688
18%
Depreciation and amortization 7,430
6,104
22%
Loss on sale or disposal of assets 22
225
(90)%
Interest expense 25,362
19,064
33%
Interest income (8,411 ) (10,824 ) (22)%
Other income (348 ) (5,363 ) (94)%
Income from continuing operations before income taxes 3,737
52,667
(93)%
Income tax expense 1,377
14,710
(91)%
Income from continuing operations, net of tax 2,360
37,957
(94)%
Loss from discontinued operations, net of tax (404 ) (631 ) (36)%
Net income 1,956
37,326
(95)%
Net loss attributable to noncontrolling interest (1,230 ) (1,348 ) (9)%
Net income attributable to EZCORP, Inc. $ 3,186
$ 38,674
(92)%

Segment contribution decreased primarily due to a $19.7 million impairment of our investment in Cash Converters International, 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 and the impact of a $6.1 million discrete transaction tax adjustment in our Latin America Pawn segment, partially offset by improved operating performance in our U.S. Pawn segment.

Administrative expenses increased $7.1 million, or 18%, in the current year-to-date period primarily due to costs of $4.9 million associated with a strategic investment in a new digital platform and other professional fees.

~~Depreciation and amortization increased $1.3 million, or 22%, primarily due to additional capitalized software costs, including the costs to develop our new point of sale system.~~

~~Interest expense increased $6.3 million, or 33%, primarily due to an increase in average debt outstanding during the current year-to-date period~~restricted stock units compared to the prior ~~year-to-date period, offset by~~estimates of the reduction of interest expense on our 2019 Convertible Notes which were repaid on June 17, 2019. Effective interest rates on our outstanding convertible debt were approximately 8% to 9%. We expect interest expense to decrease in future periods duerelated tax benefit that was recorded over their 3-year vesting period. The lower than expected tax benefit relates to the ~~June 2019 repayment of the 2019 Cash Convertible Notes, the principal amount of which was $195.0 million.~~

~~Interest income decreased $2.4 million, or 22%, primarily due~~lower related share price upon vesting compared to the declining principal balance on the Grupo Finmart notes receivable as they are repaid in accordance with their agreed amortization schedule, in addition to the reduction of interest earned on outstanding cash balances after our 2019 Convertible Notes were repaid in June 2019. The remainder of principal outstanding on the Grupo Finmart notes receivable and the first installment of the deferred compensation fee are expected to be received through September 2019, reducing the amount of interest income recognized in the fourth quarter of fiscal 2019 and forward.

~~Other income in the prior year-to-date period was comprised primarily of $5.2 million in net recoveries pertaining to a legal settlement.~~

~~Income tax expense decreased $13.3 million due primarily to:~~

~~A $48.9 million decrease in income from continuing operations before income taxes;~~

~~A discrete transaction tax adjustment with a tax benefit of $1.8 million in the current year-to-date period; and~~grant date value.

~~A lower maximum U.S. corporate rate of 21% in the current year-to-date period compared to a higher blended rate in the prior year-to-date period; 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 $3.1 million reduction in benefits associated with the expiration of a statute of limitations on uncertain tax positions.~~

Liquidity and Capital Resources

Cash Flows

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


	Nine Months Ended June 30,						Percentage Change	Three Months Ended December 31,						Percentage Change
	2019			2018			Percentage Change	2019			2018			Percentage Change

	(in thousands)							(in thousands)
Cash flows from operating activities	$	64,977		$	69,321		(6)%	$	(10,918	)	$	23,381		*
Cash flows from investing activities	(13,238		)	(117,108		)	89%	(6,798		)	(8,279		)	18%
Cash flows from financing activities	(198,101		)	170,157			*	(2,934		)	(2,612		)	(12)%
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(294		)	(1,493		)	80%	1,349			(782		)	*
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(146,656	)	$	120,877		*	$	(19,301	)	$	11,708		*



*	Represents a percentage computation that is not mathematically meaningful.

Change in Cash and Cash Equivalents and Restricted Cash for the ~~Nine~~Three Months Ended ~~June 30,~~December 31, 2019 vs. ~~Nine~~Three Months Ended ~~June 30,~~December 31, 2018

The decrease in cash flows from operating activities year-over-year was due to ~~$6.5~~$37.3 million ~~from~~of changes in working capital, offset by a ~~$2.2~~$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, 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 $99.1~~an $8.1 million net decrease in ~~cash paid for acquisitions,~~investment in customer loan growth, partially offset by a ~~$9.3~~$7.3 million net decrease ~~in additions to property and equipment and a $5.7 million increase~~ in principal collections on notes ~~receivable, offset by a $10.3 million net investment in customer loan growth.~~receivable.

The decrease in cash flows from financing activities year-over-year was primarily due ~~primarily~~ to ~~repayment of $195.0~~$1.0 million ~~of our 2.125% Cash Convertible Senior Notes Due 2019~~ in ~~June 2019, the May 2018 issuance of our $172.5 million aggregate principal amount of 2.375% Convertible Senior Notes Due 2025~~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.

The net effect of these and other smaller items was a ~~$146.7~~$19.3 million decrease in cash on hand during the current year-to-date period, resulting in a ~~$138.9~~$143.1 million ending cash ~~balance compared to $284.5 million as of June 30, 2018.~~balance. Of the ending cash balance ~~as of June 30,~~at December 31, 2019, ~~$25.4~~$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. In June 2019, we repaid $195.0 million of 2.125% Cash Convertible Senior Notes Due 2019 at maturity 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 ~~repayment~~result of ~~the 2.125% Cash Convertible Senior~~adoption of accounting standards as further discussed in Note 1 of Notes ~~Due 2019~~to Interim Condensed Consolidated Financial Statements included in ~~June 2019.~~"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 ~~June 30,~~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 ~~June 30,~~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. We have historically maintained a separate logging system that mitigated the potential impact of those ITGC deficiencies. During the quarter ended March 31, 2019, 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. We~~reporting and reported that material weakness in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. Because we have not ~~completed our remediation of~~fully remediated that material weakness as of ~~June 30, 2019.~~December 31, 2019, we have concluded that our internal control over financial reporting was not effective as of that date.

As of ~~March~~December 31, 2019, we ~~had hired a Chief Information Security Officer~~have continued to implement, manage and subsequently further built-out and developed an IT compliance group, 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 are focused on remediating the underlying ITGC deficiencies, and we are in the process of improving our control environment to adequately prevent or detect unauthorized access or changes to our operating systems and databases. As of the date of filing, we have developedmonitor a remediation plan with a combination of control modifications to implement by our fiscal year end and a roadmap for incremental procedures for the optimization of our IT control environment over a longer term period. Our remediation plan is focused on IT control enhancements across our logical access and change management processes, including the evaluation of automation tools, where applicable, and database monitoring activities. ~~See "Part II, Item 1A — Risk Factors."~~Management believes it is taking the appropriate steps to remediate the underlying ITGC deficiencies, including allowing the controls to operate 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~~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 in~~ ~~"Part II, Item 1A — Risk Factors"~~Company pursuant to Rule 10b5-1 under the Securities Exchange Act of ~~our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019~~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 ~~June 30,~~December 31, 2019, ~~June 30,~~December 31, 2018 and September 30, ~~2018;~~2019; (ii) Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 and ~~June 30,~~December 31, 2018; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 and ~~June 30,~~December 31, 2018; (iv) Condensed Consolidated Statements of Stockholders' Equity for the ~~periods~~three months ended ~~June 30,~~December 31, 2019 and ~~June 30,~~December 31, 2018; (v) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2019 and ~~June 30,~~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:	~~July 31, 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)~~

4530



	June 30, 2018
	As Previously Reported			Corrections			As Corrected

Cash and cash equivalents	$	285,031		$	(538	)	$	284,493
Pawn service charges receivable, net	33,388			(6,949		)	26,439
Prepaid expenses and other current assets	43,448			260			43,708
Goodwill	292,544			1,791			294,335
Deferred tax asset, net	616			1,245			1,861
Accounts payable, accrued expenses and other current liabilities	61,813			(218		)	61,595
Retained earnings	392,315			(4,301		)	388,014
Accumulated other comprehensive loss	(48,040		)	328			(47,712		)



	Three Months Ended June 30, 2018
	As Previously Reported		Corrections			As Corrected

Pawn service charges	$	72,874	$	(330	)	$	72,544
Operations expense	83,032		(100		)	82,932
Income from continuing operations before income taxes	15,736		(230		)	15,506
Income tax expense	1,553		(51		)	1,502
Income from continuing operations, net of tax	14,183		(179		)	14,004
Basic earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.27	$	(0.01	)	$	0.26
Diluted earnings per share attributable to EZCORP, Inc. — continuing operations	$	0.25	$	—		$	0.25



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

		(in thousands)
2019 Convertible Notes Hedges — Level 2	Prepaid expenses and other current assets	$	—	$	7,491		$	2,552
2019 Convertible Notes Embedded Derivative — Level 2	Current maturities of long-term debt, net	—		(7,491		)	(2,552		)



	Three Months Ended June 30, 2019
	U.S. Pawn		Latin America Pawn			Other International			Total Segments			Corporate Items			Consolidated

	(in thousands)
Revenues:
Merchandise sales	$	83,904	$	19,998		$	—		$	103,902		$	—		$	103,902
Jewelry scrapping sales	13,889		4,323			—			18,212			—			18,212
Pawn service charges	58,635		20,345			—			78,980			—			78,980
Other revenues	34		67			1,270			1,371			—			1,371
Total revenues	156,462		44,733			1,270			202,465			—			202,465
Merchandise cost of goods sold	52,855		17,416			—			70,271			—			70,271
Jewelry scrapping cost of goods sold	11,599		4,166			—			15,765			—			15,765
Other cost of revenues	—		—			576			576			—			576
Net revenues	92,008		23,151			694			115,853			—			115,853
Segment and corporate expenses (income):
Operations	65,449		18,284			994			84,727			—			84,727
Administrative	—		—			—			—			15,053			15,053
Depreciation and amortization	2,934		1,626			72			4,632			2,622			7,254
Loss (gain) on sale or disposal of assets and other	4		(8		)	6			2			22			24
Interest expense	—		1,491			76			1,567			8,265			9,832
Interest income	—		(376		)	—			(376		)	(2,796		)	(3,172		)
Equity in net income of unconsolidated affiliates	—		—			(1,320		)	(1,320		)	—			(1,320		)
Other (income) expense	—		34			6			40			(44		)	(4		)
Segment contribution	$	23,621	$	2,100		$	860		$	26,581
Income from continuing operations before income taxes									$	26,581		$	(23,122	)	$	3,459



	Nine Months Ended June 30, 2019
	U.S. Pawn		Latin America Pawn			Other International			Total Segments			Corporate Items			Consolidated

	(in thousands)
Revenues:
Merchandise sales	$	275,639	$	70,547		$	—		$	346,186		$	—		$	346,186
Jewelry scrapping sales	28,357		9,516			—			37,873			—			37,873
Pawn service charges	184,658		59,640			—			244,298			—			244,298
Other revenues	125		134			4,274			4,533			—			4,533
Total revenues	488,779		139,837			4,274			632,890			—			632,890
Merchandise cost of goods sold	172,931		52,252			—			225,183			—			225,183
Jewelry scrapping cost of goods sold	23,680		8,968			—			32,648			—			32,648
Other cost of revenues	—		—			1,467			1,467			—			1,467
Net revenues	292,168		78,617			2,807			373,592			—			373,592
Segment and corporate expenses (income):
Operations	200,884		54,703			6,169			261,756			—			261,756
Administrative	—		—			—			—			46,795			46,795
Depreciation and amortization	8,951		4,543			190			13,684			7,430			21,114
Loss on sale or disposal of assets and other	2,856		743			22			3,621			22			3,643
Interest expense	—		1,570			280			1,850			25,362			27,212
Interest income	—		(1,226		)	—			(1,226		)	(8,411		)	(9,637		)
Equity in net income of unconsolidated affiliates	—		—			(632		)	(632		)	—			(632		)
Impairment of investment in unconsolidated affiliates	—		—			19,725			19,725			—			19,725
Other (income) expense	—		(63		)	290			227			(348		)	(121		)
Segment contribution (loss)	$	79,477	$	18,347		$	(23,237	)	$	74,587
Income from continuing operations before income taxes									$	74,587		$	(70,850	)	$	3,737