Executive Summary / Key Takeaways

• Exceptional Earnings Growth Driven by Operating Leverage: EZCORP delivered record Q3 Fiscal 2025 revenue of $319.9 million and an all-time high Pawn Loans Outstanding (PLO) of $293.2 million, translating to a 42% year-over-year increase in Adjusted EBITDA to $45.2 million and a 38% rise in diluted EPS to $0.33, showcasing significant operating leverage.
• Strategic Expansion and Market Penetration: The company is aggressively scaling its footprint, marked by the recent acquisition of 40 pawn stores in Mexico (including entry into auto pawn) and consistent de novo store openings, broadening its addressable market and leveraging its expertise.
• Digital Innovation Enhances Customer Engagement and Efficiency: EZCORP's investment in digital platforms like EZ+ Rewards (6.5 million members), online payments, and "Instant Quote" is deepening customer loyalty, improving operational efficiency, and creating a seamless omnichannel experience.
• Robust Balance Sheet Fuels Growth and Shareholder Value: With $472.1 million in cash and a disciplined capital allocation strategy, EZCORP is well-positioned to fund organic growth, pursue accretive acquisitions, and thoughtfully return capital to shareholders, despite its own assessment of being "undercapitalized for its mission" given global opportunities.
• Resilient Business Model Amid Macroeconomic Headwinds: Persistent inflation and tighter credit access continue to drive strong demand for EZCORP's services, reinforcing its counter-cyclical strength and ability to thrive in challenging economic environments.

The Enduring Appeal of Pawn: EZCORP's Strategic Foundation

EZCORP, Inc. (NASDAQ:EZPW), established in 1989, operates as a leading provider of pawn services and pre-owned merchandise retail across the United States and Latin America. At its core, the business offers non-recourse pawn loans, collateralized by tangible personal property such as jewelry and electronics, providing immediate cash without credit checks or long-term obligations. This fundamental value proposition positions EZCORP as a crucial financial lifeline, particularly for the underbanked and value-conscious consumers, a segment whose demand intensifies amidst persistent inflation and tightening credit markets.

The industry landscape is characterized by a few major players and a highly fragmented independent market. FirstCash Holdings, Inc. (FCFS) stands as a dominant force, often outpacing EZCORP in overall scale and U.S. market share. FCFS's larger network and materially lower operating costs per store, driven by economies of scale, contribute to its superior profitability, with an estimated operating margin of 16% compared to EZCORP's TTM operating profit margin of 8.19%. However, EZCORP strategically differentiates itself through a focused approach on Latin American growth and a notable emphasis on digital innovation.

EZCORP's strategic pillars—"Strengthen the Core," "Cost Efficiency and Simplification," and "Innovate and Grow"—are designed to capitalize on its unique market position. The company's commitment to digital transformation is a key competitive advantage, aiming to enhance customer experience and operational efficiency. For instance, the EZ+ Rewards program has grown to 6.5 million members globally, accounting for over 70% of known customer transactions in Q3 Fiscal 2025. This program fosters customer loyalty and provides a valuable conversation tool for in-store staff.

Beyond loyalty, EZCORP's digital efforts streamline operations. U.S. online payments reached $30 million in Q3 Fiscal 2025, while in Mexico, 20% of layaways and extensions were completed digitally, more than double the prior year. These digital channels free up store teams to focus on core lending and sales activities, improving in-store efficiency. The "view-online purchase in-store" experience, now covering nearly 80% of U.S. stores, enhances convenience by bridging digital discovery with physical service. Furthermore, the "Instant Quote" tool, currently in pilot, aims to provide preliminary online loan estimates, with the stated goal of driving stronger conversion and further improving in-store efficiency. These technological advancements, while not always yielding direct quantifiable cost reductions, are foundational to EZCORP's competitive moat, enabling faster, more convenient service that differentiates it from traditional pawn shops and allows it to compete effectively with digital-first lenders like Enova International (ENVA), whose online offerings are notably more efficient in terms of loan approvals and costs.

A History of Resilience and Strategic Evolution

EZCORP's journey has been marked by strategic adaptations and a commitment to growth. Following a significant leadership transition in fiscal 2020, the company initiated a multi-year plan focused on cultural enhancement, team development, and optimizing core pawn operations. This period saw PLO reach a low due to the COVID-19 pandemic, but demand quickly rebounded, demonstrating the inherent resilience of the pawn business model.

From fiscal 2020 to 2024, EZCORP expanded its footprint by 274 stores, including 160 acquisitions and 131 de novo locations, while strategically consolidating 24 underperforming units. This expansion included a foray into the luxury segment with Max Pawn stores in Las Vegas, a venture now expanding to new markets like Miami Beach. The company also made strategic investments, notably in Founders One, LLC, which invests in Simple Management Group (SMG). SMG, operating 99 pawn stores across Florida, the Caribbean, and Central America, is now recognized as the "third largest pawn broker" in EZCORP's operating region, providing significant strategic exposure to new geographies and a potential future acquisition opportunity.

Financial Performance: Leveraging Scale for Profitability

EZCORP's recent financial performance underscores the success of its strategic initiatives and the operating leverage embedded in its model. For the third quarter ended June 30, 2025, the company reported record revenue of $319.9 million, a 14% increase year-over-year. This top-line growth was fueled by an all-time high PLO of $293.2 million, up 12% from the prior year. The robust lending activity translated into a 10% increase in Pawn Service Charges (PSC) to $118.2 million. Merchandise sales also grew 10%, with same-store sales up 9%, reflecting strong customer demand and effective retail execution.

Profitability metrics demonstrated significant improvement. Gross profit rose 13% to $188.4 million, with merchandise and sales gross profit increasing 19% to $70.2 million, benefiting from higher gold prices and improved counter execution. Adjusted EBITDA surged 42% year-over-year to $45.2 million, and diluted EPS climbed 38% to $0.33. Notably, the EBITDA margin expanded 280 basis points to 14.1%, marking its fifth consecutive quarter of year-over-year expansion. This consistent margin improvement highlights the company's ability to capture greater profitability as it scales its loan demand and retail productivity.

The U.S. Pawn segment, contributing 69% of revenue and 71% of gross profit, saw its PLO increase 11% (total and same-store) to $221.1 million. The average loan size in the U.S. rose 13% to $207, with approximately 80% of this growth attributed to higher jewelry pricing, particularly gold. Despite a 36% increase in inventory, driven by higher PLO, increased purchasing activity (which generally yields higher margins than pawn-sourced goods), and growth in layaways, aged general merchandise (over one year old) decreased by 260 basis points to 2.5% (1.8% excluding luxury stores), a testament to disciplined inventory management.

In Latin America, the segment delivered strong results, with revenue increasing 11% (21% on a constant currency basis) to $91.02 million. PLO grew 16% (13% constant currency), and merchandise sales were up 23% (constant currency), with same-store sales increasing 19% (constant currency). The recent acquisition of 40 stores in Mexico significantly contributed to this growth, broadening the addressable market through secured auto lending, a growing category with higher ticket sizes. While merchandise gross margin in Latin America saw a slight contraction to 31% due to increased price negotiations, the segment's EBITDA rose 28% to $15.5 million, with its margin expanding 90 basis points to 15%.

Liquidity and Capital Allocation: Fueling Future Growth

EZCORP maintains a robust liquidity position, ending Q3 Fiscal 2025 with $472.1 million in cash and cash equivalents. This strong balance sheet is a direct result of strategic financial maneuvers, including the issuance of $300 million in 7.38% Senior Notes due 2032 in March 2025, which also earned the company a first-time Ba1 credit rating from Moody's. This capital infusion, combined with strong operating cash flow, provides significant flexibility.

The company has proactively managed its debt maturities. The $34.4 million 2024 Convertible Notes were retired in July 2024, and the $103.4 million 2025 Convertible Notes were largely converted into Class A common stock (approximately $97 million) or repaid with cash (remaining $6.4 million) by May 2025. This proactive approach ensures financial stability and optionality.

Management's capital allocation strategy prioritizes "scale," aiming to significantly grow profit and cash flow. They believe the company is "undercapitalized for our mission" given the vast global opportunities in pawn broking. This conviction drives their aggressive pursuit of acquisitions, such as the recent Mexico store acquisition, and continued de novo store expansion (targeting approximately 40 new stores per year). While the company has engaged in share repurchases ($3 million in the three months ending July 31, 2025), management explicitly states that dividends are not expected in the near term, as capital will be deployed into "high-return scale opportunities across the world in pawn broking" where "scale... is the main game."

Outlook and Risk Assessment

EZCORP's outlook remains positive, underpinned by sustained consumer demand and ongoing operational improvements. Management anticipates continued organic growth in revenue and earnings, driven by higher PLO, PSC, and merchandise sales. While scrap sales gross profit is expected to be similar in Q4 Fiscal 2025 (assuming steady gold prices), scrap margins are projected to decline sequentially in Fiscal Year 2026. A sequential increase in total expenses is expected, though overall same-store expense growth is anticipated to moderate as inflation rates decline. However, minimum wage increases in Latin America (6.5% to 12% in January 2025, impacting 63% of regional team members) will continue to influence labor costs.

The company's M&A pipeline is described as "robust" and "attractive" in both the U.S. and Latin America, with a commitment to rigorous financial discipline in target selection. Management expects the "new normal" for tax refund season to involve a shorter period of impact and less severe PLO declines than pre-2019, reflecting the current consumer environment.

Despite the positive outlook, investors should consider several risks. The recent incurrence of $300 million in Senior Notes could increase future financing costs or limit financial flexibility, though the company's strong liquidity mitigates immediate concerns. Market risks related to interest rates, gold values, and foreign currency exchange rates remain pertinent. While the regulatory environment in the U.S. has been stable, unforeseen changes could impact operations. The company's ability to maintain strong inventory turnover and manage aged general merchandise is crucial, especially with growing inventory levels.

Conclusion

EZCORP is executing a compelling investment thesis centered on scaling its core pawn business through operational excellence, strategic expansion, and technological innovation. The company's impressive Q3 Fiscal 2025 results, marked by record revenue, PLO, and significant earnings growth, underscore the inherent operating leverage in its model and the effectiveness of its multi-year strategic plan. By strengthening its core U.S. operations and accelerating growth in Latin America through acquisitions and de novo stores, EZCORP is broadening its market reach and diversifying its revenue streams, notably with its entry into the auto pawn segment in Mexico.

The company's commitment to digital differentiation, exemplified by the success of EZ+ Rewards and online payment platforms, enhances customer loyalty and operational efficiency, providing a competitive edge in a fragmented market. With a robust balance sheet and a disciplined capital allocation strategy focused on high-return growth opportunities, EZCORP is well-positioned to continue its trajectory of compounding shareholder value. While macroeconomic factors and competitive dynamics present ongoing considerations, EZCORP's resilient business model, proactive management, and strategic focus on scale suggest a promising long-term outlook for investors.